Property Escrows

Property escrows or real-estate escrows have been used in the United States for a number of years and are best known where a mortgage company establishes an escrow account in which to lodge and pay property tax and insurance for the term of the mortgage.


Since a mortgage lender is not willing to take the risk that a homeowner will not pay property tax, escrow is usually required under the mortgage terms.


However, as the world has changed, and as property investment across country borders has increased, the escrow account has become more important in order to mitigate risk.

European and UK property escrows


Within Europe, escrows have been used in the property market to protect deposits, or for time share properties, for lease-to-purchase agreements or, indeed, for rental agreements where the landlord has a duty to maintain the property as a part of the rental agreement.


An escrow can be a means of protecting deposits if, for example, a purchaser wishes to buy a property from a developer. Both the purchaser and developer can select an escrow agent with conditions for release of the deposit to the developer – such as completion of title checks, planning permission approvals, etc.

Buying a property overseas


Property buying abroad has always carried a degree of risk.


There are many good estate agents abroad but in some countries the industry is less regulated than in the UK.


Typically, a buyer would transfer the deposit to an escrow account – where neither party can get at the funds until the sale is finalised.

Good faith or goodwill deposits


In some countries it is common practice for good faith deposits to be placed in escrow accounts in order to seal the sale, with specific conditions for withdrawing from the sale complete with financial penalties if either party withdraws from the sale outside the agreed terms.


Even in specific states in the United States, such as Florida, it is normal for a purchaser to pay a goodwill deposit prior to making a formal offer in the form of a purchase contract.

Property escrows for rental issues


The rent escrow is a strong recourse for tenants who may otherwise have difficulty getting a landlord to maintain a property as agreed. These types of escrows are currently common practice in countries such as Greece.


Rental is paid directly into an escrow account and, as long as the property is maintained to the standard agreed in the terms of the escrow, then the monies are released to the landlord. Clearly there are equal agreed terms by which the tenant must look after the property and stipulations upon the tenant to make the landlord aware of any problems.

Buy-to-Let escrows


Rental escrow accounts may also facilitate the transfer of property related to a rent-to-buy property.


The escrow account functions by facilitating the transfer of the property according to the terms set out in the lease-to-own contract. The owner of the property would receive the funds at the time of the transfer of property ownership.

To learn more or to discuss a specific application (without obligation) call 0207 856 0129 and speak to a member of the Escrow Custodian Services team or email