What Is a Planning & Development Escrow Account and When Should It Be Used?

Introduction

Modern planning and development projects - particularly in the UK - often come with financial obligations designed to mitigate the impact of new development. These obligations are commonly secured via Section 106 agreements (s106), requiring developers to contribute towards infrastructure, public realm improvements, affordable housing, or environmental monitoring.

While bonds and parent guarantees are frequently used, an increasingly accepted and regulator-friendly option is the planning and development escrow account. These accounts hold funds securely and independently, releasing them only upon satisfaction of planning triggers or project milestones.

This article explores how planning escrow accounts work, how they interact with Section 106 mechanisms, and where UK planning authorities have already incorporated escrow arrangements into their development frameworks.

What Is a Planning & Development Escrow Account?

A planning and development escrow account is a neutral, ring-fenced financial mechanism used to hold funds related to planning obligations. The account is typically held by a third-party escrow provider, like us, with legally binding instructions governing the release of funds.

These accounts are used to secure:

• Section 106 contributions (e.g. for highways, education, or healthcare)
• Environmental or ecological mitigation works
• Infrastructure or utility improvements tied to planning conditions
• Post-completion monitoring or long-term management obligations

Escrow ensures that contributions are:

• Available when needed, regardless of developer insolvency or delay
• Released only when agreed conditions are met (e.g. upon occupation or certification)
• Managed independently of the developer or local authority’s own banking arrangements

Real-World Examples in UK Planning

1. Brentwood Borough Council - SPD on Planning Obligations

Brentwood Borough Council's Draft Planning Obligations Supplementary Planning Document (2023) explicitly refers to escrow accounts as an acceptable mechanism for securing phased or trigger-based contributions under Section 106 agreements.

It notes that escrow can be used where payment timing is complex or where infrastructure delivery is phased, and recommends that the escrow agreement and spending protocols be incorporated into the legal agreement.

2. Redbridge Council - S106 Agreement Template

The London Borough of Redbridge provides a detailed Section 106 template agreement, which includes optional clauses for securing payments through mechanisms such as escrow. This reflects the broader shift towards incorporating escrow into the legal and procedural frameworks that underpin major planning consents.

3. General Guidance on S106 Security

UK Government planning guidance on planning obligations (updated periodically via the National Planning Policy Framework) emphasises that developer contributions must be legally enforceable, proportionate, and capable of being secured in advance.

While it does not prescribe escrow, this framework supports the principle of neutral holding mechanisms that protect the public interest - making escrow a compliant and logical alternative to bonds or charges.

Why Use Escrow Instead of Bonds or Guarantees?

Advantages of Escrow:

• Legal neutrality: The account is not controlled by either party.
• Full liquidity: Funds are already available, unlike some guarantees.
• Reduced risk: Funds cannot be diverted or delayed.
• Custom conditions: Escrow release can be tailored to match precise planning triggers.
• Transparent governance: Independent agents follow clearly documented protocols.

By contrast, bonds may involve credit risk, require negotiation with insurers, or offer only limited coverage. Parent company guarantees depend on the solvency and legal standing of the guarantor.

When Should Escrow Be Set Up?

Planning and development escrow accounts are typically established:

• During negotiation of the Section 106 agreement
• At the point of finalising planning conditions tied to financial obligations
• When phasing or staging of development creates conditional cash flow requirements
• Where multiple parties or joint ventures are involved

Setting up escrow at the outset of the planning consent process ensures that it is properly documented, acceptable to the authority, and smoothly integrated into the development timetable.

Conclusion

As UK planning obligations become more sophisticated and financially significant, escrow accounts offer a trusted and regulator-aligned method for managing developer contributions. They provide comfort to local authorities, transparency for developers, and assurance to funders that planning conditions will be met.

By aligning with Section 106 mechanisms and adopting neutral financial structures, escrow helps to professionalise the financial delivery of planning obligations - especially in complex, phased or multi-party schemes.

At dospay, our planning and development escrow services provide secure, Bank of England-held accounts with tailored release conditions and legally compliant structures. Whether you're securing s106 contributions, biodiversity net gain commitments, or off-site mitigation works, escrow provides a robust, future-proof solution.