Riverside Escrow offers a variety services that can be used in the world of construction and development. From fixed fee escrow agreements relating to party wall matters, to escrow agreements relating to the Buying and selling of Real Estate, to bespoke agreements for Construction Escrow Accounts, we offer our clients high quality escrow services to meet their individual needs. Below we have some of the ways Escrow Services can be used in construction and development.
As part of ‘The Party Wall Act 1996’ you may be required to provide ‘Security of Expenses’. This means that, when carrying out building works that involve a shared wall or boundary, your adjoining neighbours have to have a form of security provided before work commences. In the case that any problems arise in the course of the works being carried out, they then know that funds have been set aside to cover any incurred costs.
A common way to provide Security of Expenses is to place an agreed amount of funds into an Escrow Account. The funds are then held in the Escrow account until pre-determined conditions have been met, these normally require signed confirmation from individual Party Wall Surveyors acting on behalf of each party.
Once the project is complete and all conditions have been met, the Escrow funds are then released from the escrow account, to the relevant party, as directed by the Party Wall Surveyors.
Riverside Escrow are able to draft and provide tailored Party Wall Escrow Agreements that set out the conditions to be met, and the holding and releasing of Escrow Funds. This gives the adjoining Party Wall owners comfort, knowing that the funds held in escrow are available should any damage to the property occur and meets the requirements of the Party Wall Award.
It’s no secret that embarking on small or large scale construction project requires funding, and a skilled team of contractors. Over the years we have heard many stories in the press, of development companies becoming insolvent and no longer being able to pay their contractors.
Whilst there are a number of statutory and other rights that contractors can fall back on, these usually only provide outcomes after the developer has missed payments, and even then, they may not protect against insolvency and cannot guarantee payment. This is where the use of a Construction escrow account can offer a solution.
By placing funds into a construction escrow account, the developer is able to guarantee the funds are available for the project and contractors can be sure that the funds are set aside for their payment. These escrow payments, can be structured on specific milestones for the project in question.
Riverside Escrow are able to draft a bespoke Construction Escrow Agreement that contain pre-agreed conditions that must be met by the contractors before any payments are released. These conditions are agreed upon by both the developer and the contractors and drafted into the Construction Escrow Agreement by Riverside Escrow.
Once these conditions have been met, the escrow service provider can release the funds form the escrow account to the relevant party, as set out in the Construction Escrow Agreement.
Escrow services are commonly associated with buying and selling property. In the USA being ‘in escrow’ is a term indicating the Buyer and Seller of the property are currently negotiating the price and terms of the sale.
Much in the same way, escrow services can be used in the UK when buying or selling a property without the use of a mortgage. Putting money in escrow when buying a house or property can provide certainty to both seller and buyer throughout the transaction.
The Escrow Agreement will outline the conditions agreed upon by both the seller and buyer of the property, for example any maintenance of the property to be fulfilled by the seller before exchange, or after completion. Once these conditions have been agreed, the buyer will deposit the funds into the escrow account to be held against completion of the remedial work. Upon the completion of the conditions outlined in the Escrow Agreement, the escrow service provider will then release the funds to the seller of the property.
This process gives the seller peace of mind when carrying out any agreed works, allowing the seller to know that funds for the purchase will be available upon completion.
It also allows the buyer to be confident that the seller is committed to the transaction, and is making the necessary steps to complete the sale of the property in accordance with the agreed upon terms.
Riverside Escrow was instructed by a surveyor, whose client required escrow services as this was mandated in a party wall award. The award was granted as part of construction work being carried out at the client’s property, which shared adjoining walls with two neighbours.
Often where neighbours share an adjoining wall on their properties, and one neighbour wants to develop their side of the wall, a party wall award is applied for. This permits the first neighbour to develop their property, but protects the adjoining neighbour, by requiring the first neighbour to make funds available in case the works cause damage to the adjoining neighbour’s property. These funds will be held in escrow pending completion of the works.
In this case, the client was developing both sides of his property so required a party wall award and escrow account with each adjoining neighbour on either side of his property. Riverside Escrow set up the escrow arrangement with each adjoining owner and once the escrow agreement had been drafted and entered into, accepted the funds into its client account.
The sums held were security in respect of the works, and payable to the adjoining owners if certain conditions were met. Whilst the hold and release conditions are a matter of negotiation between the parties, in this case, the escrow sums were to be held until the developing neighbours appointed surveyor and the adjoining neighbours appointed surveyors inspected the property and works. Together they would either agree the sums should be returned in full to the developing neighbour or, all or part of the sum should be paid to the adjoining neighbours. If there was a dispute between the surveyors, this would be dealt with by appointment of a third party surveyor to review and provide a determination.
Riverside Escrow was able to receive and hold the funds in our dedicated client account for the duration of the works being carried out, and by setting up the escrow agreement our client was able to securely hold the funds detailed in the Party Wall Award. This gave peace of mind to both our client, as well as the owners of the adjoining properties, should any damages occur throughout the construction process.
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