So what is an Escrow?

According to the ‘legal dictionary’: “ Something of value, such as a deed, stock, money, or written instrument, that is put into the custody of a third person by its owner, a grantor, an obligor, or a promisor, to be retained until the occurrence of a contingency or performance of a condition.”

An escrow arrangement is an effective way of mitigating risk in a commercial transaction and is often used as an alternative to other often less flexible arrangements such as Letters of Credit, bank guarantees or to ensure the completion of financial transactions, especially where this may only be achieved over a period of time.

The term escrow initially applied solely to the deposit of a formal instrument or document; however, it is popularly used to describe a deposit of money.