Escrow, a Development Account and an Ordinary Bank Account in Cambodia

Prepared by the NovAsia Editorial Team

A buyer is told to transfer the booking deposit or first instalment to a “protected project account”. The sales representative may call it an escrow account, a project account, a development account or a designated bank account as though all four expressions describe the same protection. The payment instructions may even show the project name and a well-known Cambodian bank.

That information is useful, but it does not answer the central questions. Who legally owns the money after transfer? Who can instruct the bank to release it? Can the developer use it for land, marketing, interest, another phase or a related company? What direct right does the buyer have if the project is delayed, terminated or insolvent?

Three arrangements that look identical at the payment stage can produce very different outcomes after a problem:

• an ordinary operating account held by the seller or another company;
• a regulated real-estate development account used by a licensed project;
• a separately documented escrow arrangement controlled by an independent holder.

The name of the account is therefore the beginning of due diligence, not its conclusion.

Three models, three sets of rights

An ordinary bank account belongs to the person or company named as the account holder. The bank follows that customer's valid instructions, subject to the banking agreement, anti-money-laundering controls, court orders and regulatory restrictions. A bank that receives a buyer's payment into an ordinary corporate account is not normally agreeing to supervise construction or guarantee the seller's obligations.

A real-estate development account is part of Cambodia's regulatory framework for qualifying development businesses. Published legal analyses of Prakas No. 047 describe a requirement for licensed residential or co-owned-building developers to open such an account with a Cambodian commercial bank, alongside capital, business-plan and guarantee requirements. This can improve traceability and give the regulator an additional tool, including the ability to restrict or freeze funds in appropriate circumstances.

Escrow is different in principle. It is created by an agreement under which an independent escrow agent holds money for the parties and releases it only when specified conditions have been met.

This table describes the economic distinction, not a universal legal conclusion about every account. A particular development account may have strong controls. An agreement labelled “escrow” may be weak, permit release on the developer's certificate alone or give the buyer almost no direct enforcement right.

The documents matter more than the label.

What Prakas No. 047 appears to add

Prakas No. 047, adopted in September 2023 under the broader framework of Sub-Decree No. 50, updated the licensing and permitting regime for real-estate development businesses. Published legal summaries indicate that a qualifying residential or co-owned-building developer may need to:

• meet minimum-capital requirements;
• provide a business guarantee deposit or bank guarantee;
• open a real-estate development account with a Cambodian commercial bank;
• submit a project-development business plan;
• hold the required licence or permit.

The regulatory authority may have powers to impose administrative measures, including restricting business activity or freezing a development account or business guarantee when a developer breaches applicable requirements.

These controls are meaningful. They can make the project's financial route more visible and reduce the ease with which a regulated developer treats buyer payments as an entirely unmonitored cash pool.

They do not, however, establish every feature of buyer-level escrow. Public descriptions of the regime do not demonstrate a universal rule that:

• every dollar paid by a buyer remains blocked until that buyer's apartment is completed;
• each buyer has a separately segregated sub-account;
• the bank checks physical construction quality;
• the buyer is a direct beneficiary who can instruct the bank;
• funds are automatically returned if the SPA is terminated;
• buyer money is fully protected from all creditor claims if the project company becomes insolvent.

A development account may be a stronger regulatory structure than an ordinary account without being equivalent to a bespoke escrow agreement for the individual purchaser.

What genuine buyer escrow should contain

A buyer should look for several protections working together.

An independent holder

Release should not depend solely on the seller's unilateral instruction. The escrow agent may be a bank, licensed professional or another legally acceptable independent party, but its duties must be stated clearly.

Defined release conditions

The agreement should identify measurable events, such as:

• completion of foundations;
• certification of structural progress;
• completion of a specified construction milestone;
• handover of the apartment;
• registration of title;
• delivery of specified documents.

A vague condition such as “construction progress satisfactory to the developer” offers little independent control.

An objective verifier

The parties should know who confirms a milestone. Possibilities include an independent engineer, a bank-appointed surveyor, the relevant authority, both parties jointly or a combination of documents.

The developer's own progress statement may be useful evidence, but it is not independent verification.

A dispute process

The agreement should explain what happens when the buyer says a milestone has not been achieved but the developer requests release. The agent may hold the disputed amount, release an undisputed portion or wait for joint instructions, an expert determination, arbitration or a court order.

Without a dispute process, the word escrow can hide a structure that works smoothly only while both parties agree.

Refund rules

The document should identify:

• which termination events permit a refund;
• whether the agent can refund without the developer's consent;
• the time allowed for payment;
• permitted deductions and bank charges;
• what happens to interest, if any;
• the currency and receiving account;
• treatment of money already released to the developer.

Insolvency and creditor protection

The agreement should address whether the held money is segregated from the assets of the seller and the escrow agent, how it is treated if either becomes insolvent, and whether creditors can attach it.

Direct buyer rights

The buyer should be a party or clearly identified beneficiary with a practical right to receive statements, object to release and claim a refund under the agreed conditions.

A marketing brochure cannot create these rights by itself.

A bank account is not a construction guarantee

Using an established bank can improve payment security. The bank verifies its customer, processes the transfer and maintains records. Those functions are valuable, especially when compared with cash payments or transfers to an unidentified individual.

But a bank does not become a guarantor of the project merely because it opened the account. Unless it assumes a separate contractual duty, the bank is not normally promising to:

• complete the building;
• assess construction quality;
• verify every contractor invoice;
• compensate the buyer for delay;
• return money contrary to the account holder's valid instruction;
• confirm statements made by the sales team;
• cover the developer's insolvency.

The phrase “your money is with a major bank” describes where the money is held. It does not explain who owns it, who may release it or what happens after termination.

Even in an escrow structure, the bank's role may be limited to checking formal documents. An engineer's certificate might trigger release even though the buyer later disputes workmanship. The precise mandate determines the protection.

The account holder must match the deal

A project can involve several companies: the landowner, licensed developer, contractual seller, parent company, marketing company, construction company and property manager. Payments may be directed to an entity other than the one named in the SPA.

That does not automatically mean the structure is improper. It does require a written explanation.

Before transferring money, confirm:

• the legal name and registration number of the SPA seller;
• the legal name of the account holder;
• the relationship between them;
• the authority of the account holder to collect money;
• that payment to this account discharges the buyer's obligation under the SPA;
• how the payment is allocated to the buyer and exact apartment;
• which entity owes the refund if the transaction ends;
• who issues the official receipt.

High-risk routes include:

• a personal account belonging to a director, salesperson or agent;
• an unrelated company not identified in the contract;
• new bank details sent only through a messaging application;
• a payment reference that omits the buyer, project and apartment;
• a request to use a false or misleading payment description;
• a chain of intermediaries with no written agency authority.

A strong account structure cannot cure payment to the wrong legal recipient.

Release timing matters more than the headline percentage

A project may advertise that 30% of the purchase price is “placed in escrow”. The level of protection depends on when and how that 30% is released.

Consider two simplified arrangements.

Under the first, the full amount is released to the developer immediately after the SPA is signed. Escrow has acted mainly as a short payment-routing mechanism.

Under the second, one portion is released after a verified structural milestone, another after documented completion and the final amount only after title registration. The buyer retains materially greater leverage.

The milestone itself must also be meaningful. “Construction commenced” might mean fencing the site. “Structure complete” should require an identifiable certificate. “Ready for handover” does not necessarily mean the individual title is ready.

A stronger schedule connects four things:

1. a substantial result;
2. objective evidence;
3. a proportionate release amount;
4. a practical right to challenge release.

Pooled money is not the same as an individual protected balance

Development projects are collective undertakings. Payments from many buyers may enter one project account and fund contractors, materials, professional fees, interest and permits for the whole building or phase.

That can be commercially normal. It also means that a bank account does not necessarily contain a separate physical “envelope” for each apartment.

Due diligence should distinguish five protections:

• separation from the developer's other projects;
• separation from the developer's general assets;
• individual accounting for each buyer;
• control over withdrawals;
• an enforceable right to a refund.

An account may achieve one or two without achieving all five.

If money has already been validly released and spent on construction, an escrow agreement may protect only the unreleased balance. A development account may provide transaction records without giving one buyer priority over all other buyers.

A business guarantee is not the buyer's deposit

The licensing framework may require a business guarantee deposit or bank guarantee. Published summaries have described minimum amounts for certain residential-project categories by reference to construction value.

This is a regulatory protection, but it should not be represented as personal insurance for every purchaser. The aggregate guarantee may be far smaller than the total value of buyer instalments.

Questions to ask include:

• who is the beneficiary of the guarantee;
• which breach permits it to be called;
• who decides to use it;
• whether it funds regulatory remedies, construction completion or buyer refunds;
• how competing claims are ranked;
• the actual guaranteed amount;
• whether the guarantee remains valid throughout the relevant period.

The development account, business guarantee and buyer escrow are separate mechanisms with different purposes.

Freezing an account does not calculate refunds

A regulator or court may freeze an account to stop further withdrawals. That can preserve the balance that remains.

The freeze itself does not determine:

• how much belongs to each buyer;
• whether SPAs remain in force;
• whether money should complete the project or be distributed;
• the priority of banks, tax authorities, contractors and buyers;
• whether the balance is sufficient;
• which authority can instruct the bank;
• the procedure and timing of distribution.

In some cases, using available money to finish a viable project may produce a better result than dividing a small balance among hundreds of buyers. In others, completion is unrealistic and refund claims become the priority.

Those are contractual, regulatory and insolvency questions. The bank does not make the commercial decision simply because it holds the frozen funds.

Termination needs a separate refund mechanism

An SPA may promise repayment within 30, 60 or 90 days after valid termination. If the developer already controls the money, this is an ordinary repayment obligation. The buyer remains exposed to the seller's willingness and ability to pay.

Escrow strengthens the position only when the relevant money remains with an independent holder and the agreement clearly authorises a refund.

Before paying, establish:

1. Who decides that termination is valid?
2. Which portion remains unreleased?
3. Can the escrow agent refund without the developer's further consent?
4. How is a dispute handled?
5. What happens to money already released?
6. Is there a fixed refund period?
7. Does insolvency change the process?

A statement that “the deposit is refundable from the project account” is incomplete unless these questions are answered.

Construction certification has limits

An independent engineer may certify that a percentage of works has been completed. This can provide a useful release trigger. It does not guarantee:

• the developer has enough funding for the remaining works;
• every defect has been identified;
• the apartment will be handed over on time;
• title will be registered;
• the project company will remain solvent.

Different evidence addresses different risks:

• a progress certificate addresses physical completion;
• an occupancy or completion document addresses regulatory status;
• title registration addresses ownership;
• the developer's funding plan addresses completion risk;
• the escrow structure addresses control of unreleased money.

No single document should be treated as proof of all outcomes.

Escrow should protect both parties

A balanced escrow arrangement also protects the developer. It confirms that the buyer's money is available and will be released when the developer satisfies the agreed conditions. The buyer cannot withhold payment indefinitely after a valid milestone.

The agreement should set out:

• which documents are sufficient;
• how long the buyer has to object;
• the consequence of silence;
• whether undisputed sums may be released;
• who appoints and pays an expert;
• what happens to interest;
• the agent's fees and liability;
• the governing law and dispute forum.

A structure can be called escrow while still favouring the seller heavily—for example, if the agent releases funds on a developer-issued certificate and the buyer must first win an arbitration to stop payment.

The quality lies in the procedure, not merely in the involvement of a third party.

An ordinary account can still appear in a viable deal

The absence of buyer escrow does not automatically make a project unacceptable. It means the buyer bears more direct credit and performance risk against the developer.

That risk may be consciously accepted where:

• construction is substantially complete;
• the developer has a strong delivery record;
• early instalments are limited;
• payments genuinely follow construction progress;
• land, licences and financing have been reviewed;
• a parent company gives an enforceable guarantee;
• the price reflects the remaining risk;
• a meaningful final balance is held until handover or title registration.

Conversely, even a well-designed escrow arrangement cannot correct defective land rights, an unlicensed seller, an economically unviable project or an SPA that gives the buyer no workable remedy.

Account protection and project quality measure different risks.

Documents to request before transferring money

A practical file may include:

• the SPA and all payment schedules;
• the official invoice or payment instruction;
• the account holder's legal name and registration number;
• written confirmation from the bank where available;
• the project's development licence or permit;
• the escrow agreement, if one exists;
• any account-control agreement or relevant extract;
• release conditions and milestone-verification procedure;
• refund and dispute rules;
• treatment of interest and bank charges;
• treatment of released and unreleased funds;
• insolvency provisions;
• confirmation that the payment is allocated to the named buyer and apartment;
• authorised signatures and contact channels for changes to bank details.

A seller may reasonably protect commercially sensitive terms. It should still answer the material buyer-protection questions in writing. Confidentiality is not the same as complete uncertainty about the legal destination of the purchase price.

Marketing phrases that need clarification

“Escrow-like account” may mean the account resembles escrow in only one respect.

“Protected by the bank” does not identify the bank's obligation.

“Government-controlled account” may describe regulatory supervision rather than approval of every withdrawal.

“Funds are used only for the project” does not say whether project costs include land repayment, marketing, interest or related-party payments.

“Refundable deposit” does not identify the source or procedure of repayment.

“Held until construction” needs an exact milestone.

“The developer cannot withdraw freely” should be supported by the account mandate or agreement.

Each statement may be technically true while remaining inadequate for an investment decision.

The decision rule

An ordinary bank account, a regulated development account and buyer escrow are not interchangeable.

The regulated development-account requirement can improve oversight and allow authorities to intervene, but it does not by itself prove individual segregation, independent release control or automatic refunds for every purchaser.

Full escrow protection requires an independent holder, precise release conditions, objective evidence, a dispute mechanism and clear treatment of money after termination or insolvency.

The most useful question is not simply, “Is there escrow?” It is:

Who owns and controls the money today, what evidence permits its release tomorrow, and what direct right does the buyer have if the apartment is never delivered?

This article is general information, not legal, banking or financial advice. The SPA, account mandate, release conditions, refund mechanism and insolvency treatment must be reviewed for the particular project by qualified Cambodian advisers before money is transferred.

Sources

1. Non-Bank Financial Services Authority — Prakas No. 047 on the rules and procedures for granting real-estate development business licences and permits, 26 September 2023; account and regulatory requirements considered through published legal analyses.
2. Royal Government of Cambodia — Sub-Decree No. 50 on the Management of Real Estate Development Business, 2 March 2023.
3. DFDL — legal update on the replacement of Prakas No. 089 by Prakas No. 047, including capital, business-guarantee and regulatory-measure requirements.
4. Sithisak Law Office — legal alert on Prakas No. 047, including the development-account requirement and possible account freezes.
5. ASEAN+3 Macroeconomic Research Office — analysis recommending stronger regulatory oversight and separate escrow protection for buyer deposits; used as policy context, not as evidence of a universal existing escrow requirement.
6. JICA Legal and Judicial Development Project — Civil Code of Cambodia, unofficial English translation, for general contractual performance, termination and restitution principles.

Frequently asked

Is a Cambodian development account the same as full buyer escrow?

Not automatically. Prakas No. 047 requires a qualifying developer to open a real-estate development account, but the protection available to an individual buyer depends on the account holder, withdrawal rules, bank mandate and the buyer's direct contractual rights.

How does escrow differ from an ordinary developer bank account?

Under a genuine escrow arrangement, an independent holder releases money only when agreed conditions are satisfied. With an ordinary account, control normally remains with the account holder, subject to the banking agreement and applicable law.

Will buyers automatically receive refunds if the regulator freezes a development account?

No. A freeze may preserve the remaining balance from further use, but it does not by itself allocate that balance among buyers or guarantee that every buyer will recover the full amount paid.

Which documents show whether a payment is genuinely protected?

Check the account holder, the bank's written confirmation of the account structure, any escrow or account-control agreement, release and refund conditions, dispute rules, insolvency treatment and the link between the payment, the SPA and the exact apartment.