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BalticLegal Offline

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18.11.2022 13:26
Escrow account in Latvia Antworten

Escrow – is a contractual arrangement between transaction parties whereby an independent trusted third party (usually a bank) receives and disburses money or documents on behalf of the transaction parties, with the timing of this disbursement by the third party depending on the fulfillment of the contractually agreed terms of the contracting parties. It is widely used to support sale/purchase transactions such as buying a property, minimizing risk between parties and providing a mechanism that ensures trust and trust.

The buyer, seller, and bank sign an agreement in which they agree on the necessary documents, terms, and other terms needed to close the deal, as well as all the key milestones along the way. A trustee – the bank – acts as an impartial custodian of the money or documents, keeping the risk of fraud, for example, to a minimum for both parties.

Although escrow accounts are generally used during a real estate transaction, in practice they can be used in any transaction where there is a desire to reduce the risks for all parties, for example:

Buying a used car where the money can be released at the end of a warranty period.
Deposit for renting an apartment where the money is released after the tenant moves out according to the condition of the apartment.
Provision of construction services where all or part of the money can be released when the construction work is completed to a defined standard or when defined phases (milestones) of the work are completed.

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