When escrow or trust funds can be released before the deed is recorded under North Dakota law

Disclaimer: This article is for general information only and is not legal advice. Consult a licensed North Dakota attorney about your specific situation.

Detailed answer — how North Dakota law treats deed delivery, recording, and release of funds

Under North Dakota law, whether funds held in trust (for example, earnest money, escrow funds, or settlement proceeds) can be released before a deed is recorded depends on three separate legal questions:

1. Did legal title actually pass when the deed was delivered?
2. What do the escrow or trust instructions say about the conditions for releasing funds?
3. What risks does an early release create with respect to third-party purchasers or creditors — and how do North Dakota recording rules affect those risks?

Key principles:

• Delivery controls legal title. Recording a deed is evidence of ownership and protects against later purchasers and creditors; recording itself is not always the act that creates title. In most jurisdictions, including North Dakota, a properly executed and delivered deed passes legal title even if it is not yet recorded. However, failure to record means later buyers or lienholders who rely on the public records may take priority over an unrecorded grantee. See North Dakota property law resources at the North Dakota Century Code, Title 47: https://www.legis.nd.gov/cencode/t47.
• Escrow/trust instructions control the escrow agent. The escrow agreement or closing instructions typically spell out the conditions that must be satisfied before the escrow holder may disburse funds. If the instructions require recording of the deed (or delivery of an acknowledged recorded copy, or confirmation from the county recorder) as a condition to release, the escrow agent should refuse to disburse funds until that condition is met.
• Recording protects against later third-party claims. Recording statutes give constructive notice to the world of the recorded deed. Until recording occurs, a later bona fide purchaser or creditor who records first may have priority over the unrecorded grantee. That risk is why many title companies or escrow agents will not release funds until the deed is recorded or a title insurance commitment is issued showing a marketable record title.

Common scenarios and what typically happens

Below are typical fact patterns and how they are usually handled in North Dakota real estate practice:

1) Closing completed, deed delivered to buyer, deed not yet recorded due to timing

If the deed has been properly delivered and the escrow instructions authorize release upon delivery (and any lender payoff instructions are satisfied), funds can legally be disbursed even if recording happens a short time later. But title companies and buyers often insist on same-day recording or at least receipt of a recorded copy before releasing large disbursements to reduce risk.

2) Closing documents signed but deed not delivered (or seller refuses to deliver)

If the seller refuses to deliver the deed, legal title has not passed. An escrow agent should not release funds to the seller when the escrow condition is delivery of the deed. The buyer may pursue contractual remedies (specific performance, rescission) or ask a court to compel delivery.

3) Funds are being held for payoff of liens, but deed not recorded yet

Payoff of prior liens (mortgages, tax liens) is often required before recording. If instructions require payoff and recording, an escrow agent may pay off the lienholder at closing and hold remaining funds until confirmation that the deed is recorded and title clears. Conversely, paying off liens before ensuring the buyer’s deed will be recorded can be risky if the seller refuses to convey.

Practical remedies if deed hasn’t been recorded and funds are stuck or disputed

• Carefully review the escrow or closing instructions. They often control who can demand funds and when.
• Contact the escrow holder or title company and request written confirmation about conditions for release and the status of recording.
• Ask the seller to deliver an executed deed and to allow immediate recording. If the seller refuses, demand performance under the purchase contract and consider filing an action for specific performance or to quiet title.
• If a party already received funds improperly, you can seek return of funds through breach of contract or conversion claims and may ask a court for injunctive relief.
• Record or request the county recorder to accept the deed for recording as soon as possible; recording gives constructive notice to later purchasers.

How North Dakota recording law affects priorities and risk

North Dakota’s recording rules (see North Dakota Century Code, Title 47) make recording the primary way to give public notice of an ownership interest. Because priority among competing claims commonly depends on recordation, parties frequently condition disbursement of funds on proof of recordation or a title insurance commitment reflecting the recorded deed. For an overview of the statutes governing real property and recording in North Dakota, see: https://www.legis.nd.gov/cencode/t47.

When an escrow agent may refuse to release funds

An escrow or trust agent may refuse to disburse funds if:

• The escrow instructions require recording and it hasn’t occurred;
• The agent reasonably believes disbursement would subject the agent to liability (for example, if there is a competing claim or the deed wasn’t delivered); or
• The agent has not been indemnified against known risks or lacks clear written authority to disburse.

When funds can be released even without recorded deed

Funds can be released before recording when:

• All parties agreed in writing (escrow instructions) to allow release on delivery of the deed, not on recording;
• The deed has been validly delivered and possession/other indicia of ownership transferred; and
• The parties accept the risk that the buyer remains vulnerable to later-recording third parties until recording occurs.

Next steps — what a buyer or seller should do now

• Get a copy of the escrow/closing instructions and any title commitment. Read the disbursement conditions.
• Ask the escrow agent for a written statement explaining why funds are being held or why they won’t be released.
• If you are the buyer and the seller or escrow agent is refusing to record or release funds, consult a North Dakota real property attorney promptly about specific performance, a court order to compel recording, or an action to recover funds.
• If you are the seller, provide the executed deed and cooperate with recording to avoid a dispute and a potential holdback.

Helpful hints

• Before closing, require escrow/closing instructions that clearly state the condition for release (for example: “release upon recording” versus “release upon delivery”).
• Insist on same-day recording when possible, or insist the title company provide a recorded copy or title insurance commitment prior to disbursement.
• Keep written proof of delivery of the deed and any communications about recording.
• If you are a lender, protect your advance by requiring a recorded mortgage or a host of protective measures before releasing funds.
• If a dispute arises, file a written demand for performance and preserve all documentary evidence (contracts, escrow instructions, emails, receipts).
• When in doubt, consult a North Dakota attorney experienced in real property and escrow disputes — early legal advice can prevent loss of priority or title problems.

Remember: recording safeguards against third-party claims, but legal title is generally determined by delivery and the substance of the conveyance. The exact outcome in any dispute over funds and recording will depend on the parties’ written instructions, the facts about delivery of the deed, and applicable North Dakota law and rules.

Relevant North Dakota legal resource: North Dakota Century Code, Title 47 (Real Property): https://www.legis.nd.gov/cencode/t47.