18.08.2026 - Testowa
Housing escrow account - what is it and how does it protect the buyer?
What is a housing escrow account?
A housing escrow account (MRP) is a special bank account maintained by a bank for the developer, into which the buyer pays successive instalments for the apartment or house being purchased. The key principle is simple: the funds deposited in this account do not belong to the developer until specific conditions have been met. The bank acts as a neutral custodian, ensuring that the money is transferred to the developer only in accordance with the law and the progress of construction works.
The obligation to maintain an MRP arises directly from the Developer Act, which regulates the protection of buyers of residential premises and single-family houses. Every developer carrying out a development for individual buyers must maintain such an account for the relevant project.
Every residential development carried out by J.W. Construction uses a housing escrow account in accordance with the requirements of the Developer Act.
How does a developer’s escrow account work?
A developer’s escrow account works by separating the buyer’s funds from the developer’s day-to-day finances. The buyer transfers money not directly to the company’s account, but to a dedicated bank account. The bank verifies the progress of construction and releases the relevant instalments to the developer only after confirming the completion of successive stages.
Are you wondering what should come first – the money or the notarial deed? The order in which ownership is transferred and funds are released is strictly regulated. Payment for the final stage of the development is made only after the bank receives the notarial deed transferring ownership to the buyer.
Before each payment, the bank carries out an inspection to verify, among other things:
- whether the developer holds legal title to the property,
- whether bankruptcy or restructuring proceedings are pending against the developer,
- whether the developer holds a valid building permit,
- whether the developer has any outstanding taxes, social security contributions or liabilities towards contractors,
- whether funds from previous payments were used exclusively to finance the relevant development.
Types of housing escrow accounts
The law provides for two types of MRP, which differ primarily in terms of when the funds are released to the developer.
Open housing escrow account
An open housing escrow account allows the developer to receive funds in instalments after individual construction stages have been completed and confirmed. Payments are made in accordance with the schedule, but no earlier than 30 days after the development agreement has been concluded.
This allows the developer to finance subsequent stages of the project using buyers’ payments, reducing the need for external credit financing.
Closed housing escrow account
A closed housing escrow account provides the buyer with a higher level of protection. The developer receives the entire accumulated amount in a single payment only after construction has been completed and ownership has been transferred to the buyer. The bank releases the funds after receiving the relevant notarial deed, which means that the money remains blocked in the account throughout the entire construction period.
Feature | Open MRP | Closed MRP |
| When funds are released to the developer | In instalments after individual construction stages are completed | In a single payment after ownership is transferred |
| Level of buyer protection | High | Highest |
| Ability to finance the development using buyers’ payments | Yes, progressively during construction | No, the funds remain frozen until the development is completed |
| Maximum DFG contribution | Up to 1% of the payment | Up to 0.1% of the payment |
The Developer Guarantee Fund and the housing escrow account
The protection provided by the MRP is supplemented by the Developer Guarantee Fund (DFG). The developer is required to pay contributions to the DFG on each payment made by the buyer. The bank transfers these funds to a separate fund account within 7 days of the date on which the developer pays the contribution. The purpose of the DFG is to protect buyers in the event of the bankruptcy of the developer or the bank maintaining the escrow account.
The contribution depends on the type of account. For an open MRP, it may not exceed 1% of the payment, while for a closed MRP it is capped at 0.1%. This gives the buyer additional protection and helps ensure the return of funds even in the event of unforeseen problems on the developer’s side.
How does a housing escrow account protect the buyer?
The protection provided by an MRP works on several levels. First of all, the money paid by the buyer does not go directly to the developer, but is held by the bank until the conditions specified in the legislation have been met. In addition, the bank regularly verifies the developer’s financial and legal standing before each instalment is released.
The developer is required to maintain the MRP until ownership of the last unit within the development has been transferred, which means that the protection remains in place throughout the entire project. It is worth knowing that the apartment ownership deed transferring ownership to the buyer is a document without which the bank will not release the final instalment to the developer.
Before signing an agreement with a developer, it is worth checking:
- which bank maintains the MRP and which type of account is used – open or closed,
- whether the payment schedule is linked to specific stages of construction,
- whether the developer pays DFG contributions on time,
- whether the development agreement clearly specifies the conditions for returning funds if the buyer withdraws from the agreement.
FAQ – frequently asked questions
What is a housing escrow account?
A housing escrow account is a dedicated bank account into which the buyer pays funds for the apartment being purchased. The bank holds the money and releases it to the developer only after the conditions specified in the Developer Act have been met, protecting the buyer’s funds throughout the construction period.
How does a housing escrow account work?
The buyer pays the money into an account maintained by the bank rather than directly to the developer. The bank verifies the progress of the development and releases the funds to the developer either in instalments under an open MRP or as a single payment after construction has been completed and ownership transferred under a closed MRP.
How much does it cost to set up a housing escrow account?
For the buyer, the only cost associated with the MRP is the contribution to the Developer Guarantee Fund, which is included in the price of the property.
Who owns the funds held in an escrow account?
The funds held in an MRP formally belong neither to the bank nor to the developer until the conditions for their release have been met. In the event of the bankruptcy of the developer or the bank, the funds are protected and may be returned to the buyer, including through the Developer Guarantee Fund.
