Escrow account in France: definition, how it works, duration and cost

Key points

• An escrow account freezes a sum with a neutral third party: nobody can touch it alone until the agreed conditions are met.
• Escrow is conventional when the parties choose it (article 1956 of the French Civil Code) and court-ordered when a judge imposes it (article 1961).
• With a lawyer, the funds sit on a dedicated CARPA sub-account, checked at every movement and out of reach of the lawyer's creditors.
• It lasts as long as the risk: a few months for the sale of a business, often one to two years to secure a share sale.
• The funds go to the beneficiary once the conditions precedent are met; otherwise they return to the depositing party.

What is an escrow account?

An escrow account is the account on which a sum is deposited with a trusted third party, who undertakes to hold it and then hand it to the person entitled to it. The French Civil Code defines conventional escrow as the deposit of a disputed item with a third party who undertakes to return it, once the dispute is over, to whoever is entitled to it (article 1956 of the French Civil Code). In business practice, the "dispute" is usually an uncertainty: will the financing be obtained, will a liability come to light, will creditors lodge an opposition?

The mechanism answers a simple problem: in a transaction where one party must perform before the other, the one who performs first takes a risk. Escrow removes that risk by neutralising the price: it is available, but nobody can take it until the agreed conditions are met.

Conventional or court-ordered escrow

Conventional escrow arises from an agreement: the parties choose the escrow agent and set out in an agreement the conditions for releasing the funds. It is the tool for voluntary transactions: sales, financing, settlements. The escrow agent may be paid (article 1957 of the French Civil Code), and escrow may cover movable as well as immovable property.

Court-ordered escrow is ordered by a judge, in particular for an item whose ownership or possession is disputed, or for assets a debtor offers to discharge a debt (article 1961 of the French Civil Code). The escrow agent is then chosen by the parties or appointed by the judge, and is bound by the same obligations as in conventional escrow (article 1963 of the French Civil Code). The differences are detailed in our analysis conventional or court-ordered escrow.

How an escrow account works, step by step

• Agreement: the parties and the escrow agent sign an agreement setting the amount, the term and the conditions precedent for release.
• Checks: the escrow agent identifies the parties and verifies the source of funds (KYC and AML/CFT).
• Payment: the depositing party transfers the sum to the escrow account; from that moment, it can no longer take it back alone.
• Holding: the funds remain locked and ring-fenced, for the exclusive benefit of the transaction.
• Completion: on the agreed supporting documents, the escrow agent releases the funds to the beneficiary, or returns them if the conditions are not met.

Who can hold an escrow account?

Several professionals perform this role, each within their own framework. The notary is the usual escrow agent in French real estate sales, notably for the deposit paid on the preliminary contract. A commissaire de justice (bailiff) may hold funds in their office. Some banks offer escrow accounts for large or international transactions. Finally, the lawyer acts as escrow agent in sales of shares, businesses or assets, financings and settlement agreements.

The choice depends on the nature of the transaction rather than on a hierarchy of safety: where the transaction does not require a notarial deed, it is natural to entrust the escrow to the lawyer advising on it. See our comparison escrow with a lawyer or a notary.

Escrow with a lawyer: the CARPA account

A French lawyer never holds clients' funds directly: all fund handling passes through the CARPA (Caisse des Règlements Pécuniaires des Avocats) of their bar. For an escrow, a sub-account is opened for the transaction: the funds are ring-fenced there, separate from the firm's money and other matters, and every movement is checked by the CARPA, which verifies the reason for the payment and the identity of the beneficiary.

Two practical consequences follow. The funds are out of reach of the lawyer's creditors. And they do not earn interest for the parties: the financial income of CARPA accounts funds access to justice. Escrow is a safeguard, not an investment. To follow the path of the funds, see what happens to escrowed money.

When to open an escrow account

• Share sale: escrow of part of the price to secure the representations and warranties, an earn-out or a price adjustment.
• Sale of a business: escrow of the price during the creditors' opposition period and the buyer's joint tax liability period.
• Financing and capital increase: funds reserved and released once security is in place or the transaction is recorded.
• Settlement agreement: sums paid as soon as the other party has performed its side.
• Valuable assets: yacht, classic car, artwork, with the price released after verification and delivery.
• Real estate: deposit or immobilisation indemnity, usually held by the notary.

How long does an escrow last?

There is no single duration: it is set by the agreement, according to the risk to be covered. In practice, escrow of the price of a business usually lasts three to five months, to cover oppositions and tax deadlines; escrow securing representations and warranties often lasts twelve to twenty-four months; escrow linked to a financing or a dispute runs until the conditions are met or the dispute is settled. The parties may bring the release forward by mutual agreement; an incident (opposition, warranty claim) may delay it. See how long an escrow lasts.

Release of funds and conditions precedent

The agreement lists the supporting documents on which the escrow agent releases the funds: signed completion deed, certificate of no opposition, release of security, written agreement of both parties. If the conditions precedent are met, the funds go to the beneficiary; if they fail, they are returned to the depositing party or allocated as agreed, often after a long-stop date.

In the event of disagreement, the escrow agent does not decide: it keeps the disputed sum until an agreement or a court decision, and may release the undisputed part if the agreement allows. It cannot be discharged from its mission before the dispute ends except with the consent of all parties concerned or for a cause found legitimate (article 1960 of the French Civil Code).

If the sum is not paid into escrow

Failure to pay by the agreed date is a breach of contract. Depending on the main agreement, the other party may serve formal notice, rely on a termination clause or claim damages. To avoid this, the escrow agreement sets the payment deadline, the receiving account and the references to quote, and may provide for a bank guarantee as a substitute.

The escrow agreement: essential clauses

• the identity of the escrow agent and its acceptance of the mission;
• the escrowed amount or how it is calculated, and the receiving account;
• the conditions precedent and the supporting documents required for release;
• what happens to the funds if the conditions fail, and the long-stop date;
• what to do in the event of disagreement between the parties;
• the escrow agent's fees and how they are shared between the parties;
• the governing law and competent courts, especially in an international transaction.

Each of these clauses is discussed in our analysis escrow agreement: essential clauses.

The escrow agent's liability

The escrow agent must hold the funds, release them only on the agreed conditions and account for its mission. The French Civil Code requires a court-appointed custodian to take "reasonable care" of the assets entrusted (article 1962 of the French Civil Code). An escrow lawyer also incurs professional liability, covered by insurance, and remains subject to professional ethics and CARPA oversight.

How much does an escrow account cost?

The escrow agent's fee is freely agreed in advance, and the agreement allocates it between the parties. With a notary, it forms part of the costs of the real estate transaction. At Fidens, fees are based on the transaction amount under a sliding scale, with a minimum of €1,800 excluding VAT, communicated before the matter is opened. Any bank charges, in particular for international transfers, are additional.