Why I’ve Been Using a Lawyer for Escrow

In the last couple of years, I have been using a lawyer for escrow services more than ever before. Although there tend to be more steps when using a lawyer for escrow, I have found the deal closing process to be more streamlined, often quicker, and the cost is flexibly reasonable.

When I use a lawyer for escrow, I can integrate the purchase agreement with the escrow agreement. Instead of using a purchase agreement that doesn’t totally align with the escrow agreement, having a unified purchase agreement is helpful. This is primarily an issue on a payment plan deal or when special terms are necessary in the purchase agreement. It is easier to get a counterparty to agree to language on an integrated agreement.

A lawyer doesn’t have the same KYC (know your customer) requirements as a licensed escrow provider. I have run into KYC issues numerous times. For instance, the CTO or CFO of a large company won’t necessarily want to become personally KYC’d with a driver’s license or other form of identification on a $25,000 domain name sale that won’t benefit her personally.

The best part about using an attorney is the fee flexibility. I have done a few escalating lease to own deals where the buyer seeks a lower initial price because they want to use a high value domain name to fuel growth. It doesn’t make sense for a buyer to pay $2,000/month for the first year but have a $xx,000 escrow fee due at the time of initiation because the ultimate value of the deal is well into the 6 figures. I am also unwilling to pay more for an escrow fee than I will make in the first few months of a deal. I have found the IP lawyers I have used for escrow offer some level of flexibility on their fees in line with the escalating payment structure.

There are a few drawbacks to using an attorney for escrow that I should mention since this is not always ideal.

In order to get started with an attorney-led escrow transaction, the attorney needs to be available. Most IP attorneys don’t operate 24/7 businesses, so if a deal needs to be put into escrow right away, that’s not usually going to happen. It can also take time to draft the agreement. This is not generally a big delay, but it does take more time.

An additional consideration people need to make is that the escrow attorney will need to be independent in the deal. This means that if the deal utilizes an attorney I work with for my domain name legal needs, I would not be able to use the attorney should a legal issue arise with the deal in the future.

The final drawback is a buyer may be less willing to work with an attorney they don’t know. While attorneys are licensed and have legal requirements to fulfill, someone may be less inclined to use an attorney than a licensed escrow service.

I particularly like using an attorney on more complicated deals as I have found the escrow process to go more smoothly.