Escrow Laws
California Escrow Law
The Escrow Law is contained in Division 6 of the California Financial Code commencing with Section 17000. The regulations are contained in Subchapter 9, Title 10 of the California Code of Regulations commencing with Section 1700.
The purpose of the Escrow Law is to protect the public who deals with the escrow agents in California. Various types of protection are provided including fidelity coverage, surety bonding, minimum financial requirements, minimum experience for designated persons, trust account requirements and annual CPA audits.
The Escrow Law requires that any person engaged in the escrow business within California do so only as a corporation organized for that purpose licensed by the commissioner as an escrow agent. There are exemptions from licensing as follows:
- Banks, trust companies, building and loan or savings and loan associations, or insurance companies.
- Any person licensed to practice law in California who is not actively engaged in conducting an escrow agency
- Title insurance companies
- Any real estate broker while performing acts in the course of or incidental to a real estate transaction in which the broker is an agent or a party to the transaction and in which the broker is performing an act for which a real estate license is required.
Escrow agents licensed pursuant to the Escrow Law are required to be corporations whose main purpose is to provide escrow services. Prior to obtaining a license each applicant must demonstrate the following:
- Membership in Escrow Agents Fidelity Corporation.
- Financial requirements must be demonstrated through submission of audited financial statements which indicate that the company has liquid assets in excess of current liabilities of $25,000 and tangible assets in excess of total liabilities of $50,000. If branch offices are maintained by the escrow agent they must increase tangible net worth by 50% of the requirement for the first branch office and 25% for each additional branch office.
- A surety bond of at least $25,000.
- All stockholders, officers, directors, managers and employees must be investigated. These investigations include obtaining criminal history information through the Department of Justice and conducting civil court checks for activities which would indicate previous involvement in fraud, embezzlement, fraudulent conversion, or misappropriation of property.
- A manager who has five years of responsible escrow experience who will be stationed at the licensed location during open office hours.
We have copied this page from the following web site: California Department of Corporations.
