Notarial escrow

What it means

Notarial escrow is a service in which one party deposits money, documents or securities with a notary, who releases them to the other party only once the conditions set out in the deposit record are met. It is the Slovak form of what is known abroad as escrow, with the difference that the custodian is a notary acting as a public official.

Money held in notarial escrow sits in a separate notary account, kept apart from the notary's own assets. If something happened to the notary or they ran into trouble with creditors, the deposited funds would not form part of their estate and could not be used to pay their debts. That is the main difference from simply entrusting money to a third person.

The release conditions must be worded so that the notary can check them objectively, for example by an extract from the land register showing the new owner, a final court decision or a signed handover protocol. The notary does not settle disputes; they only verify whether the documents presented match what was agreed.

How it works in practice

Notarial escrow is used most often when buying real estate: the buyer deposits the price, the seller files for registration, and once ownership is entered in the land register the notary pays the seller. The buyer does not pay up front without security and the seller does not give up ownership without being paid.

In a business setting escrow is used when transferring an ownership interest, selling a business or part of it, holding back part of the price to cover the seller's warranties, or keeping documents that must be handed over at a precise moment. The notary's fee depends on the amount held and is usually lower than the cost of a bank loan or guarantee.

For the accounts it matters that paying money into escrow is not yet payment to the supplier. For the buyer it is a receivable from the notary, in effect cash in transit; for the seller it is nothing until the escrow is released. Recording the moment of payment correctly also affects set-offs and payment terms.

What to watch out for

Release conditions need to be written precisely and include a fallback: what happens if registration is refused, if the buyer does not hand over documents or if a certain date passes. An unclear deposit record means the notary releases the money to no one and the parties end up in court.

Mind the difference between notarial escrow and escrow with a lawyer or a bank. Each has its place, but they differ in fees, speed and level of protection. In a large transaction it pays to compare offers and check who will actually manage the money and on what terms.