Escrow account in Latvia

Escrow Account - is an arrangement made under contractual terms between the parties to the transaction, whereby an independent trusted third party (usually a bank) receives and pays out money or documents for the parties to the transaction, the timing of any such disbursement by the third party being dependent on the fulfillment of the contractual agreed conditions of the contracting parties. It is widely used to aid in sales / purchase transactions like buying a property, minimizing risk between the parties, and providing a mechanism that ensures trust and confidence.

The buyer, seller and bank sign an agreement in which they agree on the necessary documents, terms and conditions and other terms required to close the deal, as well as any critical milestones along the way. A trustee - the bank, acts as an impartial holder of the money or documents, thus keeping the risk of fraud for both parties to a minimum.

Although escrow accounts are generally used during a real estate transaction, in practice they can be used in any transaction that seeks to reduce risks for all parties, for example:

Buying a used car where the money can be released after a warranty period has expired. Deposits for renting an apartment, in which the money is released after the tenant moves out according to the condition of the property. Provision of construction work in which the money can be released in whole or in part if the construction work has been completed according to a defined standard or if defined stages (milestones) of the work have been completed. How does an escrow account work? The bank creates an escrow account and the buyer / client transfers the agreed purchase price or payment amount; As soon as the seller / contractor has the necessary documents or has fulfilled the relevant requirements - he submits documents or evidence to the bank; The bank informs the buyer / client that the seller has submitted the documents / evidence; If the documents / evidence meet the contractual requirements and the buyer / client accepts them - and the bank completes the transaction: transfer the money to the seller / contractor and hand over the original documents to the buyer / client. The transaction is then closed.

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Last-modified: 2021-10-13 (水) 22:08:59 (48d)