Client Money Obligations

Section 1

Purpose

Client money is money of any currency that a firm holds or receives for or from a client, including money held as stakeholder, and which is not immediately due and payable to the firm for its own account. Its handling is governed by RICS Client money handling (1st edition, October 2019, effective from 1 January 2020), whose section 2 sets mandatory requirements for RICS-regulated firms and for individual RICS members. A professional statement is a professional or personal standard for the purposes of the RICS Rules of Conduct, so a departure from a 'must' provision is a conduct matter. Firms that hold client money must also be registered with the applicable RICS Client Money Protection Scheme, whose rules are set out in RICS Client money protection scheme rules (Version 2, with effect from 18 June 2025).

Quantity surveying practices often assume the regime does not reach them because they invoice fees and never touch a client's funds. That assumption needs testing at appointment rather than later. A QS firm comes within the regime the moment it receives money to settle a third party's invoice on the client's behalf, holds money as stakeholder, or banks a receipt of mixed monies. The duty is both institutional and personal: section 2.1 makes every principal responsible for the compliance of everyone employed in the firm, and extends that duty to the directors of a regulated corporate entity and the members of a regulated limited liability partnership. Responsibility is also not delegable — where client money is held by a wholly-owned subsidiary or by an appropriately contracted third-party transaction service provider, the firm and its principals remain responsible for holding it securely.

Section 2

Key Principles

The mandatory requirements sit in section 2 of RICS Client money handling (1st edition, October 2019, effective from 1 January 2020). Section 2.2 binds RICS-regulated firms and section 2.3 binds individual RICS members personally. Provisions using 'must' are mandatory; the section 3 provisions using 'should' are good practice from which a departure has to be capable of justification to RICS.
Client money must be held in a client money account over which the firm has exclusive control, at a bank or building society authorised by the relevant banking regulator. The account title must include the word 'client' written in full together with the name of the firm, and a discrete account must carry a further identifier such as the client or property name (section 2.2.1).
Bank operating conditions must be confirmed in writing, including the bank's acknowledgement that money in the client money account will not be combined with or transferred to any other account of the firm, and that the bank is not entitled to exercise set-off or counterclaim against it for sums owed on the firm's other accounts (section 2.2.1).
Receipts must be paid into a client money account promptly. A receipt of mixed monies goes into the client money account in full, with the office element transferred out promptly — never the reverse. Interest or other benefit accruing on client money must be accounted for to the client unless otherwise agreed with the client in writing (section 2.2.3).
Each client's money may be used only for that client's matters, and must be returned immediately once there is no longer any reason to retain it. Before drawing fees from a client money account the firm must send an invoice or other written notification of the costs incurred, unless the client has given written authorisation for deduction of agreed fees without prior notification (section 2.2.4).
The firm's written client money procedures must be published on the firm's website, if it has one, and supplied free of charge to RICS or to any person who may reasonably require a copy. Reconciliations must be carried out regularly and demonstrably reviewed by a principal or senior staff member, and overdrawn balances must be prevented by the firm's systems and controls (section 2.2.5).
The RICS Client Money Protection Scheme is a scheme of last resort for members of the public. Compensation is limited to £50,000 per claim, within an overall cap of £10,300,000 on the scheme's liability in any one financial year — a cap shared with tenancy deposit claims, themselves sub-limited to £3,000,000, and with Property Agent claims (Scheme Rules Version 2, 18 June 2025, Annex: Compensation Limits). Fees paid in advance for professional work agreed to be performed, and clearly identifiable as such, are excluded from the scheme's definition of client money, and section 2.2.2 requires the firm to advise clients who pay fees in advance for surveying services that this money is not scheme-protected.

Section 3

Practical Application

Step 1

Decide, before accepting the instruction, whether it will involve client money. Ask whether you will hold or receive any money for or from the client that is not immediately due and payable to you for your own account — funds to settle contractor or consultant invoices, sums held as stakeholder, or the client element of a mixed receipt. Record the conclusion on the file. Where the answer is yes, the account, the written procedures and the scheme registration must all be in place before the first receipt, not assembled afterwards.

Step 2

Register with the correct RICS scheme. The RICS Client Money Protection Scheme for Surveying Services applies generally to client money held by RICS-regulated firms in the United Kingdom. The separate RICS Client Money Protection Scheme for Property Agents applies to client money held in connection with letting agency work and property management work in England. A firm doing both holds money under both schemes and must satisfy the rules of each.

Step 3

Open a compliant client money account and document it. Confirm the operating conditions with the bank in writing, including the acknowledgement that the account will not be combined with any other and is not subject to set-off, and check that the title carries the word 'client' in full plus the firm's name. Keep the bank's written confirmation with the practice's regulatory records — it is among the first documents RICS will ask to see.

Step 4

Write the firm's client money procedures and publish them. Section 2.2.5 requires publication on the firm's website if it has one, and free supply to anyone reasonably requiring a copy. The procedures should cover receipts, payments, reconciliation, unidentified funds, breach recording, and the escalation route for suspected misappropriation.

Step 5

Give the client the written information section 2.2.2 requires, at appointment: confirmation that the money will be held in a client money account together with the bank account details; confirmation that the firm has exclusive control and whether the account is in the name of the firm, a wholly-owned subsidiary or a contracted third-party transaction service provider; disclosure of all commissions earned while managing the property; how unidentified funds are dealt with; a copy of the written procedures; and, where fees are paid in advance for surveying services, the warning that those funds are not covered by the Client Money Protection scheme.

Step 6

Operate reconciliations and evidence the review. Reconcile the client bank accounts regularly and have a principal or senior staff member review each reconciliation, so the review is demonstrable rather than merely asserted. Configure the accounting system so that an overdrawn client balance cannot arise, and investigate and rectify immediately if one does.

Step 7

Run the unidentified funds procedure to the timetable the standard sets. Review any unidentified receipt as soon as possible and no later than one month from receipt (section 3.3), investigating through the accounting records, correspondence to the last known address, and attempted repayment through the banking system, and keep a record of each step. Only where the owner cannot be identified after three years from receipt and all avenues of investigation have been exhausted may the money be paid from the client money account to a registered charity, and a receipt and an indemnity must be obtained (section 2.2.3).

Step 8

Record and escalate breaches. Any breach must be investigated and remedied promptly on discovery, including replacing any money improperly withheld or withdrawn, and recorded in writing in sufficient detail — including the firm's consideration of whether to inform RICS and any affected client. If client money is misappropriated by any person, the firm must inform RICS, the client and its insurers immediately (section 2.2.6). An individual member must disclose any risk of, or actual, misappropriation to a senior member of the firm or to a regulator immediately, and keep a written record of that disclosure (section 2.3).

Section 4

Common Mistakes to Avoid

Assuming a QS practice sits outside the regime. The test is not the discipline practised but whether money is held or received for or from a client and is not immediately due and payable to the firm. A single receipt to fund a payment on a client's behalf brings the instruction inside section 2, with the account, procedure and scheme registration requirements that go with it.
Splitting a mixed receipt at the point of banking. Section 2.2.3 requires the whole receipt to be paid into the client money account first, with the office element transferred out promptly. Paying the office share directly into the office account is a breach even where the arithmetic is correct and nothing is lost.
Drawing fees from the client money account without prior written notification. Unless the client has given written authorisation for deduction of agreed fees without prior notification, an invoice or other written notification of the costs incurred must be sent to the client before the withdrawal (section 2.2.4). An internal fee note or a timesheet entry is not notification to the client.
Treating the protection scheme as insurance for the firm. It reimburses members of the public only and confers no financial benefit or protection on the regulated firm. The firm remains primarily liable to make good the loss; the scheme operates only where the firm cannot, and is capped at £50,000 per claim.
Holding the written procedures internally and going no further. Section 2.2.5 requires both publication on the firm's website, if it has one, and free supply on reasonable request. An unpublished procedure satisfies neither limb, and the omission is visible to RICS without any need for an inspection.
Relying on superseded RICS client money material. The 2011 helpsheet Clients' money: general advice for firms and the 2011 clients' money protection scheme firms' guide still circulate widely; they cite Rule 8 of the pre-2021 Rules of Conduct and an annual scheme cap of £5,300,000. The governing documents are the 2019 professional statement and the current scheme rules.

Section 5

APC Competency & Quick Reference

This topic is relevant to: Ethics, Rules of Conduct and professionalism (Level 3, mandatory), Client care (Level 2, mandatory), Accounting principles and procedures (Level 1, mandatory), and Business planning (Level 1, mandatory) — levels per the RICS Quantity Surveying and Construction Pathway Guide (December 2025), section 3.

What is client money, and when would a QS firm be holding it?

Money of any currency that the firm holds or receives for or from a client, including money held as stakeholder, and which is not immediately due and payable to the firm for its own account (RICS Client money protection scheme rules, Version 2, 18 June 2025). A QS firm holds it whenever it receives funds to settle third-party invoices on the client's behalf, acts as stakeholder, or banks a receipt of mixed monies — the regime is not confined to property agency work.

How must a client money account be set up and titled?

At a bank or building society authorised by the relevant banking regulator, under the firm's exclusive control, and containing nothing but client money together with any sums needed to replace money withdrawn in error and accrued interest on those amounts. The title must include the word 'client' written in full and the name of the firm; a discrete account must carry a further identifier such as the client or property name. The bank must confirm in writing that it will not combine the account with any other and will not exercise set-off against it (Client money handling, October 2019, section 2.2.1).

What must happen if client money is misappropriated?

The firm must inform RICS, the client and its insurers immediately, investigate and remedy the breach promptly on discovery including replacing the money, and record the breach in writing in sufficient detail with its consideration of whether to inform RICS and any affected client (section 2.2.6). An individual member who becomes aware of any risk of, or actual, misappropriation must disclose it immediately to a senior member of the firm or to a regulator and keep a written record of the disclosure (section 2.3).

Section 6

Pre-Appointment Checklist

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Client money assessment completed for this instruction and the conclusion recorded on file — will the firm hold or receive money that is not immediately due and payable to it?

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Registration confirmed with the correct RICS Client Money Protection Scheme — Surveying Services, Property Agents, or both

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Client money account opened with the word 'client' in full and the firm's name in the title, plus a further identifier where the account is discrete

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Bank operating conditions confirmed in writing, including no combination with other accounts and no right of set-off or counterclaim

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Written client money procedures prepared, published on the firm's website, and available free of charge on reasonable request

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Section 2.2.2 information issued to the client in writing — account details, exclusive control, commissions, unidentified funds, copy procedures, and the fees-in-advance warning

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Reconciliation routine established with a named principal or senior staff reviewer, and overdrawn-balance prevention configured in the accounting system

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Breach recording and misappropriation escalation route documented and briefed to every member of staff who handles receipts

Section 7

CPD Learning Outcomes

Understand the mandatory client money requirements in RICS Client money handling (1st edition, October 2019, effective from 1 January 2020), distinguishing the firm obligations in section 2.2 from the personal obligations placed on individual members by section 2.3.
Apply the regime at the pre-appointment stage by testing whether an instruction will involve client money, selecting the correct RICS Client Money Protection Scheme, and issuing the written information required by section 2.2.2 before the first receipt.
Evaluate a firm's client money controls against the standard — account titling, bank operating conditions, mixed-monies handling, reconciliation review, the unidentified funds timetable and breach recording — and identify the remedial actions required.

Section 8