Transfer escrow

Definition

California law requires the full price in escrow before a transfer, paying creditors first; other states vary.

Why It Matters

California will not simply let money change hands. Before the transfer application is filed the parties must open an escrow with somebody who is not a party to the deal, and the buyer deposits the full purchase price there; the consideration is paid only after the regulator approves the transfer. The escrow then pays the seller's creditors who file, and where the price cannot cover them all the statute ranks eight classes. Claims for goods sold and delivered for resale at the licensed premises come sixth, behind taxes, wages, secured creditors, mechanics' liens, and escrow, brokerage and attorney's fees, and that is where the unpaid wholesalers land. That is the same receivable the credit rules create, seen from the other end. Ask for a wholesaler aging report before agreeing a price, because those balances come out of the escrow before the seller sees any of it.