Jurisdiction(s):
United Kingdom

Related legal acts

Key definition

Escrow account definition

What does Escrow account mean? An escrow account is a segregated account held by an independent escrow agent (such as a bank or professional firm) into which money is paid to be released only when agreed conditions are met. The term is not generally defined in UK or Irish legislation; it is a descriptive label used across commercial, property, construction, M&A and pensions practice and documented in an escrow agreement, usually with the funds held on trust or as a stakeholder arrangement. Key features include ring-fencing from the parties’ own assets, third-party control, clear release mechanics (including evidence required), treatment of interest and fees, and...

Construction Escrow Accounts and Agreements: Payment Security, Operation, Drafting and HGCRA 1996 Compliance

Published by a LexisNexis Construction expert

Practice notes

This Practice Note examines why parties involved in a construction project may enter into an Escrow agreement (or escrow deed) to set up an Escrow account.

It explores the advantages of placing Funds into escrow, how an escrow account functions, and the kinds of provisions commonly included in an escrow agreement. A major worry for a contractor or sub‑contractor on a construction scheme is the possibility of not being paid. One practical way to tackle this is for the contractor/sub‑contractor to agree an escrow arrangement with its Employer and establish an escrow account. An escrow agreement can be put in place, and an escrow account opened, between a contractor and employer, a contractor and a sub‑contractor, or, more generally, wherever on a project one party must pay another for works or services. For ease, this Practice Note focuses on an employer–contractor arrangement. Within construction, an escrow account is primarily used to bolster confidence in the payer’s financial reliability and to provide the receiving party with certainty of payment. Although there is some administration involved in negotiating an escrow agreement (also referred to as an escrow...

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Web page updated on 21/05/2026

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