Escrow account services
Escrow account services
- An escrow account (similar to a stakeholder account) is an account whereby the release of funds is subject to the fulfilment of certain events. It is useful in the sale of property or goods with the money being held until a specified event has occurred.
- Escrow accounts can be operated by either reputable finance houses or legally qualified personnel usually either solicitors or notaries. An account will be established whereby an agreement is drawn up specifying the conditions that need to be met prior to money being released. The person operating the escrow account needs to define precisely what authorisation, whether written or oral, needs to be provided and in what form. On the provision of such information or confirmation money is released to the party who will benefit from the account.
- The agreement that will be signed on the establishment of an account is a legally binding contract setting out the terms of the particular business transaction for which the money is being paid. The agreement will set out the terms of the transaction and any conditions that require to be met. It will specify how each party will notify the person who is charged with holding the account in order that money may be released. This means that parties to the agreement may be in different countries and can rely on an independent inspection firm or independent verification by a notary or otherwise.
- It would be our usual practice for escrow accounts to be operated by a solicitor. This is a representative of the Supreme Court of England and Wales who may give a legally binding undertaking which can be relied upon in court. A breach of an undertaking can result in disciplinary procedures, a fine, the payment of compensation an ultimately being struck off the roll as solicitor and prevented from carrying on ones profession. This is an extremely heavy sanction and no solicitor of any repute would give an undertaking that is not complied with.
- Services of a solicitor cost from £200.00 per hr and generally preparation of the contract and working out of the instructions takes three hours (the cost will therefore be from £600.00)
- A person residing abroad wishes to sell a property in his home country. Providing the exact mechanism for the sale is agreed ie. what documents need to be stamped and notarised or otherwise witnessed an escrow agreement can be drawn up whereby on the execution of documents in an agreed manner, money deposited in an escrow account will be released to the seller.
- It can also be useful in trading transactions where a cargo has been ordered. Rather than the provision of a letter of credit, money can be deposited in an escrow account and upon the seller fulfilling the contractual terms to the satisfaction of the buyer which may include an independent inspection by SGS or another firm, money will be released to a seller.