Interest on Funds Held in Trust in an Offer to Purchase

You paid the deposit in March. The transfer only registers in June. For three months, R150 000 of your money sits in the conveyancer's trust account, earning interest the whole time, and when you ask at the end who that interest belongs to, nobody can point to a line in the offer that says. The seller assumed it was theirs. So did you.

Who the trust interest belongs to

Interest on funds held in trust is the return earned on money the buyer pays into the conveyancer's trust account before transfer. Under section 86 of the Legal Practice Act, interest on the ordinary trust account goes to the Legal Practitioners Fidelity Fund. The buyer earns it only if the money is invested in a separate interest-bearing trust account on the buyer's instruction, and even then 5% goes to the Fund.

Key Takeaways

• Interest on your deposit reaches you only if the conveyancer invests it in a separate interest-bearing trust account on your instruction, under section 86(4) of the Legal Practice Act, with 5% of that interest paid to the Fidelity Fund. Without that instruction, interest on the ordinary trust account is paid to the Fund, so the instruction belongs in the OTP.
• The OTP must specify who is entitled to interest earned during the trust period. Without a written clause, uncertainty can surface when transfer approaches and expectations on both sides have drifted apart.
• The conveyancer acts on written instruction, not on assumptions of fairness. If the OTP is silent on interest, the conveyancer can't allocate it based on what seems equitable.
• The amount of interest earned is often modest, but the principle isn't. Your funds are committed for weeks or months while the transfer process runs its course. You have a legitimate interest in receiving the return on that commitment.
• Address interest in the OTP before signing, not after funds have already moved. It's a detail that disappears cleanly when agreed upfront and surfaces at the worst possible moment when left unwritten.

The problem: when waiting is treated as neutral

Once money has been paid into trust, most buyers stop thinking about it. The focus shifts to moving dates, packing boxes, and registration timelines. Interest feels like a technical detail, too small to count in the context of a property purchase.

This is where misunderstanding begins.

Money held in trust isn't frozen in time. It is held under strict rules, but it may still generate interest. If the agreement doesn't deal with that interest clearly, silence can turn into assumption, and assumption into disagreement.

Why this often comes as a surprise

You may be used to interest being linked to savings accounts or investments, not transactions. Sellers may assume that once funds are paid, everything connected to that money belongs to the sale itself.

Neither assumption is unusual. Both can be wrong.

The trust account exists to protect funds, not to redistribute benefit by default. Without a written agreement, expectations on both sides may drift apart, only to meet again at the end of the process when emotions are already invested.

How the law treats interest in trust

When funds are paid into a conveyancer's trust account before transfer, they are held on your behalf unless agreed otherwise. The interest on that money follows section 86 of the Legal Practice Act: in the ordinary trust account it is paid to the Legal Practitioners Fidelity Fund, and it reaches you only if the money is invested in a separate interest-bearing account on your instruction, less 5% paid to the Fund.

However, this position relies on what is written. Conveyancers act strictly on instruction. If the Offer to Purchase is silent, or if it allocates interest differently, that instruction governs what happens.

This is why interest shouldn't be left to inference. A single sentence in the agreement can prevent uncertainty later.

Why writing it down protects you

Interest earned during transfer is often modest, but the principle isn't. It speaks to fairness. Your funds are committed early, sometimes for weeks or months, while compliance and registration take place. Recognising that cost through interest acknowledges the waiting.

When this detail is agreed upfront, it disappears into the background where it belongs. When it is overlooked, it can surface at exactly the wrong time, as the transaction is reaching its conclusion.

Settled Certainty

Interest on funds held in trust isn't a strategy or a benefit to chase. It is a detail to be settled.

How the Legal Practice Act treats trust interest

The law on trust interest is more specific than many buyers expect, and it turns on where the money sits. Under section 86 of the Legal Practice Act, a conveyancer's practice must deposit money it holds on behalf of clients into a trust account at a bank with which the Legal Practitioners Fidelity Fund has an arrangement. The Act directs that interest earned on money in that trust account, and on surplus money the practice chooses to invest of its own accord, is paid over to the Fund.

A different rule applies when the client gives an instruction. Section 86(4) allows the practice, on the instructions of any person, to open a separate trust savings or other interest-bearing account and invest that person's money in it. Interest on that account is paid over to the person, less 5% which the Act requires to be paid to the Fund.

For the buyer, the practical point is plain. The route to the interest runs through an instruction to invest the deposit in a separate interest-bearing account under section 86(4). Without that instruction, the deposit sits in the practice's trust account, and the Act sends the interest there to the Fund.

Writing the investment instruction into the offer

The cleanest way to secure the interest is to put the instruction in the Offer to Purchase itself. A well-drafted deposit clause states that the deposit must be invested in a separate interest-bearing trust account in terms of section 86(4) of the Legal Practice Act, and names who receives the interest when the sale registers or falls away. The conveyancer then has a written instruction from the day of signing, not a question to settle at the end.

Timing counts too. A deposit paid on the day the OTP is signed and invested promptly earns interest across the whole waiting period. A deposit which sits uninvested for weeks while the instruction is clarified loses those weeks for good, and nothing in the later paperwork brings them back.

Where an estate agency rather than a conveyancer holds the deposit, the Property Practitioners Act governs that trust account instead, and the buyer should ask the agency directly how and where the money will be held and what happens to any interest.

The buyer's question before signing is short: where will the deposit sit, and who has instructed what? An answer in writing is like a fence post set in concrete; it stays exactly where it was put.

Contact Golden Homes before signing any offer. Our agents will confirm that your interest entitlement is addressed in the OTP before the document is presented for signature.

This topic raises specific questions. Here are the ones our agents hear most often.

For context on how trust interest connects to the broader payment structure, the purchase price clause covers deposits, lump sums, and payment deadlines as parts of a single binding agreement.

Frequently asked questions

Who is legally entitled to the interest earned on money held in a conveyancer's trust account?

Under section 86(5) of the Legal Practice Act, interest earned on money in a conveyancer's ordinary trust account is paid to the Legal Practitioners Fidelity Fund, not to the buyer or the seller. The buyer earns interest only if the conveyancer invests the money in a separate trust savings or other interest-bearing account on the buyer's instruction under section 86(4), and even then 5% of that interest is paid to the Fund. However, this position depends entirely on what is recorded in the OTP. Conveyancers act strictly in accordance with the agreement and any written instructions attached to it. If the OTP allocates interest to the seller, or provides that interest will be waived, that written term governs. There is no subsequent adjustment based on fairness or assumption. This is why interest entitlement should not be left unaddressed. Buyers frequently assume it belongs to them. Sellers may assume it forms part of the purchase price. Without a written clause, both assumptions can coexist until transfer forces a discussion that the agreement should have pre-empted.

How much interest is usually earned, and is it worth worrying about?

The interest earned on funds held in a conveyancer's trust account is typically modest. Trust accounts are regulated for protection, not structured for return, and the interest rates applied are not comparable to investment or savings rates. The amount earned depends on the sum held, the interest rate in force, and the length of time between payment and transfer. On a large purchase price held for several months, the amount may be meaningful. On a deposit held for a few weeks, it may be small. The monetary amount is not the primary reason to address interest in the OTP. The reason is alignment. When interest entitlement is agreed before signing, neither party is surprised at the end of the process. When it is left unaddressed, the question surfaces at the point where the transaction should be concluding smoothly, which is exactly when a disagreement about a relatively modest amount creates the most disproportionate friction.

What happens if the Offer to Purchase says nothing about interest?

When the OTP is silent on interest, uncertainty enters the transaction. In that case there is no instruction to invest the money under section 86(4) of the Legal Practice Act, so the deposit stays in the ordinary trust account and the interest on it is paid to the Legal Practitioners Fidelity Fund. A later written instruction can still move the money into a separate interest-bearing account, but only from that point on. Silence creates room for assumption on both sides, and assumption is unreliable in legal transactions. A seller may argue that interest should attach to the purchase price; a buyer may assume entitlement without having secured it in writing. The conveyancer, bound by professional duty, cannot resolve the question based on what seems fair. A clause stating who is entitled to interest gives the conveyancer clear instruction and removes the question from the equation entirely. In property transactions, details agreed in writing before signing rarely cause difficulty. It is the unwritten ones that surface when the transaction should be finishing.

Can interest entitlement be agreed after funds have already been paid into trust?

Yes, but it is significantly more complicated than agreeing it before signing. Once funds are in trust and the transaction is in progress, any agreement about interest requires both parties to engage with a question that was not addressed at signing, often at a point when attention is on registration timelines, moving dates, and handovers rather than financial entitlements. The agreement must still be made in writing to be enforceable. A verbal understanding between the parties does not bind the conveyancer, who requires written instruction to allocate interest. If the parties have divergent expectations, which is likely if the OTP was silent, reaching written agreement under time pressure can be difficult. The conveyancer cannot act until the instruction is clear. The practical lesson is that addressing interest before signing costs nothing and takes one sentence. Addressing it after funds are in trust, when expectations have already formed on both sides, costs time and goodwill that the rest of the transaction cannot afford to lose.