Escrow Agreements in Turkey

Escrow Agreements in Turkey

What is an Escrow Agreement in Turkish Law?

An escrow agreement in Turkish law is the contract that governs the relationship between the buyer, the seller and the escrow agent. It defines what the escrow agent holds, under which conditions the funds or assets are released, and what happens if those conditions are not fulfilled. Without a properly drafted agreement, the parties have no clear rule on when the money moves — or when it comes back.

Who are the Parties to an Escrow Agreement?

Escrow agreements in Turkey are typically trilateral contracts signed by the buyer, the seller and the escrow agent. The agreement should define each party’s obligations, the authority granted to the escrow agent, the limits of that authority, and the liability of each party in case of breach.

Defining the Release Conditions

The release conditions are the core of the agreement. They vary depending on the underlying transaction: for the international sale of goods, the condition is usually satisfied by delivery of the original bill of lading to the escrow agent; in a property transaction, it may be the registration of the title deed; in a share purchase, the registration of the transfer at the Trade Registry.

In every case the conditions must be explicitly stated and objectively verifiable. Vague wording such as “once the transaction is completed” leaves the escrow agent without a clear instruction and creates a dispute rather than preventing one.

What Happens when the Conditions are Met?

When the Seller satisfies the conditions specified in the escrow agreement, the Escrow releases the funds or assets to the Seller without needing additional action or permission from the Buyer. This is why the drafting matters: once signed, the agreement itself authorises the release.

What Happens if the Conditions are not Met?

If the Seller does not satisfy the conditions specified in the escrow agreement, the Escrow returns the funds or assets to the Buyer. The agreement should state the deadline for performance, what counts as failure, and whether any partial release or extension is permitted.

What Should an Escrow Agreement Include?

A well-drafted escrow agreement should set out:

• the parties and the authority granted to the escrow agent
• the exact release conditions and the documents required as proof
• the deadline for performance and the consequences of delay
• the procedure to follow if the conditions are not fulfilled
• the escrow agent’s fee, who pays it, and the agent’s liability
• the governing law and the dispute resolution mechanism
• the conditions for amendment or termination of the agreement

Drafting and Reviewing the Agreement

The escrow agreement should be drafted alongside the underlying commercial contract, not separately from it. If the sale agreement and the escrow agreement define the closing conditions differently, the escrow agent is left with conflicting instructions.

Antalya Lawyer Baris Erkan Celebi drafts and reviews escrow agreements for private law contracts — reviewing the commercial contract on which the agreement is based, assisting the negotiations between the parties, and drafting the agreement under Turkish law.

For the complete overview of escrow services in Turkey — including fees, the legal framework, who can act as an escrow agent and how the process works — see the full guide.