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.

How this will work under the new Civil Code

On 1 October 2026, the National Council of the Slovak Republic approved the new Slovak Civil Code, which will take effect on 1 July 2027. For a Slovak transfer, escrow will become even more important. Withdrawal from the sale agreement will no longer automatically restore ownership. It will cancel the obligation, and the parties will settle with each other under the rules on unjust enrichment, so a seller whom the buyer has not paid after registration in the Land Register would be left with only a claim for transfer back. Escrow into which the buyer deposits the price before the application for registration is filed, and from which the buyer cannot unilaterally withdraw it, will significantly limit this risk.

A rule on security for the purchase price will also be added. If the parties agree that payment of the price will be secured, the buyer will have to prove to the seller within the agreed period that the security has been created. Otherwise, the seller may refuse to hand over the property and, after an additional period has expired without result, withdraw from the agreement. If the agreement designates escrow as such security, this rule would probably apply to it.

The rule under which the depositor may request release from escrow even before the agreed period has expired will remain. The escrow agreement should therefore continue to exclude it expressly. The new code changes neither the Act on the Legal Profession nor the Czech rules.

Sale agreements and escrow agreements concluded by 30 June 2027 will be governed by the existing law, even if the money is paid out later. For agreements signed from 1 July 2027, state directly in the sale agreement that payment of the price is secured by escrow. In both the sale agreement and the escrow agreement, align the period for depositing the price and the precise conditions for its release to the seller and for its return to the buyer; where release is tied to registration being allowed, also specify the permitted encumbrances and how the agreed state of affairs will be proved.

Status as of 22 October 2026: the act has been approved and was signed by the President on 20 October 2026, but has not yet been promulgated in the Collection of Laws. Until 30 June 2027, the rules described above in this article apply.