Where escrows are used
Escrows appear in business acquisitions, where part of the price is held back to cover indemnity claims, and in real estate, where a contract deposit is often held by a seller's attorney or a title company. They are also used in construction, in settlements, and in software licensing, where source code is held in case the vendor fails. In each setting, the escrow agent's job is narrow: hold the property and release it as the agreement directs. The agent is usually not there to decide who is right.
When the parties disagree about release
A typical escrow dispute begins when one party demands release and the other objects. Many escrow agreements tell the agent to hold the funds until it receives joint written instructions or a court order, and some allow the agent to deposit the funds with a court and let the court decide. That means the side that wants the money usually has to act, whether by negotiating joint instructions or by starting a proceeding. Keep the escrow agreement, the underlying contract, every release request and objection, and the agent's communications. Read the notice provisions carefully, since a claim against an escrow may have to be made in a specific form within a set period.
Drafting and resolving escrows
When we draft an escrow agreement, we focus on clear release triggers, how a claim is made and disputed, what happens to interest earned on the funds, and how the agent's fees and liability are handled. Vague release language is a frequent source of later disputes. If a dispute is already underway, we review whether your demand or objection complied with the agreement, whether the other side's position has a basis, and whether the amount at stake justifies litigation or favors a negotiated split. An escrow agent who is also one party's attorney raises questions of its own, and we look at those too.
