Cyprus Legislation | Purchasing Property
5 years March 1, 2019
Should you Consider Cyprus Escrow Services: Benefits
An escrow service is a financial arrangement whereby a third-party acts as an intermediary, overseeing and holding fund payments required for two parties involved in any given transaction.
In Cyprus, escrow services are often used as an added security when purchasing property to make transactions more secure by holding the money in an escrow account. Funds can only be released when all terms of the agreements have been overseen and met by an independent escrow company.
Escrows can be useful principally where transactions are involved with large sums of money and a number of obligations are required to be fulfilled before payments can be released.
They also occur in business contracts without involving property or land. For example, in the event that a freelance website developer is contracted to build or redesign a large website, the owner may want various stages of the website to be completed to a certain standard before releasing payment.
The freelance web developer may have his terms to the contract such as being paid a certain percentage upfront before work proceeds on a large project. Usually this amount is then set aside as assurance of full pay after the task or trade has been sufficiently completed.
Traditional or Online Escrow Services in Cyprus?
Both traditional and online escrow services exist in Cyprus. Traditional services are typically stricter and more lengthy as they must be obtained using a service provider, Solicitor and bank or a combination of the 3.
Online escrow services are more easy-going and may not require too much paperwork when opening an account. Both services are relatively well regulated on the island, though the traditional methods are considered more reliable as they do not require the sharing of as much personal data as with the online service options.
How Does Escrow in Cyprus Work?
Many people believe that an escrow service is another mere pyramid scheme. However it is another form of insurance you can take out when dealing with assets or large sums of money.
The process in Cyprus starts with the drafting of a contract between the seller and the buyer, whereby the terms and conditions from both parties are detailed in writing.
Upon agreeing to the terms and conditions for both, the escrow contract is handed to both parties for signing. The escrow agent in charge also has a space to sign to verify that the two parties have made an agreement.
The contracted amounts are then held on a mobile account if it is an online escrow service provider and deposited in the escrow agents account, who will manage and monitor the account going forward until the agreement has been satisfied.
After this stage, there can only be two different outcomes:
- The agreement can be concluded by both the seller and the buyer meeting the terms. The funds will then immediately be safely disbursed to the seller.
- The agreement can be lengthened or terminated if the terms and conditions have not been honoured or met on behalf of either party for whatever reason. The funds will immediately be released back to the buyer.
Contact our local Cyprus legal team for any further information.