Escrow
Escrow is a financial arrangement in which a neutral third party — the escrow agent — holds funds or assets on behalf of two other parties until specific, pre-agreed conditions are fulfilled. Once those conditions are met (or not met), the escrow agent releases or returns the funds according to the agreement.
In real estate, escrow is used in several critical scenarios. During property purchases, the buyer deposits funds into escrow while due diligence, inspections, and legal checks are completed. The seller knows the money exists and is committed; the buyer knows the money will not be released until all conditions are satisfied. In rental operations, security deposits are increasingly held in regulated escrow accounts to protect both landlord and tenant — ensuring the deposit is returned at lease end (minus legitimate deductions) and cannot be misappropriated.
For real estate crowdfunding platforms, escrow serves a different but equally important function: investor capital is held in a segregated escrow account until a funding target is reached. If the target is not met, investors receive their money back automatically. This structure is required under the European Crowdfunding Service Provider (ECSP) regulation for platforms operating in the EU.
The regulatory environment around escrow in Europe is tightening. PSD2 and AMLD6 both emphasise the need for proper segregation of client funds, and property companies that hold tenant deposits in their own operating accounts face increasing scrutiny. Using a regulated escrow service provides both legal protection and operational clarity — the funds are clearly separated from the company's own money, with a full audit trail.