How can an escrow account help to relieve concerns I have with financial security and how do I go about setting one up?

Question

Tom Spilsted · Answer

Financial security on projects especially in today's environment is near the top of the list when engaging in a contract.
Using an escrow account for funds to be used to pay valuations is one possible route though I must admit increasingly resisted by Employers. Perhaps the public sector project bank account is the next generational development?
Escrow accounts work where the account is set up and frequently operated by an independent party with valuations being paid out once a CA's certificate has been issued to the bank.
The agreement is usually that the account maintains at all time the equivalent of say 3 to 4 months valuations - hence not forcing the Employer to have drawn down and pay interest on all of the finding yet giving the contractor sufficient security of payment to cover -

The current months work
The last months valuation being processed
The last but one certificate that may not yet be due.

Alternative forms of security are becoming more common including guarantees from funders by warranty, or charge over parts of the development.

How can an escrow account help to relieve concerns I have with financial security and how do I go about setting one up?

escrow

financial-security

Steve Hardy

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