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ShieldpayAug-04 20235 min read

Escrow uncovered: Exploring escrow's diverse range of applications in transactional law

We explore the diverse range of applications escrow services has in transactional law to uncover how law firms can leverage the value of  having a streamlined process for safeguarding and holding funds when managing high value, complex transactions. 


Escrow services have been an integral part of transactional law for many years. Traditionally associated with property deals, their role has significantly expanded and diversified as legal practices have evolved. Today, escrow services are being deployed strategically in a wide array of sectors, from banking and finance to international trade, energy, and entertainment to manage risk. 

These services provide an essential layer of financial security and trust in transactions, offering a safety net against unexpected mishaps and ensuring all parties meet their obligations. This article provides an overview of various use cases for escrow services, shedding light on the varied ways lawyers and their clients can utilise this payment mechanism to safeguard their interests and add a level of assurance in their transactions.

Whether you are an experienced legal practitioner or new to the field, understanding these applications can greatly enhance your legal strategies and outcomes for clients. 

Real Estate Transactions 

Escrow services' most familiar role is in real estate transactions. 

For these transactions, an escrow agent holds funds while buyers and sellers iron out the final terms of the property purchase. These are lengthy transactions, and delays are a major risk. There are a lot of stakeholders to coordinate, reports and surveys to be conducted and documentation to be negotiated which can all hold up the exchange date. Escrows are used to safeguard against defaults, mitigate the inherent trust issues present in such significant transactions, and ensure a straightforward and fast completion of the deal when all conditions have been met.  

Also within this sector, there are cases where escrow services are beneficial to hold rental deposits and even secure deposits on the purchase of freehold and long leasehold property interests. When it comes to managing these high value sums, payer and payee want piece of mind that the other party is legitimate, and the property is in the expected state upon purchase or rental. Escrow services foster a secure environment for the transaction and assurances in the event that something wasn't as it seemed.  

Mergers and Acquisitions (M&A) 

Escrow accounts play an indispensable role in complex M&A transactions. They safeguard significant sums, ensuring a smooth transfer of assets. Escrow services cater to various needs within M&A, including holding funds for deferred considerations, W&I retentions, title transfer holdbacks, third-party debt finance, and even SPAC considerations.

A noteworthy use of escrow in this sector is the provision of 'indemnity escrow' where funds are retained to secure indemnification obligations, thereby offering the buyer protection against potential losses from the seller's breach of representation and warranties. 

We have previously explored the uses of Escrow and W&I insurance in M&A transactions, considering the differences, similarities and synergies of the two. Read all about it in this article.  

Banking, Finance, and Capital Markets 

In the banking and finance sectors, escrow services help secure bonds or loan facilities, providing assurance for the availability and timely delivery of funds.  

In the context of capital markets, they can be employed to manage investor holdings, oversee the payment of carried interest distributions to fund managers, and securely hold investment monies pending the completion of equity investment transactions. These applications bolster the integrity and trustworthiness of transactions, essential in these high-stakes sectors. 

Shieldpay recently announced our partnership with TISE Private Markets. We are integrating our platforms to embed secure payment and escrow services into TISE-listed securities transactions, fostering confidence and efficiency in the process. Read more here.  

Litigation, Arbitration, and Employment Disputes 

In contentious scenarios, including arbitration, litigation, and employment disputes , escrow services ensure the secure holding and distribution of final awards or settlement monies. Funds are safely held until the execution of a Settlement Agreement or satisfaction of deal conditions, offering a safety net during sensitive legal proceedings. 

A key use case for Shieldpay’s escrow solution is in class actions. We have worked with law firms such as Pogust Goodhead to verify class members through automated robust KYC checks and open banking powered bank account verification; hold compensation funds until payment conditions are met; and disburse funds out to the individual claimants. Read more about our mass disbursement process here.  

Construction and Infrastructure 

In construction contracts, escrow accounts can manage payments to contractors and subcontractors, reducing non-performance risk. They can also provide 'security for expenses' in Party Wall Act 1996 disputes. By releasing funds in stages corresponding to project milestones, they prevent disputes over payment and facilitate smoother project execution.  

An adjacent example of this use case is the work we have been doing with bridging and commercial lender Avamore Capital for managing their milestone payments and controlling fund flows for property development projects. Read more here.  

E-commerce, International Trade, and Shipping 

Escrow services provide a trusted mechanism in e-commerce transactions, particularly for high-value items. They hold funds until the buyer confirms receipt of goods in the agreed condition, ensuring a fair and secure transaction process. In international trade and shipping, escrow services are a reliable alternative to letters of credit, bank guarantees, and open accounts, holding deposits, instalment payments, and securing contributions for settling mutual claims. 

Sports, Media, Entertainment, and Luxury Goods 

In the domains of sports, media, and entertainment, escrow can secure prize money, adding an extra layer of trust and transparency. In the art, antiquities, luxury goods, and private wealth sectors, escrow services can hold purchase monies during the sale of valuable assets, offering much-needed security. 

Energy and Natural Resources 

In the energy sector, particularly within renewables and oil & gas, escrow services can hold funds for end-of-lease decommissioning costs, non-compliance with reinstatement obligations, and the abandonment and decommissioning of facilities. They can also hold monies against approval of concept select reports by regulatory authorities, assuring regulatory compliance and environmental protection. 


The applications of escrow services are as diverse as they are crucial. They bring versatility and security to a wide range of transactions beyond the conventional real estate deal. By understanding these diverse use cases, lawyers can develop more innovative approaches to managing risk in transactions, ultimately providing better outcomes for their clients. 


 If you want to learn more about how Shieldpay works with law firms to simplify complex transactions, manage and protect high value funds, and solve compliance complexity, get in touch with us.