19 November 2008 23:54

Escrow Accounts – Are They Worth it?

A major consideration as far as a contractor is concerned is getting paid. With the economic downturn, receiving payment for works carried out becomes even more critical. One way of achieving security is to agree with the employer that funds should be paid into an Escrow account. An escrow account is a separate account, usually in the names of the employer and the contractor but held by an independent bank who will not release the monies in that account until certain criteria are met e.g. The presentation of interim valuation certificates issued and signed by the contract administrator/architect.

This means that the contractor has the comfort of knowing that the money is available to him provided he carries out his side of the bargain by completing the works to the contract administrator’s satisfaction.

Escrow accounts are used on a regular basis where contracts involve work abroad and foreign clients. They are not so common in the UK but may become more acceptable in the future.

The one advantage that an Escrow account is that if the employer becomes insolvent, then the Escrow account is one that cannot be appropriated by the liquidator.

If you would like any further information on this or other construction issues then please contact Sarah Shemmings on office@shemmingsllp.co.uk.

February 2008

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