Every transaction has the same standoff. The buyer does not want to pay before getting what they bought. The seller does not want to hand over before being paid.
In Pakistan this is usually resolved by trust, by paying in stages and hoping, or by a token amount with the balance "on transfer". All three produce the disputes we litigate. Escrow is the mechanism that resolves it properly, and it is far less used here than it should be.
What escrow is
Money — or documents, or shares — held by an independent third party, released only when defined conditions are met.
The escrow holder is not acting for either side. Their obligation is to the escrow agreement, and to release only on the trigger it specifies.
That is the whole idea: neither party can take the money, and neither can walk away with both the money and the asset.
Where it is worth using
Property purchases. The balance held until the sale deed is registered and mutation applied for, with staged releases against defined milestones. This directly addresses the two classic Karachi problems — paying before registration, and the seller refusing to complete after taking the money. See when the seller refuses to complete and checking title before buying.
Purchases by overseas Pakistanis, where the buyer cannot be present and is relying on documents sent from abroad. This is the single strongest use case, and the one we recommend most often. See property scams against overseas Pakistanis and buying property as a non-resident.
Business and share sales, where consideration is released on completion, and a retention is held against warranty claims or a specified liability for an agreed period.
Settlements, where money is placed with a neutral holder pending withdrawal of proceedings or execution of documents.
Cross-border trade, where the parties do not know each other. Note that in international goods trade the established mechanism is usually a letter of credit, which does a similar job through the banking system. See bank guarantees and letters of credit.
Construction and development, where funds are released against certified progress.
Who can hold the money
Pakistan does not have a large dedicated escrow industry, so in practice:
A bank, under an escrow or trust account arrangement. The cleanest option, and the one to prefer for larger sums, though banks apply their own onboarding and documentation requirements and not every bank offers it.
A law firm, holding funds pending completion, under a written agreement defining the terms of release. This is common in transactional work and is how much conveyancing is safely handled elsewhere.
A licensed escrow or payment service provider, where one is available and appropriately regulated. Check the regulatory status before using any online "escrow service" — fake escrow sites are themselves a fraud vector. See fintech licensing and investment scams.
What should never be used: a relative, the estate agent, or "a mutual friend". An escrow holder with a relationship to either side is not an escrow holder.
What the agreement must specify
An escrow arrangement is only as good as its document. It must state:
- The parties, and the escrow holder, with their obligations
- The amount, the currency, and the account it will be held in
- Release conditions, defined objectively and verifiably — "on production of the registered sale deed and the mutation application receipt", not "on satisfactory completion"
- Who certifies that a condition is met, and what document proves it
- Timeframes, and what happens if a condition is not met by a long-stop date
- Return of funds on failure, and to whom
- The escrow holder's duty, standard of care and fees, and who pays them
- Interest or profit on the held funds, and who receives it
- Dispute mechanism — what the holder does if the parties disagree, which is usually to hold until agreement or a court or arbitral direction
- Tax and withholding treatment of the release. See withholding tax obligations
Get the release conditions right and the rest follows. Vague conditions are how escrow fails — the holder cannot tell whether the trigger has occurred, and the money sits while the parties argue.
Cross-border points
For funds coming from abroad, route them through banking channels and document the source. Money brought informally is a problem for the transaction, for the tax position, and potentially under the AML framework. See repatriating profits and capital and AML compliance for smaller businesses.
For foreign buyers, an escrow structure with a defined release mechanism is also usually easier to enforce than a claim after the event — particularly given the difficulty of enforcing foreign judgments here. See enforcing foreign judgments and awards in Pakistan.
When escrow is not available
Not every counterparty will agree to it, and not every transaction justifies the cost. The practical alternatives, in rough order of strength:
Staged payment tied to registration. Token on agreement, substantial payment at execution before the sub-registrar, balance on registration. Never pay the majority before the deed is registered.
Bank guarantee or pay order delivered against documents at a defined moment.
Retention of a percentage for a defined period after completion.
Security — a charge, a lien, or post-dated cheques, which at least give a faster route if things fail. See cheque dishonour.
Registration of the agreement to sell where appropriate, and prompt action if the seller stalls. Note the deadlines. See stamp duty and registration and limitation and the deadlines that end claims.
How the firm can help
We structure and document escrow arrangements for property purchases, business and share sales and settlements, act as the holder of funds on defined terms where that is appropriate, and design staged payment structures for transactions where escrow is not practical.
For overseas clients buying in Pakistan, this is one of the most effective protections available, and we recommend it routinely.
See corporate and commercial, or contact the firm — before the first payment, not after.