More recently, in July 2014, a new type of contract between a bank and a citizen, an escrow account, was introduced into the Civil Code of the Russian Federation. This agreement is created to record or block funds received from the owner (depositor) in order to transfer them to an individual (beneficiary) upon manifestation of the grounds considered in the agreement. You can resort to such an agreement in a variety of cases. The most common reason is buying and selling real estate.
Despite the popularity of the law abroad, in Russia the contract of account for exrow did not receive wide popularity. There are several reasons for this, but first things first.
What is an escrow account agreement
Otherwise called a "trust account agreement." The essence of it in simple terms is the transfer by the debtor of funds to a third party, counterparty (ex-agent), until the creditor fulfills certain conditions specified in the contract. Such a deal implies tripartite relations, and the contract, as a rule, is executed in triplicate.
Persons participating in the transaction: ex-agent (usually a bank), depositor and beneficiary (the one to whom the money belongs). In practice, it is the beneficiary who receives great power in the transaction and is able to influence its outcome.
In this way, an escrow account agreement increases confidence that both parties will receive what they expect. In extreme cases, if part of the transaction is not completed, then the debtor has a chance to return part of the funds.
When is it convenient to apply escrow contracts
Escrow bank accounts can be opened for a variety of reasons. Let's look briefly at what kind of operations are most popular.
- Transactions related to the acquisition of real estate by a citizen.
- Payment of taxes on real estate or other property, insurance.
- Depositing of securities and securities.
- Reservation of amounts for the purchase of corporations and companies.
- Storage of deposits.
Earlier, escrow was used through foreign banks. Since the beginning of the XXI century, this treaty has gained well-deserved popularity not only in European countries and the USA, but also in eastern states: China, Mongolia and Japan. Now all these operations are carried out by large Russian banks: Sberbank, Rosbank, etc.
Features of the escrow agreement
Since creating an escrow account is a large financial institution, all three parties may encounter some difficulties that should be prepared in advance.
The contract is subject to the possibility of amending it: by an agreed decision of the parties (Article 450 of the Civil Code of the Russian Federation), by a court decision (Article 450 of the Civil Code of the Russian Federation), due to significant changes in the transaction (Article 451 of the Civil Code of the Russian Federation)
P. 1, Art. 860.10 - the only reason for the expiration of the contract is the expiration of the transaction. Also, termination of the contract is possible upon recognition of the depositor or beneficiary as legally incompetent, partially legally incompetent, missing, upon liquidation of the legal entity.
If the escrow agent goes bankrupt, the depositor appears in the register of creditors if the terms of the agreement are met and the beneficiary if they are not met.
Knowing these nuances, you can not be afraid to open an escrow account.
How to open an account?
Open an escrow account today is offered by various banking organizations. Admission to act as an agent is permitted not only to the legal entity. individuals or individuals, but also individuals. The conclusion of the contract consists of three stages:
- Drawing up and signing a contract for three parties.
- Register a bank account. The balance escrow account is opened on a separate account.
- Placement on the account of the agreed amount of money, which is the subject of the contract.
The bank or other trustee guarantees the blocking of funds until the conditions of the contract are fulfilled.
Open an account with Sberbank
As of 2017, an escrow account in Sberbank can be opened. The contract is implemented through subsidiaries of Sberbank of Russia PJSC and Sberbank-AST. Moreover, you can make a deal online, which significantly saves time.
Escrow Action Scheme
Before concluding a transaction, it is useful to know the algorithm by which it occurs. It is not so complicated:
- The seller and the buyer decide to conclude a contract and turn to a third party - an escrow agent.
- The agent takes on paper work: conclusion of an agreement based on the instructions and wishes of the beneficiary and the depositor, registers a new account.
- This account stores cash or equivalent resources until the execution of the contract.
Until the transaction ends, the account is completely blocked. After fulfilling the terms of the contract, the beneficiary receives the amount from the account. As soon as the funds are transferred from the account, the intermediary (agent) assumes the responsibility to close the contract.
Escrow and letter of credit - which is more expensive, what are the prospects for development?
Many entrepreneurs are concerned about the question of whether escrow will be more expensive than a letter of credit (another financial contract adopted by banking companies on behalf of the debtor). At the moment, most financial experts do not exclude an increase in escrow prices in comparison with an established letter of credit. However, with approximately the same probability it may fall due to guarantees on deposits offered by banks.
To date, the escrow account will cost the parties 2,500 p. Change in the terms of the contract - from 500 to 2,500 rubles. depending on the degree of importance and volume. In this case, the bank does not receive remuneration from escrow funds.
On the other hand, the letter of credit is strictly regulated by law and does not imply initiative, and the escrow account is a relatively new phenomenon, it allows making various amendments to the contract, correcting it, involving an individual as an intermediary, etc. This aspect is very convenient for many financial businessmen.
Also, under a letter of credit, bank employees do not bear serious responsibility for the state of funds, therefore they are limited to formal, not always careful, verification of documents. In the case of large transactions, this can be detrimental to one or two parties. However, when issuing an escrow, the bank bears a serious responsibility for the safety of funds, and all documents are checked clearly and properly.
Prospects for such accounts in Russia
In the near future, escrow accounts can become widespread in Russia, which will entail an increase in funds for concluding a contract.
However, economists are convinced that prices can vary widely depending on the complexity of the relationship. Experts adhere to the following opinion - escrow tariffs can increase and decrease due to the type and complexity of the transaction, as well as the size of the account funds.
Since at the moment the escrow account is not so common, then its tariffs are low. In the future, with the development of this focus of the banking system, prices may rise significantly.
Positive and negative sides of escrow
Any transaction has its pros and cons, an escrow account is no exception. Despite all the convenience, there are unresolved issues to this day.
For starters, the pros. This may include a minimum of paper work compared with a letter of credit, as well as financial risks. Contacts with fraudsters are completely excluded due to account blocking, which guarantees a 100% successful commercial transaction. Also, in case of non-compliance with the terms of the contract, the transaction may terminate promptly.
The disadvantages of such a system can be attributed to the need for cooperation with an intermediary, bank or escrow agent, which entails the additional costs discussed above. In addition, at the moment in Russia there are few companies that are ready to engage in such mediation, because of which they can establish a monopoly on escrow tariffs.
It is also worth noting that at present in Russian legislation there are no significant differences between escrow and letter of credit, but there is a prospect of their appearance with the spread of the first.
Nominal and escrow - what are the differences?
Nominal and escrow accounts are varieties of banking obligations in the modern world. A nominal account is opened by a guardian to receive social benefits and the opportunity to spend them on a child without reporting to guardianship authorities. Also, a similar account is used for accrual for the purpose of keeping incompetent citizens of limited legal capacity.
Moreover, expenditure operations are carried out in any case only under the supervision of a parent, guardian or trustee. A representative can issue a second account for automatic charging of funds to social services. security.
Escrow accounts are the exact opposite. If the nominal funds come to fulfill the terms of the contract - the maintenance of an incompetent citizen, then in order to receive funds from an escrow, the terms of the contract must first be fulfilled.
Thus, opening an escrow account is a reliable and modern method of concluding a major transaction related to real estate, securities, insurance payments, etc. The escrow agent provides complete security and untouchability of funds for the duration of the transaction, which is carried out at the expense of registration of a new account. Intermediaries can be both Russian banks and individuals, as well as foreign companies. Moreover, the attraction of a foreign company is more common in the world, especially in the eastern direction: China, Mongolia, Japan, etc.