Lawyer escrow when buying property: why the money should not go straight to the seller

Imagine an ordinary flat purchase: the buyer sends the money, the seller signs the agreement and the application goes to the land register. Between these steps, one party has performed while the other has not. This is where the worst scenarios arise: the land register suspends the registration proceedings, the seller encumbers the property in the meantime or the parties simply fall out.

How escrow works

Lawyer escrow provides a straightforward solution: before the land register application is filed, the purchase price is paid into a separate lawyer’s escrow account, kept apart from the firm’s own funds. The lawyer releases the money to the seller only once the agreed conditions are met, typically after registration of the buyer’s ownership is approved.

If registration fails, the money is returned to the buyer under the escrow terms agreed in advance. The seller knows the money actually exists. The escrow agreement should expressly prevent the buyer from unilaterally withdrawing it before the conditions are met; otherwise, the general rules on deposit allow the buyer to request its return at any time (Section 749(2) of the Slovak Civil Code). Both parties have a third person overseeing the process.

Escrow + authorisation + land registration = a complete transfer

Escrow makes most sense as part of the full package: the lawyer prepares the sale agreement, authorises it (drafts it, verifies the parties’ identity and assesses its compliance with the law and the risk of loss, Section 1a(1) of the Slovak Act on the Legal Profession), arranges escrow and files the land register application. The entire transfer is handled by one lawyer who is liable for loss and holds compulsory insurance (Sections 26 and 27 of the Act on the Legal Profession).

What to ask when someone offers escrow

1. Where exactly will the money be held? The right answer is a separate escrow account, kept apart from the firm’s own funds.
2. Exactly when will it be released? The release conditions should be set out clearly in the escrow agreement.
3. What if registration fails? The agreement should state clearly to whom, and when, the money will be returned.

We provide escrow for property transfers in both Slovakia and Czechia, including where a Slovak buys in Czechia or vice versa. For a Czech transfer, this is lawyer’s escrow under the Czech Legal Profession Act, under which the funds may be held only in a special account designated “advokátní úschova” (§ 52g(2) of Act No. 85/1996 Sb.). See the escrow terms on our Lawyer’s escrow of the purchase price service page and the complete transfer in Slovakia on our Complete property transfer page.