Definition

Escrow is a contractual arrangement in which a neutral, regulated third party holds funds or assets on behalf of transacting parties and releases them only once the agreed conditions (e.g., milestone completion, delivery, signing, approvals) are met.

Why it matters

Escrow reduces counterparty risk, prevents premature/incorrect payments, and creates a clear, auditable path to completion. In the UK, using an FCA-authorised provider adds regulatory oversight and safeguarding - particularly valuable in large, multi-stage or cross-border transactions.

How escrow works in the UK

1. Agreement – Parties set out the release conditions in an escrow agreement.
2. Deposit – The buyer/client pays into the provider’s safeguarded client account.
3. Verification – The provider confirms cleared funds and checks any pre-conditions.
4. Release – Funds are paid out strictly per the agreed conditions/instructions.
5. Reporting – Closing statements and records are issued to all relevant parties.

Note: With dospay, GBP funds are safeguarded in segregated accounts at the Bank of England via our technology banking partners for maximum security.

Examples and use cases

• Property – Holding deposits until exchange/completion.
• Corporate/M&A – Consideration holdbacks, earn-outs and indemnity escrows.
• Construction – Retentions and milestone-based progress payments.
• Luxury assets – Yachts, jets, fine art and collectibles.
• Projects & procurement – Payment control across suppliers and workstreams.

Mini-FAQ

Q: Is escrow regulated in the UK?
A: Yes - when providing escrow as a payment service, providers must be authorised by the FCA and follow safeguarding and conduct rules.

Q: Who owns the money in escrow?
A: Neither party can use it freely. Funds are held for the benefit of the parties under the escrow agreement, segregated and safeguarded from the provider’s own assets, and released only under the agreed conditions.