Can funds held in trust be released if the deed hasn’t been recorded yet?

Short answer: Sometimes — but it depends on the escrow instructions, the parties’ agreement, the title situation, and any lender requirements. In Maine, the legal transfer of ownership usually occurs at delivery and acceptance of a deed, not at recording. Recording provides public notice and protects against later claims, so many closing agents and title companies will not disburse trust/escrow funds until they have clear proof of recordation or other protections in place.

Detailed answer — how this works in Maine

When a buyer and seller close a real estate transaction, funds are frequently placed with a neutral third party (escrow agent, closing attorney, or title company) pending performance of closing conditions. The escrow instructions govern when that agent can release money. Commonly, one of those conditions is a properly executed deed delivered to the buyer and then recorded in the county registry of deeds.

Key legal concepts:

• Conveyance vs. recording: Under general property principles, title passes between the parties when a deed is delivered and accepted. Recording the deed creates public notice and protects the grantee against some subsequent purchasers or lienholders who rely on public records. Recording is therefore a practical protection, though not always essential for the parties’ private rights.
• Escrow obligations: The escrow agent must follow the escrow instructions. If the instructions say “disburse funds when deed is recorded,” the agent should not disburse until there is proof of recordation (for example, a recorded-deed copy or recording receipt). If the instructions instead allow disbursement upon delivery of an acknowledged deed and other closing items, the escrow agent may release funds before recording — but that increases risk.
• Title insurance and lender requirements: Lenders almost always require a recorded mortgage and often insist on recorded deeds. Title companies typically will not issue final owner’s or lender’s title policy until they see recording confirmation or are otherwise assured the public record will be clear. If a lender is involved, its payoff instructions or funding conditions often require recordation before funds are sent.

Typical safe procedures used in Maine closings

• Hold funds in escrow until the closing agent obtains a stamped copy of the recorded deed or a recording receipt from the county registry.
• Disburse funds only after obtaining title company confirmation that all liens required to be paid have been cleared and that a title policy will be issued.
• Use an interim holdback: release most proceeds but keep a small sum in escrow (a short-term holdback) to cover any last-minute adjustments or unknown liens until the deed is recorded.
• If parties agree to disburse before recording, obtain written indemnities or additional assurances (for example, the seller’s warranty, escrow agent’s written release conditions, or seller-signed affidavit concerning encumbrances).

What can go wrong if funds are released before recording?

• A later claimant with an earlier unrecorded interest could assert priority.
• Outstanding mortgages, judgments, or liens not discovered at closing could attach to the property.
• If the deed is defective (improper execution or failure to deliver), the buyer could lose protections even though the seller received funds.
• The escrow agent or title company could face indemnity or malpractice claims for releasing funds contrary to the agreed instructions.

Practical steps to protect buyers, sellers, and escrow agents in Maine

1. Read and negotiate clear escrow/closing instructions. State explicitly whether disbursement requires recording or just delivery of the deed and when interim disbursements are permitted.
2. Ask the closing agent for a recording receipt or a certified copy of the recorded deed. Many Maine registries of deeds issue stamped copies or a recording confirmation number.
3. Use title insurance: insist the title company commit to issuing a policy or provide a closing protection letter before funds are released.
4. If you are a seller who needs funds quickly, consider keeping a small agreed-upon holdback until recording is confirmed.
5. If you are an escrow agent, follow the written instructions. If instructions are ambiguous, obtain clarification in writing from the parties or refuse to disburse until ambiguity is resolved.

Relevant Maine law and resources

Delivery and acceptance of a deed generally controls the private transfer of title; recording statutes govern public notice and priority of interests. For Maine statutory materials and the recording statutes, see the Maine Revised Statutes on property and recording at the Maine Legislature website: https://legislature.maine.gov/statutes/. You can also contact the county registry of deeds where the property is located to learn specific recording procedures and obtain recordation confirmations.

Helpful Hints

• Confirm in writing whether the escrow agent must wait for a recorded deed before disbursing funds.
• Obtain a stamped/certified copy of the recorded deed or a recording receipt before you accept disbursement if you are the buyer.
• Use title insurance to shift post-closing title risk away from the buyer or lender.
• If a lender is involved, follow the lender’s pay-off and funding conditions — lenders commonly demand recordation first.
• Keep a modest holdback if any payoff, tax proration, or repair issue is unresolved at closing.
• If you are unsure about instructions or obligations, stop the disbursement and consult a Maine real estate attorney or the title company’s counsel.

Disclaimer: This article provides general information about Maine real estate practice and is not legal advice. It does not create an attorney-client relationship. For advice about a specific situation, consult a licensed attorney in Maine or a title/closing professional.