Glossary
Escrow
An arrangement under which part of the purchase price is held by an independent third party, typically a solicitor or bank, and released to the seller when agreed conditions are met or a period expires.
In plain English
Buyers use escrow to make sure money is available to meet warranty or indemnity claims, or to settle a price adjustment, without having to recover it from the seller later. Sellers accept it as a way of giving the buyer comfort while keeping the money out of the buyer's hands.
A retention or holdback achieves a similar result but the money stays with the buyer instead of a third party.
Why it matters
Escrow reduces the cash the seller receives on completion, so the amount, the period and the conditions for release are all negotiating points.
What to watch for
- Keep the escrow proportionate to the risk it is protecting against.
- Agree a clear process for claims and for release.
- Interest and the costs of the arrangement need to be settled.
Transaction language and legal treatment depend on the agreement and the jurisdiction. Written by Motion Advisory Partners as general guidance, not legal advice.