Escrow, Development Accounts and Ordinary Bank Accounts in Cambodia

Prepared by the NovAsia Editorial Team

A buyer is asked to transfer the down payment to a protected project account.

The sales manager may use the terms escrow, project account, development account and designated bank account as though they describe the same arrangement.

The bank details may show the project name and a major Cambodian bank.

That is not enough to determine the level of protection.

The bank may simply hold an ordinary operating account of the project company.

The account may be a real-estate development account required by Cambodia’s licensing framework.

There may be a separate escrow agreement under which an independent party releases money only after specified milestones.

From the buyer’s perspective, all three arrangements initially look identical: money is sent by bank transfer.

The difference becomes visible after a problem.

Who can withdraw the funds?

Can the developer use them for marketing, land, interest or another project?

Can the bank return the money after termination without the developer’s consent?

Do the funds become part of the project company’s insolvency estate?

Does the buyer have a direct claim against the bank or only against the SPA seller?

The account name begins the inquiry.

It does not answer it.

This article provides general information, not legal or banking advice. The account agreement, SPA, bank mandate, release conditions and insolvency treatment should be reviewed for the specific project by a Cambodian lawyer.

Three payment structures create different rights

An ordinary bank account belongs to the company or individual in whose name it is opened.

The bank follows the account holder’s instructions subject to the banking agreement, court orders, regulatory restrictions and applicable law.

A real-estate development account is a special element of the project’s regulatory structure.

Published legal commentary on Prakas No. 047 indicates that licensed residential and co-owned-building developers must open such an account with a Cambodian commercial bank.

Escrow is based on a separate agreement.

An independent holder receives the funds for the parties and releases them only when the conditions in that agreement are satisfied.

The table describes the economic logic.

It does not establish the legal characteristics of every Cambodian account.

A development account can contain strict controls.

A poorly drafted arrangement labelled escrow can leave substantial control with the developer.

The documents matter more than the label.

What the Cambodian development-account framework appears to require

Prakas No. 047 was introduced in 2023 under the broader real-estate-development regulatory framework.

Published legal summaries describe requirements that can include:

• minimum capital;
• business guarantee deposit or bank guarantee;
• real-estate development account;
• development business plan;
• project licence or permit.

The framework also gives the competent regulator administrative tools that may include freezing the development account and guarantee deposit after certain violations.

Those measures are meaningful.

They can improve:

• traceability;
• project-level banking;
• regulatory supervision;
• response to misconduct.

They do not, on the public descriptions alone, prove that every dollar paid by an individual buyer remains blocked until that exact unit reaches a milestone.

They also do not automatically establish that each buyer is a direct beneficiary of the account or can demand payment directly from the bank.

A development account should therefore not be described as full buyer escrow without further evidence.

What genuine escrow protection normally requires

A meaningful escrow structure usually contains several elements.

Independent holder

The seller should not be able to release the money by unilateral instruction alone.

Defined release conditions

Examples include:

• verified construction milestone;
• handover;
• title registration;
• lender release;
• agreed document delivery.

Objective verifier

The agreement should identify who confirms the condition:

• independent engineer;
• licensed certifier;
• bank-appointed surveyor;
• cadastral authority;
• both parties.

Objection procedure

The buyer should know:

• how long they have to object;
• what evidence is required;
• whether the disputed amount remains frozen;
• whether undisputed funds can be released.

Refund procedure

The agreement should say:

• when a refund is permitted;
• who instructs it;
• whether developer consent is needed;
• deadline;
• charges;
• interest.

Insolvency treatment

The buyer should understand whether the funds are segregated from the estate of the developer or account holder.

Direct buyer rights

A buyer-facing escrow structure is stronger where the buyer can submit notices or claims directly under the agreement rather than relying entirely on the seller.

An account can be marketed as escrow while omitting several of these protections.

The reverse is also possible: a tripartite control agreement can create meaningful protection without using the word escrow prominently.

The bank is not automatically a project guarantor

A recognised bank adds operational credibility.

It conducts KYC, receives funds, maintains records and follows financial regulation.

That does not automatically make it liable for:

• completing the project;
• checking construction quality;
• controlling every contractor payment;
• refunding the buyer after delay;
• enforcing the SPA;
• validating sales promises.

On an ordinary account, the bank acts for the account holder.

On a development account, the bank follows the applicable account and regulatory framework.

Under an escrow arrangement, the bank or other escrow agent follows the escrow agreement.

Its role may still be narrow.

The agent can be instructed to release funds after receiving a certificate without independently verifying the underlying quality of work.

The statement the money is held at a major bank answers where the funds are stored.

It does not answer who owns them and who can direct their release.

The account holder must fit the legal map of the project

A project can involve several companies:

• landowner;
• licensed developer;
• SPA seller;
• parent group;
• sales agent;
• treasury company.

A mismatch is not automatically improper.

It must be explained.

Assume the SPA seller is Project Residence Co. but the payment account belongs to Parent Holdings Co.

The buyer should receive written confirmation that:

• payment to Parent Holdings satisfies the SPA;
• the payment is allocated to the exact project and unit;
• the account holder acts with seller authority;
• receipts will be issued correctly;
• the refund obligation is allocated clearly.

Particular caution is required where payment goes to:

• personal account of a director;
• personal account of an agent;
• an entity not named in the documents;
• a newly substituted account notified only through messaging;
• a multi-stage chain of intermediaries;
• an account requiring a false payment purpose.

Even a protected account cannot cure the wrong payee automatically.

The buyer may later face disputes over whether the SPA seller actually received the payment.

The release schedule matters more than the amount deposited initially

A buyer may ask what percentage of the price is placed in escrow.

The answer is incomplete without the release timetable.

Assume 30% of the purchase price first enters an independent account.

Structure A

All 30% is released immediately after SPA signing.

Structure B

• 10% after contract completion;
• 10% after verified structural milestone;
• 10% after handover.

Both arrangements can be described as involving escrow.

Their protective value is different.

The milestone also needs substance.

Construction commenced may mean only site fencing.

Structural completion should be supported by a defined certificate.

Ready for handover may not include strata title.

A stronger schedule combines:

• material milestone;
• independent verification;
• proportionate release;
• dispute period;
• connection with the seller’s obligation.

A weak structure holds the money for a few days before transferring it to the developer and uses escrow mainly as marketing language.

Project money may be pooled across many buyers

A development account can be dedicated to one tower or phase while still holding money from hundreds of buyers.

The funds may be used for:

• contractor payments;
• materials;
• interest;
• permits;
• project operations.

Unless the accounting system creates separate buyer ledgers or sub-accounts, there are no physical envelopes for each unit.

That is not necessarily a problem during normal construction.

The building is a common project and cannot be built unit by unit in isolation.

The issue appears after termination.

If part of the buyer’s money has already been released and spent lawfully on construction, the account balance may not equal the refund obligation.

The buyer should distinguish five layers:

1. Separation from other projects.
2. Separation from developer assets.
3. Allocation to the individual buyer.
4. Control over withdrawal.
5. Contractual refund right.

These protections are not interchangeable.

A guarantee deposit is not the buyer’s personal account

Published legal commentary on Prakas No. 047 refers to a business guarantee deposit or bank guarantee associated with licensed development activity.

For some residential or co-owned-building developments, summaries refer to a minimum linked to a percentage of construction cost.

That instrument serves the regulatory framework.

It should not automatically be described as:

• insurance for every SPA;
• a complete refund fund;
• a substitute for escrow;
• money belonging to each buyer.

Important questions include:

• Who is the beneficiary?
• What event activates the guarantee?
• Who decides?
• How are funds distributed?
• Does it support refunds or regulatory obligations?
• How many buyers or creditors may claim?
• What is the amount relative to total buyer payments?

The development account, guarantee deposit and escrow perform different functions.

Combining them into the statement your money is protected by the government and the bank can create false certainty.

A frozen account preserves a balance but does not allocate it

The regulator’s ability to freeze a development account can stop further withdrawals.

That can preserve value.

A freeze does not answer:

• how much remains;
• which buyer paid which amount;
• whether the SPA was terminated;
• whether the bank has security;
• whether taxes or wages rank ahead;
• whether the funds should complete the building;
• whether buyers receive refunds;
• how an insufficient balance is shared.

In some cases, using the remaining money to complete construction may produce better recovery than immediately dividing a small balance.

In another case, the project may no longer be viable and refund may be more appropriate.

Those decisions require:

• agreement;
• regulation;
• court process;
• insolvency administration.

The bank does not make them merely because it holds the account.

Refund rights need their own mechanism

An SPA may say that money is refunded within 30, 60 or 90 days after termination.

Where the seller controls the funds, that is an ordinary contractual obligation.

Escrow can strengthen the position where the unreleased balance remains with an independent party and the agreement expressly permits return to the buyer.

Complications include:

• some funds already released;
• dispute over whether termination was valid;
• contradictory instructions;
• regulatory freeze;
• court order;
• buyer default;
• administrative deductions;
• refund conditional on resale.

Before payment, the buyer should know:

1. Who decides whether termination is valid?
2. Which amount remains unreleased?
3. Can the bank refund without seller consent?
4. How is a dispute handled?
5. What happens to released funds?
6. What is the refund deadline?
7. Is interest payable?
8. What happens after seller insolvency?

Refundable from the account adds little protection without a procedure.

Milestones should be supported by objective evidence

The developer wants the next tranche released.

The buyer wants the money held until real progress occurs.

Where only the developer confirms the milestone, the escrow agent effectively follows the seller’s instruction.

Stronger evidence can include:

• independent engineer’s certificate;
• licensed construction certifier;
• official completion document;
• registered title;
• bank-appointed quantity surveyor;
• joint confirmation;
• objectively verifiable document.

No one certificate proves everything.

A construction certificate can confirm physical progress.

It does not necessarily prove:

• remaining funding;
• title availability;
• foreign quota;
• occupancy approval.

Different release conditions should address different risks.

Escrow can protect both parties

A balanced escrow arrangement also benefits the developer.

It confirms that the buyer’s money exists and will be released after the agreed condition.

The buyer cannot delay payment indefinitely after a valid milestone.

A useful dispute process addresses:

• sufficient documents;
• objection period;
• silence;
• release of undisputed amounts;
• expert appointment;
• expert cost;
• interest;
• final decision.

An escrow agreement can be formally independent and still favour the seller heavily.

For example, the bank may release funds after a developer certificate while the buyer must first win arbitration to stop the release.

The value lies in the balance of the process, not merely the presence of a third party.

An ordinary account can still be acceptable in a strong transaction

The absence of escrow does not automatically make a project uninvestable.

A buyer may consciously accept seller credit risk where:

• developer has a strong completion history;
• project is substantially built;
• price reflects the risk;
• payments follow construction milestones;
• land and permits are verified;
• funding is stable;
• final payment remains linked to title;
• parent company provides an enforceable obligation;
• early exposure is limited.

Escrow also does not cure:

• defective land rights;
• missing licence;
• unclear seller;
• unaffordable construction budget;
• weak SPA.

The account is one layer of risk control.

It is not a substitute for project due diligence.

Worked comparison

Project A

• 30% to ordinary seller account;
• construction 80% complete;
• land position clear;
• developer has five completed projects.

Project B

• 20% to development account;
• withdrawal rules undisclosed;
• construction recently started;
• funding depends heavily on pre-sales.

Project C

• tripartite escrow;
• independent milestone certification;
• final 15% held until title;
• developer has no completed projects.

The account labels alone do not produce an automatic ranking.

Project A has weak payment segregation but stronger execution history.

Project B follows a regulatory structure, while buyer-level protection remains unclear.

Project C has stronger cash control but meaningful developer execution risk.

Account protection and project quality measure different things.

Documents that provide a real answer

Useful documents include:

• SPA;
• official payment instruction;
• account-holder name;
• company registration number;
• bank confirmation;
• development licence;
• escrow agreement;
• account-control agreement;
• release schedule;
• milestone-certification procedure;
• refund rules;
• dispute process;
• bank fees;
• interest treatment;
• treatment of released funds;
• treatment of unreleased funds;
• rights after termination;
• insolvency wording;
• allocation to the specific unit.

Retail buyers may not receive every confidential banking document.

The seller should at least answer the material questions in writing and provide verifiable evidence.

Commercial confidentiality can be reasonable.

Complete uncertainty about the fate of the buyer’s money is not.

Marketing phrases that need clarification

Escrow-like account may mean the arrangement shares only one feature with escrow.

Protected by the bank does not identify the protection.

Government-controlled account may mean regulatory supervision rather than daily approval of withdrawals.

Funds used only for the project does not explain whether permitted project costs include marketing, land repayment, interest or related-party charges.

Refundable deposit does not identify the source of refund.

Held until construction does not identify the milestone.

Developer cannot withdraw freely should be supported by the account mandate.

Each phrase can be technically true and still incomplete.

Conclusion

An ordinary bank account, a real-estate development account and escrow are different structures.

Cambodia’s development framework requires licensed developers to use project-level accounts and gives the regulator tools that may include freezing accounts after violations.

That can improve oversight.

It does not automatically prove buyer-level escrow, individual segregation or guaranteed refund.

Meaningful escrow requires:

• independent control;
• defined release conditions;
• milestone verification;
• dispute process;
• refund rules;
• clear treatment after insolvency.

A major bank can be the custodian or account provider without guaranteeing completion.

A business guarantee deposit should not be confused with the money of an individual buyer.

The strongest question is not:

“Does the project have escrow?”

It is:

“Who owns the money today, who can release it tomorrow and what direct right does this buyer have if the project is not completed?”

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, as summarised by DFDL and Sithisak Law Office.
2. Royal Government of Cambodia — Sub-Decree No. 50 on the Management of Real Estate Development Business, 2 March 2023.
3. DFDL — Cambodia: Prakas 089 on Real Estate Development Business Replaced by New Prakas No. 047, 11 April 2024.
4. Sithisak Law Office — Legal Alert on Prakas No. 047, 24 January 2024.
5. ASEAN+3 Macroeconomic Research Office — Cambodia: Stringent Regulatory Oversight Needed to Tackle Real Estate Downturn and Rise of Shadow Banks, 26 February 2024.
6. JICA Legal and Judicial Development Project — Civil Code of Cambodia.

Frequently asked

Is a Cambodian development account the same as full escrow?

Not automatically. Prakas No. 047 requires a real-estate development account, but the protection depends on the account holder, withdrawal rules, bank mandate and the rights granted to the individual buyer.

What distinguishes escrow from an ordinary developer account?

In escrow, an independent party controls the funds and releases them only after agreed conditions are satisfied. On an ordinary account, control normally remains with the account holder.

Will the buyer be refunded if the regulator freezes the development account?

A freeze can preserve the remaining balance from further spending, but it does not determine each buyer’s entitlement or guarantee a complete refund.

Which documents show whether a payment is genuinely protected?

The buyer needs the account name and holder, bank confirmation of the account regime, any escrow or control agreement, release conditions, refund procedure and a clear link to the SPA and selected unit.