Quick answer

Under Montana practice, funds held in escrow or trust generally should not be released until the escrow instructions’ conditions have been satisfied. Commonly those conditions include delivery of a properly executed deed and, often, recording of that deed in the county clerk and recorder’s office. If the deed has not been recorded, releasing funds can create risk for the buyer or lender. The precise rule depends on the escrow agreement, the parties’ instructions, and Montana property/recording principles.

Detailed answer — how this works in Montana

This answer assumes a typical residential or commercial sale handled through an escrow or trust arrangement (an escrow agent, title company, or attorney holding money pending closing conditions).

1. Escrow/trust relationship and instructions control

Who controls release of funds is usually set by the escrow or trust instructions signed by the buyer and seller. The escrow agent’s job is ministerial: follow the written closing instructions. If the instructions require the deed to be recorded before funds are disbursed, the agent must wait. If the instructions say funds may be released after delivery of a signed deed even if the recording is not yet complete, the agent may be authorized to release funds once the agent has taken the steps the parties agreed on.

2. Recording gives constructive notice

Recording a deed in the county clerk and recorder’s office provides constructive notice to the world of the new ownership. Until a deed is recorded, other parties (subsequent purchasers, judgment creditors, or mortgagees) may have competing claims that can create risk for the buyer who believes title is theirs. For that reason, many buyers and lenders insist on recording as a condition to releasing loan proceeds or disbursing sale proceeds.

3. Practical protections commonly used in Montana closings

• Title insurance: A buyer or lender often requires title insurance. Title companies will typically want the deed recorded and will only issue finished policies once recording is complete or they reserve exceptions.
• Escrow instructions: Make the requirement to record explicit. Example condition: “Escrow agent shall not disburse funds until the deed has been recorded in [County], Montana, and evidence of recording has been delivered to the escrow agent.”
• Recording certificates: Escrow agents usually wait for a stamped recorded copy (or electronic recording confirmation) before releasing funds.
• Short hold-back: Parties sometimes agree to a small hold-back until recording is confirmed, especially if recording is delayed for administrative reasons.

4. What if funds were released but the deed wasn’t recorded?

If funds were disbursed while the deed remains unrecorded, the buyer (or lender) may be exposed if the seller fails to record or if a third party interferes. Possible responses include:

• Contact the escrow agent immediately to stop further disbursements and demand production of the recorded deed or evidence of recording.
• Demand that the seller cause the deed to be recorded at once and provide a recorded copy.
• If the seller refuses or if recording cannot be done because the deed is defective, potential legal remedies include suing for breach of contract, rescission, specific performance, or alleging fraud or conversion. The right remedy depends on the facts.
• Title insurance claims: If a title company was involved or a policy was to be issued, contact the insurer promptly to explore coverage for losses caused by failure to record or defective title.

5. Montana statutory and procedural points to keep in mind

Montana’s recording laws and property statutes set out the procedures and effects of recording instruments affecting real property. Recording statutes are located in Montana’s code of statutes governing property and recording; recording gives constructive notice of recorded instruments to subsequent purchasers and creditors. For statutory text and chapters addressing property and recording in Montana, see Montana Code Annotated, Title 70 — Property: https://leg.mt.gov/bills/mca/title_0700/.

6. Typical hypothetical scenarios

Scenario A (safe practice): Buyer deposits purchase money into escrow. Escrow instructions require delivery of a fully executed deed and recording of the deed before funds are disbursed. Escrow obtains electronic confirmation that the deed was recorded in the County Clerk & Recorder’s office. Escrow releases funds. Buyer receives recorded deed — low risk.

Scenario B (risky practice): Seller delivers an unrecorded deed to the buyer and demands immediate release of funds. Buyer authorizes escrow to disburse without requiring recording. Seller pockets funds but never records the deed. Because the deed wasn’t recorded, the buyer could face competing claims from another purchaser or creditor. Buyer may have to sue to enforce the transaction or recover funds.

7. Best practice recommendation

For buyers and lenders in Montana: require that the deed be recorded (or that escrow have a recorded-stamped copy or official electronic recording confirmation) before releasing funds. If there is a short, documented administrative delay, consider a specified small hold-back rather than full disbursement without recording. Put all conditions in the escrow instructions and retain written evidence of what was agreed.

Helpful hints

• Always read and sign escrow instructions that clearly list conditions for disbursement.
• Require a recorded-stamped copy of the deed or official electronic recording confirmation before authorizing release of funds.
• Buyers/lenders: obtain a title commitment or title insurance and confirm whether the policy will be issued only once recording is complete.
• Use licensed escrow agents, attorneys, or title companies; verify their credentials and whether they hold an errors & omissions policy or trust account protections.
• If a seller claims recording is delayed for harmless administrative reasons, get that in writing and consider a small hold-back rather than full disbursement.
• If funds were already released and the deed is still unrecorded, document all communications, stop further payments if possible, and contact a Montana real property attorney immediately to discuss remedies and urgent steps (e.g., obtaining a signed, recordable deed, title search, or injunction).
• Know where to record: deeds are recorded in the County Clerk & Recorder’s office where the property is located. County recording offices can confirm whether and when an instrument was recorded.