Legalese, Translated
Thank fully, the era of "the party of the first part" is over. Many legal forms are now required to be written in "plain English" to make legal documents accessible and understandable to the general public. But lawyers still speak "legalese". The result is a widespread use of words formerly used only by legal professionals. Words and expressions carefully crafted, albeit centuries ago, to convey very specific meanings are now subject to misunderstanding, misuse, and sometimes hilarious mispronunciation.
"Escrow"
When the parties to a transaction entrust a third party with something of value, either money or property, pending the occurrence of an event, it is called "escrow" (pronounced as spelled, not "es-car-o" or "es-ca-role"). Usually by written agreement, the escrow agent is authorized by the parties to hold the money or property until the agent is given permission to release it. The agent is performing a service, for which the agent may or may not be paid: the agent will be required to protect the property and to account for it; will not be allowed to use the property for the agent's own benefit; and will be required to return it upon satisfactory proof that the conditions for return have been fulfilled.
Escrow agreements are most common in real estate transactions, when the seller's lawyer or agent (often a title company) holds a down payment until the sale is completed. Money or property may also be held "in escrow" until a dispute is resolved. In custody disputes, for example, a child's passport may be held by an attorney until the issues are settled. Misuse of property held in escrow is serious. A lawyer who uses escrow funds (that's called "conversion") may lose her license to practice, and may be subject to criminal penalties as well, so the incentive to be honest is compelling.
As a client, you should make sure to retain licensed counsel or a reputable title company as an escrow agent. Read the escrow agreement carefully and have it explained in detail if it's in "legalese" so that you can be secure that your money or property is safe and will be distributed only when you are ready.
Oops! Legalese.
Translation: Money or property is said to be held in "escrow" when someone you trust is asked to keep it until he is instructed either to give it back or to give it to someone else.
"Lien"
Not "lean" but "lee-an". It is a right to collect a debt. Period.
It is not some stranger lurking around, waiting to seize your property. It is not necessarily the end result of a lawsuit to collect moneys owed, although it can be. It may or may not be publicly recorded. It may be imposed by statute, as in the case of Federal tax liens and mechanic's liens, or it may be created by agreement. It can create a right to withhold property: an attorney or accountant, for example, is entitled to withhold a client's file until the bill is paid; a landlord may seize the property of a tenant to secure the payment of back rent.
A lien can affect your credit score, and make it difficult and expensive for you to obtain financing or open charge accounts. On the other hand, if you've been stiffed for work performed, you might be able to impose a lien to secure payment. If someone owes you money, or if you find yourself faced with a lien, even if you're deliberately withholding payment, have a conversation with your lawyer. In plain English.
"Due diligence"
It is not a verb. One does not "do" diligence, although you will hear the expression "do the due diligence."
It is not only good advice. It is the buyer's responsibility to prepare for a transaction by learning as much as possible, in order to make an informed decision. A seller or offeror has no obligation to educate the buyer, or to disclose conditions that the buyer should discover on his own. Don't rely on the seller to warn you about the upcoming increase in real estate taxes, or to explain the water stains on the ceiling of the condo you want to buy. Doing your "due diligence" means that you as the buyer must make a reasonable and appropriate effort to find out if there is a tax increase on the horizon or if the upstairs neighbor had a flood.
Your attorney may be able to do "due diligence" for you, and help you analyze financial information and legal documents. Or she may direct you to a termite inspector, engineer, forensic accountant, or other professional. If you neglect your "due diligence" you may have no recourse. The law may protect you from fraud, coercion, and duress, but the law doesn't protect you from a bad deal.