Notice: The following is a draft escrow agreement prepared for the Board of Trustees of the Lawyers Fund for Client Protection of the State of New York. It is being circulated to members of the New York bar for comment. All comments and suggestions are welcome. They can be addressed to Frederick Miller, Esq., New York Lawyers Fund, 119 Washington Avenue, Albany, New York 12210. Telephone 800/442-3863 or E-Mail your comments to:
escrow@nylawfund.org. (10/97)
Escrow agreement between the buyer and seller of real property and their attorneys as escrow agents. The use of the singular in this agreement shall be deemed to include the plural, and vice versa, whenever the context requires. If more than one person is buying or selling the premises covered by this agreement, their obligations shall be joint and several.
The buyer and seller have entered into a contract to purchase and sell residential real estate. The premises to be conveyed to the buyer are located at:
As a term of the contract of sale, the buyer is obligated to provide the seller with a
down payment on the purchase price, to be held in escrow.
To safeguard the down payment from loss, the buyer and seller, and their attorneys,
agree to the escrow arrangement set forth in this agreement. For that purpose, this agreement
designates the buyer and seller as "escrow beneficiaries"; their attorneys as joint "escrow
agents"' and the buyer's down payment as the "escrow deposit".
Escrow agents acknowledge the receipt of the escrow deposit, for the seller's account,
in the amount of $____________.
Escrow agents acknowledge their fiduciary obligations to the escrow beneficiaries to
safeguard the escrow deposit in a special bank account, and to provide to them a complete
accounting of all financial transactions relating to that escrow deposit.
Escrow agents shall be entitled to the following compensation for their services as
escrow agents:
With the consent of the buyer's attorney, the down payment may be deposited in an
attorney escrow, attorney special or attorney trust account (sometimes designated an IOLA
account) that the seller's attorney or law firm maintains in the practice of law. Nothing in this
agreement shall be interpreted to require the escrow agents to establish a joint bank account
solely for the deposit of the down payment, or to require the dual signatures of the escrow
agents for any withdrawal of the escrow deposit.
The escrow deposit shall be maintained in a bank account with the following banking
institution in the State of New York at its branch at the following address:
No later than fifteen (15) business days after the date of this agreement, escrow agents
(or the seller's attorney, as the case may be) shall provide the escrow beneficiaries with written
notice confirming the escrow deposit required by this agreement, the title and number of the
bank account and, if such account is interest-bearing, the initial rate of interest.
[Consumer Notice: Section 778 of the New York General Business Law sets forth the
fiduciary obligations of escrow agents in possession of down payments in the sale of residential
real estate. Section 497 of the New York State Judiciary Law authorizes special escrow bank
accounts for attorneys called Interest On Lawyer Accounts (IOLA). Bank interest which is
earned on these IOLA deposits, which can include down payments in real estate transactions, is
used by the State of New York to finance legal services for the poor and to projects to improve
the administration of justice. Law clients having questions about these laws should discuss
them with their attorneys.]
Upon closing, the escrow deposit shall be made available to the seller, together with
earned interest, if any. In the event the contract to purchase and sell is canceled, the escrow
deposit will be refunded to the buyer, together with earned interest, if any.
In the event of a dispute between the escrow beneficiaries concerning entitlement to the
escrow deposit, the escrow deposit shall be preserved intact until their dispute is resolved by
their agreement, or judicially in an action of interpleader.
In the event that an escrow beneficiary claims a default under the contract to purchase
and sell, that party shall provide a written notice of its claim to the escrow agents, who shall
provide written notice to the party against whom the default is claimed. Such party shall
thereafter have ten (10) business days in which to object to the payment of the escrow deposit
to the party claiming the default. In the event that no objection is received within such ten (10)
day period, the party claiming the default shall be entitled to the escrow deposit. In the event
of a dispute, the escrow deposit shall be preserved intact until the dispute is resolved by
agreement of the escrow beneficiaries, or judicially in an action of interpleader.
[Consumer Notice: Section 1006 of the New York Civil Practice Law and Rules
provides a judicial procedure for resolving conflicting claims to property that is held by
stakeholders, including escrow deposits held by escrow agents.]
Escrow agents are stakeholders, and shall not be liable to the escrow beneficiaries for any loss of the escrow deposit except for a loss which results from gross negligence, bad faith, or willful misconduct. Escrow agents shall not be liable for any error in judgment, or any act taken or omitted in good faith, any mistake of law, or any mistake of fact. Upon final distribution of the escrow deposit in accordance with the terms of this agreement, escrow agents will be fully released from all liability and other obligations with respect to the escrow deposit.
Nothing in this agreement shall be interpreted to prevent an escrow agent from
representing an escrow beneficiary as an attorney in any action or proceeding involving the
purchase and sale of the premises covered by this agreement.
This agreement shall be governed by the laws of the State of New York. Any action or
proceeding arising out of this agreement shall be commenced in the county in which the
premises are located.
This agreement contains the entire understanding between the escrow beneficiaries and
escrow agents with respect to the escrow deposit of the buyer's down payment. In the event of
an inconsistency between the contract of sale and this escrow agreement, the provisions of this
agreement shall prevail.
In Witness Whereof, the buyer and seller and their attorneys have signed this agreement on the ___ day of ________, 199_.
Buyer:
Name
Address
Social Security Number
____________
Name
Address
Social Security Number
____________
Buyer's Attorney:
Name
Address
Telephone
____________
Seller:
Name
Address
Social Security Number
____________
Name
Address
Social Security Number
____________
Seller's Attorney:
Name
Address
Telephone Number