Escrow Accounts in International Property Transactions

When buying property internationally, transferring significant sums to an unfamiliar counterparty in a foreign jurisdiction is one of the most financially consequential actions an investor takes. Escrow arrangements exist to mitigate the risk of this transfer — holding funds with a neutral third party until contractual conditions are met. Yet many buyers, even experienced ones, do not fully understand the escrow landscape: who holds the funds, what protections apply, what happens if the arrangement fails, and how requirements differ between markets.

This guide addresses these questions for HNW individuals buying property in the UK and internationally.

What Is an Escrow Account?

An escrow account is a bank account held by a third party — the escrow agent — on behalf of both buyer and seller. Funds are deposited into escrow by the buyer and released to the seller only when agreed contractual conditions are satisfied. In a simple residential sale, the condition is typically completion of the transfer of legal title. In more complex transactions (off-plan purchases, staged developments, commercial acquisitions), conditions may be multi-stage.

The escrow agent may be:

• A solicitor or conveyancer
• A licensed escrow company
• A regulated bank acting in an escrow capacity
• A notary (in civil law jurisdictions such as France, Spain, Greece, and UAE)

The key characteristic is that the escrow agent holds funds as a fiduciary, not as an owner — the funds do not belong to the agent and cannot be used by them for their own purposes.

Escrow in UK Property Transactions

In England and Wales, the equivalent of escrow is the "exchange and completion" mechanism administered by solicitors. At exchange of contracts, the buyer's solicitor transfers a 10% deposit to the seller's solicitor to hold as stakeholder. The remaining balance is transferred at completion, typically on a date set at exchange.

Solicitor client accounts in England and Wales are regulated by the Solicitors Regulation Authority (SRA). Client money must be held in a designated client account at an authorised bank, kept separate from the firm's own funds. The SRA Compensation Fund provides a backstop (up to £2m per claim) if a regulated firm misappropriates client funds.

UK conveyancing does not typically use a separate escrow agent — the solicitors on each side perform this function as part of their professional role. The system is well-established but it is important to use a solicitor on the lender's approved panel and verify SRA registration independently.

Escrow in UAE Property Transactions

The UAE has a developer escrow regime specifically for off-plan property transactions, introduced after the 2008 property crisis. Under Dubai Law No. 8 of 2007 (and equivalent Abu Dhabi regulations), developers must:

• Hold all buyer payments in an escrow account registered with the Real Estate Regulatory Agency (RERA)
• Obtain RERA approval before receiving funds from buyers
• Use funds only for the construction of the specific project
• Provide RERA with construction completion certificates to trigger each drawdown

Buyers transferring funds to a Dubai off-plan developer should verify the RERA escrow account number and the escrow bank before transferring any money. RERA publishes approved escrow accounts on the Dubai Land Department portal. Any developer asking for funds to be sent to an account other than the registered RERA escrow account should be treated as a red flag.

For completed properties in Dubai, transfer takes place at the Dubai Land Department (DLD), where funds — typically via a manager's cheque — are physically exchanged for the title deed. The DLD transfer appointment provides an institutional safeguard.

Escrow in Spain

Spain uses a notarial system for property transfers. The notary (notario) is a state-licensed official who authenticates the deed of sale (escritura) and registers the transfer with the Land Registry. Funds are typically exchanged at the notary's office on the completion date.

For new-build purchases in Spain, buyer deposits are protected by Law 57/1968 (recently updated to Law 20/2015), which requires developers to either hold stage payments in a separate bank account and provide a bank guarantee or insurance policy, or to use a regulated escrow arrangement. Buyers should always obtain the bank guarantee document (aval bancario) when making stage payments on Spanish off-plan purchases.

Escrow in Thailand

Thailand's property market has less developed statutory escrow protections than the UAE or Spain. The Real Estate Business Act B.E. 2543 provides a framework, but enforcement is variable and the escrow culture is not uniformly adopted by developers.

For foreign buyers in Thailand, it is strongly advisable to use an independent Thai lawyer to hold funds in a client account until conditions are satisfied, rather than paying directly to a developer. Condominium purchases — the only form of direct foreign freehold ownership in Thailand — should be structured with payment on or close to transfer of title at the Land Department, not in advance.

International Escrow Services

For large international transactions, specialist escrow service providers (including Intertrust, Sievert, and various bank-affiliated escrow services) offer international escrow arrangements. These are particularly relevant for commercial property, development joint ventures, or acquisitions where the underlying contractual conditions are complex.

Key features to assess in an international escrow provider:

• Regulatory status: Is the escrow company regulated (FCA authorised in the UK, DFSA in UAE, MAS in Singapore)? Unregulated escrow providers offer no regulatory backstop.
• Segregation: Are client funds held in segregated accounts, clearly separated from the company's own funds?
• Instruction triggers: What documentary proof is required to release funds? Vague release conditions create dispute risk.
• Dispute resolution: What happens if buyer and seller disagree on whether release conditions are met? Is there an arbitration mechanism?
• FSCS or equivalent coverage: If the escrow is held at an FCA-regulated firm, the FSCS may cover deposits if the firm fails — but only up to the applicable limit. For large transactions, this coverage is partial.

Wire Fraud and Escrow Fraud: A Growing Threat

Business Email Compromise (BEC) fraud targeting property transactions is a serious and growing threat. The typical pattern: a fraudster intercepts email communications between buyer and solicitor/escrow agent, substitutes fraudulent bank account details for the genuine escrow account, and the buyer unknowingly transfers funds to the fraudster's account.

Protective measures:

• Verify bank details by telephone, using a number obtained independently from the firm's official website — not a number supplied in an email alongside the account details.
• Use a verification call-back: Ask your bank to call the receiving firm to confirm account details before releasing large transfers.
• Be suspicious of any last-minute account detail changes: Solicitors and escrow agents do not typically change account details at the last moment; this is a classic fraud indicator.
• Avoid using email to share or confirm sensitive financial instructions: Use secure portals where available.

Once a transfer has been made to a fraudulent account, recovery is possible but not guaranteed — Faster Payments has no chargeback mechanism, but if you act quickly your bank can attempt to recall the payment and freeze the receiving account before the funds are moved on. Since 7 October 2024, the Payment Systems Regulator's mandatory reimbursement scheme requires UK payment firms to reimburse most authorised push payment (APP) fraud victims (up to £85,000 per claim, with the cost split 50/50 between the sending and receiving firm), though success and eligibility depend on the circumstances and reporting promptly is essential.

Stages of an International Property Escrow

A typical escrow sequence for an international off-plan purchase might look as follows:

1. Reservation payment (typically 1–5% of purchase price): Released to developer on execution of reservation agreement. Usually not held in escrow — this is a direct payment.
2. Exchange deposit (typically 10%): Paid into escrow on exchange of contracts. Released to developer on receipt of building permit or equivalent milestone.
3. Construction stage payments: Released from escrow against certified construction milestones (typically independent engineer certification).
4. Completion payment (remaining balance): Released to developer on legal completion and title transfer confirmation.

Ensure that your legal advisers review the escrow trigger conditions carefully before agreeing to this structure — vaguely defined release conditions are a common source of disputes.

Tax Treatment of Escrow Funds

Funds held in escrow pending property completion are generally not taxable — the buyer retains the beneficial ownership of the funds until release conditions are satisfied. Interest earned on escrow balances may be taxable in the jurisdiction of the escrow account and in the buyer's country of residence, depending on the terms of the escrow agreement and applicable double tax treaty.

For UK tax purposes, the date of exchange of contracts (not completion) is generally the relevant date for CGT and SDLT calculation purposes on the sale side. Buyers should confirm the relevant dates with their UK tax advisers.

Property purchase regulations, escrow requirements, and fraud risks vary by jurisdiction and change frequently. Always engage qualified local legal advisers and verify escrow arrangements independently before transferring funds. This guide is for general information only and does not constitute legal or financial advice.

How Global Investments Can Help

Global Investments has experience supporting HNW clients through property acquisitions in markets around the world. Our team can help you understand the local escrow conventions, identify reputable legal and escrow professionals in each market, and structure your transaction to minimise counterparty risk. Contact us to discuss your upcoming property purchase.