UK Accounting Glossary
An arrangement under which a deed, money, security, or other property or document is held by a neutral third-party (called an escrow agent) in trust for a first-party (called grantor, obligor, or promisor) for a specified period or until the occurrence of a condition or event. The escrow agent is duty-bound to deliver the asset or document in his or her possession to a named second-party (called grantee, obligee, or promisee) upon the fulfilment of the condition(s) or the happening of a stated event, as established in the escrow agreement.
a bond, deed, or other document kept in the custody of a third party and taking effect only when a specified condition has been fulfilled.
Funds paid by one party to another to hold until the occurrence of an event, after which the funds are released to a designated individual.
In contract law, escrow is a legal arrangement whereby an asset is held by a third party, called the escrow agent, for delivery from one party to another once certain conditions are met. Escrow is commonly used in high-value transactions. Documents, title to real estate, software code, and of course, cash, can all be held in escrow. In real estate, the buyer’s deposit is typically held in escrow until the closing, when title is transferred. The fiduciary duty of the escrow agent is generally to the seller. The importance of picking a trustworthy escrow agent cannot be understated. There have been several cases of attorneys who, while acting as escrow agent for their client, took funds held in escrow.
When Charles closed on the house, he didn’t need to move in right away, and he allowed the previous homeowners to remain there, once they agreed to pay rent into an escrow account with his lawyer.
Both parties in the bidding war over the antique collection were required by the seller to put ten per cent of their bid into an escrow account as a guarantee of their payment.
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This glossary post was last updated: 5th January 2020.