What does it mean when lawyers agree to close in escrow on a real estate deal in Ontario?

Closing in escrow means the lawyers exchange the closing documents and funds, but hold them back from being finalized and released until a specific condition is satisfied, rather than releasing everything immediately as in a standard closing. Typically one lawyer, often the seller's, holds the documents and money in trust pending confirmation that registration can proceed, or that some other outstanding step has actually happened.

This arrangement is usually built on a written escrow agreement between the lawyers spelling out exactly what triggers release, what happens if the condition is never met, and who bears risk in the meantime. It is commonly used interchangeably with the term gap closing, though escrow more precisely describes the mechanism of holding documents and funds conditionally, while gap closing describes the practical effect of closing before registration is complete. Because money and documents are sitting in a holding pattern rather than moving straight through, both lawyers typically want clear, written terms before agreeing to close this way, rather than relying on an informal understanding about what will happen next.