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Escrow Agent – Where are you?

Escrow Agent – Where are you?

David Tan
An escrow agent in real estate business is an agent that is responsible for holding the money and title deed pending fulfillment of other conditions by the parties to the contract. This is a good risk management method.
Typically, the seller of a plot of land or house would let an escrow agent (neutral agent) hold the title deed, and the buyer would let the escrow agent hold the deposit payment. The escrow agent should release the title deed, plus arranging for the ownership title transfer of property to the buyer, and hand the deposit over to the seller upon fulfillment of the contractual conditions.
This method minimizes the risk of the buyer losing the deposit money to the seller if the seller does not sell the property to the buyer on the agreed day of sale due to (a) the seller subsequently finding another buyer who is prepared to pay a higher purchase price, (b) the seller not completing construction of the property for sale, (c) the seller disappearing with the deposit money or (d) the seller not being able to release the mortgage or other kinds of encumbrances attached to the property, etc.
Furthermore, the involvement of an escrow agent protects the seller and the buyer from other kinds of fraudulent and deceptive practices.
In Thailand, however, escrow agent service was never solely offered by commercial banks or financial institutions because there had been no specific laws or regulations on this until May 19 this year. Under the Escrow Business Act B.E. 2551 (2008), effective as of May 19, 2008, an escrow agent must be a financial institution, a commercial bank, a financial company or other juristic persons proscribed under ministerial regulations.
Some of the important provisions under the Act are:
1) An escrow contract must be drafted, signed by the seller, the buyer and the escrow agent, and must stipulate certain conditions.
2) The escrow agent must be a neutral party with no connections whatsoever to either the seller or the buyer.
3) The escrow agent must open an escrow bank account with a financial institution for the contractual parties and deposit monies held into this escrow bank account.
4) In the event that the escrow agent is deemed a debtor under a court execution order, all property, monies, title deeds or other legal documents of the contractual parties that are held by the escrow agent are protected and are not ceased or used as payment for the escrow agent’s debt.
5) The escrow agent must inform an official at the Land Office in writing that the property is under an escrow contract and that transfer of ownership is not permitted until the escrow agent provides the Land Office with a written notice authorizing transfer of ownership. The official of the Land Office must make a record of these as evidence.
6) If there is a disagreement between the buyer and the seller under the escrow contract, the escrow agent shall not transfer money or property to either party until the contractual parties have reached an agreement or as according to a court order.
According to the Act, a financial institution, commercial bank or financial company which wishes to operate as an escrow agent must obtain a license from the Ministry of Finance in order to provide escrow agent services. The application and granting of this license shall be according to the standards, procedures and conditions as provided by ministerial regulations. Thus far, no license has been granted to any financial institution, commercial bank or financial company to provide escrow agent service. It may be some time until we will be able to find an escrow agent who will assist in a real estate transaction.
This means that we will still have to use other kinds of protective measures, e.g. in a sale and purchase of property contract, the seller and buyer may open a joint bank account to receive and hold the buyer’s deposit. The withdrawal or deposit of money to or from the bank account may then only be made jointly by the seller and the buyer.
David Tan is a Lecturer of Business Law at Asian University and author of the book “A Primer of Thai Business Law,” available at www. chulabook.com or call 038 233 490 to order. Any questions or comments to David should be sent to blas.inter @yahoo.com.