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Interest on Client Funds Held by Notaires

Wednesday 03 June 2020

Who gets the interest earned on client funds held by a notaire?

Notaires hold funds on behalf of their clients for many different reasons, most frequently in connection with the purchase of a property.

Normally, the funds may only be with them a few days or weeks until completion takes place, when they are then transferred to the seller.

However, where a notaire is dealing with an inheritance (succession) they may hold funds for many months; where the formalities cannot be easily and quickly finalised, it may be years.

Originally, notaries kept all the interest earned on client funds, but since 2014 regulations have sought to put an end to this practice, although old habits appear still to be in place.

Strictly speaking, notaries may not keep in cash in their office, for more than two working days, 5% of the total amount of funds held by them in any capacity whatsoever.

They are obliged to deposit client funds with the Caisse des dépôts et consignations (CDC), a public investment bank controlled by the government.

During the first three months the funds are held in a current account with the CDC, after which the funds must be transferred to a deposit account with the CDC.

Under a decree originating from 2015 the funds earn interest at the rate of 0.75% on both accounts.

However, notaires have interpreted the law as meaning that for the first three months interest on the sum is to their own account, and it not to the client.

Only interest on funds that remain with the CDC beyond three months are given to the client.

Nowhere in the regulations does it state that notaires are permitted retain the interest for the initial three-month period.

On the contrary, Article R444-66 of the Code de commerce states:

'Les notaires ne peuvent percevoir aucun droit de recette pour l'encaissement ou la garde des capitaux et valeurs déposés pour l'exécution directe d'un acte de vente ou d'emprunt passé dans leur étude.

Les notaires doivent, en cas de dépôt obligatoire ou de consignation de fonds, en vertu de l'article 15 du décret n° 45-0117 du 19 décembre 1945 pris pour l'application du statut du notariat, tenir compte à leurs clients des intérêts qui leur sont servis, sans préjudice des obligations résultant pour eux des articles 547 et 548 du code civil pour les autres fonds appartenant aux clients.
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In an authoritative legal work used by notaires, Frédéric Hébert, Secretary General of the Conseil Régional des Notaires of the appeal court in Grenoble and Associate Professor of Law at the University of Grenoble states:

'Sommes déposées et non consignées – ... Les fruits civils appartiennent au propriétaire par voie d'accession d'après les articles 547 et 548 du Code civil et si la chose déposée en a produit, qui ont été perçus par le dépositaire, celui-ci est obligé de les restituer (C. civ., art. 1936). Il en résulte que si les établissements dépositaires servent aux notaires des intérêts pour les sommes déposées dans les conditions qui précèdent, les notaires doivent en tenir compte à leurs clients : c'est le second cas visé par l’article R. 444-66, alinéa 2 du Code de commerce.'

In addition, the notaires own national regulations also states that they are not entitled to any remuneration other than that which is set out in the regulated schedule of tariffs, with Article 3.3 stating: 'Le notaire ne peut percevoir aucune rémunération sous quelques formes et conditions que ce soient, autre que ce qui est prévu par les différents textes relatifs au tarif des notaires.'

Nevertheless, on their website the notaires state that they retain the interest earned for the first three months:

'Cette rémunération est versée :

  • au notaire, pour les intérêts servis sur les sommes déposées par les notaires sur les comptes de disponibilités courantes pendant les 3 premiers mois. Il s’agit d’un versement trimestriel.
  • et ensuite au client, pour les intérêts servis sur les sommes déposées par les notaires sur les comptes de dépôts obligatoires. Ces intérêts sont calculés affaire par affaire et liquidés à la clôture de chaque affaire, sur le compte de disponibilités courantes.'

With current rates of interest, the income earned might not be a significant, but in 2015 the French national auditor estimated that notaires earned an average of €17,000 a year in interest on client funds held by them.

The auditor also noted that four out of ten notaires did not transfer the funds from the current to the deposit account with the CDC, and that interest earned on these accounts was retained by the notaires, although since this date it is likely the practice is less widespread.

The professional body of notaires, the Conseil supérieur du notariat, has defended the retention of interest as 'justifiée économiquement', arguing that the task of providing safe custody of client funds is carried out by their accounting staff, and paid to the notarial office, not to the notaire.

So it seems even the notaires are not saying it has a proper legal basis.

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