Escrow Account
What does the escrow contract consist of?
The Escrow is a legal figure in which the parties agree to deliver the custody of a document or value to an impartial third party, so that this one retains it and delivers it to the other party, against the fulfillment of the conditions that are agreed. Under this figure, the escrow administrator, allows to give security to the parties to comply with the objective agreed in the escrow contract.
The escrow contract allows the buyer to deliver the premium to the escrow agent and, once the conditions of the business have been fulfilled, to carry out the purchase and sale. Thus, the escrow agent is an impartial third party, who will proceed to return the funds or goods in case the transaction is not carried out due to acts not attributable to the buyer, or to the seller when the agreed conditions are fulfilled.
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How does it work?
Escrow services serve a primary purpose in any real estate investment or commercial transaction.
When a client wishes to carry out a commercial or real estate transaction, the parties manage through an escrow agent, the constitution of a contract in which funds corresponding partially or totally to the amount of the purchase-sale are deposited prior to the signing of the purchase-sale option, for the custody and regulation of the escrow administrator, subject to their distribution once the contractually defined obligations have been fulfilled.
In Costa Rica, escrow contracts are widely used for the purchase and sale of goods (properties, shares), where the buyer and seller subscribe under an escrow contract, the premium funds or total price, subject to the fulfillment of specific conditions, such as availability of water, segregation, cancellation of liens, or others, so that once this process is completed the escrow agent delivers the same to the seller.
Escrow contracts are also widely used, so that the owner of a real estate property, who is based outside Costa Rica, contributes funds to an escrow account, so that the agent can make partial payments for the development of a project in stages, payment of taxes generated from the property, maintenance, or others.
Since escrow services are duly regulated in Costa Rica, escrow administrators must comply with several regulations in order to comply with current regulations, namely the Know Your Client policy and therefore determine the origin of the funds.
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Benefits
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