Who Pays Commercial Escrow Costs in Los Angeles
Every Los Angeles commercial purchase agreement has a blank line labeled “Escrow Fees.” Leave it empty and most brokers drop in “50/50.” That single line can move $40,000 on a $20 million deal, yet state law does not care who pays. The Civil Code only says the final escrow instructions must spell out the split. Until the last counter is signed, the allocation is live ammo in the negotiation.
Local custom says buyer and seller split the tab, but custom is not a statute. A seller who wants to prop up the stated cap rate will often pick up the entire fee. A buyer fighting multiple bids can volunteer to pay all escrow and title costs as a sweetener that does not show up in the headline price. REITs and special servicers usually shove the fee onto buyers in their form contracts; you can still move it, but only if you ask before the LOI is locked.
Lenders never pitch in. Their lawyer bills, doc prep charges, UCC searches and endorsement reviews are deemed borrower costs. Borrowers usually find those lines buried on page four of the settlement sheet three days before closing. A thirty second redline during underwriting saves about $3,000 on a typical deal. Foreign buyers should also budget $600 to $900 per incoming wire; park that obligation in paragraph four so the money lands on time.
Investors who close multiple assets each year have extra leverage. A clause such as “Seller pays escrow fees up to $25,000; excess paid by buyer” keeps large sellers comfortable while still saving real dollars. You can also tie the fee to another concession: buyer takes a shorter inspection period, or seller replaces the HVAC unit, in exchange for the other side picking up escrow. Every dollar moved is a dollar of IRR preserved.
Hidden Charges That Reopen the Fight
Even after the PSA is signed, small line items can reignite the debate. Same day courier to Sacramento costs $275. Rush recording when the county is backed up adds $450. Wire fraud insurance, now pushed by every major underwriter, is $175 per side. A tenant estoppel audit ordered by the lender tacks on another $750. These are labeled “additional services,” so escrow will debit whoever is stuck with the miscellaneous bucket unless you speak up. Insert one sentence: “All additional escrow charges shall follow the same allocation as base escrow fees.”
Another trap is the seller’s 1031 exchange. If the exchange accommodator wires late, escrow charges $350 per retry, and the exchange agreement usually dumps that cost on the seller. Smart buyers can use the delay to claw back repair credits, effectively recovering the escrow concession they gave up earlier.
City transfer tax is separate from escrow fees but is often lumped together. Los Angeles City charges $4.50 per $1,000 of consideration and the seller usually pays, yet if the contract is silent escrow will simply debit the first party named on the transfer tax affidavit. Santa Monica, Culver City and West Hollywood rates are even higher; confirm the municipal code early so the correct party budgets the charge.
Quick Checklist Before You Release Contingencies
- Confirm the full escrow quote, including courier, recording and wire fraud add ons
- Verify city and county transfer tax amounts
- Decide who pays wire fraud insurance, messenger and rush recording fees
- Add a prevailing party attorney fees clause in case a fee fight derails closing
- Demand a preliminary settlement sheet 48 hours before funding so math errors can be fixed without delaying recordation
Follow those steps and the only surprise on closing day will be the temperature of the champagne. Secured Trust Escrow provides transparent fee breakdowns on every Los Angeles commercial file and rehearses the allocation with both sides before anyone initials the final instructions. Book a pre PSA fee review with our commercial team today and kick escrow surprises out of your next closing.
