Short answer

Yes — sometimes. But it depends on the type of trust/escrow, the written instructions or trust agreement, the parties’ conduct (whether the deed was validly delivered), and the title company or lender requirements. Recording the deed protects against third‑party claims and establishes priority, so most title companies and lenders will insist on recordation or a clear title report before they allow final disbursement of funds.

Detailed answer — how this works in California

1. Two separate concepts: validity between the parties vs. notice to others

Under basic property law, a properly executed and delivered deed can transfer title between the grantor and grantee even if the deed is not yet recorded. Recording is a public notice mechanism: recording a deed protects the grantee against later purchasers or creditors who rely on public records. In short, delivery creates rights between the parties; recording creates protection against third parties and affects priority.

2. Who decides whether funds are released?

If funds are held in escrow or in a trustee account, the escrow instructions or the trust agreement control release. Escrow agents, title companies, and institutional trustees follow written closing instructions. Those instructions commonly require either:

• recordation of the deed (or a title company confirmation that recording has occurred), or
• an exception such as a written waiver, an owner’s title policy issued after recording, or an agreed escrow disbursement plan (for example, a short holdback to clear a known lien).

3. Practical scenarios

Common scenarios where recording affects release:

• Residential sale: A title company typically will not fund the seller until the grant deed has been recorded and the title company has evidence of recordation or issues the owner’s policy showing the buyer as owner.
• New loan secured by a deed of trust: Lenders usually fund only after the deed of trust is recorded (or they receive evidence that their security interest is on the public record).
• Payoff of an existing deed of trust: The payoff often occurs after the reconveyance deed or recorded satisfaction is prepared and—or in coordinated closings—the title company provides instructions to record payoff documents and then disburse funds. Lenders and trustees protect their priority by recording before or simultaneously with disbursement.
• Private trust transfers: If a trustee holds sale proceeds and the trust documents authorize release upon delivery of a deed to the beneficiary, the trustee may be permitted to pay out before recordation — but that increases risk that third parties may later claim the property.

4. Risks of releasing funds before recordation

Releasing funds before a deed is recorded creates several risks:

• Priority problems: A subsequent purchaser or creditor who records first may gain priority over the unrecorded transfer.
• Seller creditor claims: If the seller has unpaid debts, a creditor could place a lien or levy that interferes with the buyer’s title if the deed is unrecorded.
• Fraud/double conveyance: A dishonest party might convey the same property to multiple buyers; recording helps protect the later buyer who records first.
• Title insurance exceptions: An owner’s or lender’s title policy may not protect against claims that arise from failures to record or from unrecorded interests; title companies therefore delay disbursement until they can clear and insure title.

5. How California law and practice address this

California regulates escrow and title practices. Licensed escrow companies and title insurers follow the escrow instructions and generally will not disburse funds until the deed or security instrument is of record or until the insurer is willing to issue the title policy. For more about California escrow regulation, see the Department of Financial Protection & Innovation (DFPI) escrow consumer information: https://dfpi.ca.gov/consumers/escrow/.

For the statutes and recording rules that affect how recording creates public notice and priority, you can consult California codes and the state’s legislative information site: https://leginfo.legislature.ca.gov/faces/codes.xhtml. Recording acts and conveyancing principles appear in the California Civil Code and related statutes (search the Civil Code on the legislative site for recording and conveyance provisions).

6. What parties typically require before disbursing funds

To reduce risk, escrow agents and title companies often require one or more of the following before releasing funds:

• Evidence that the deed (grant deed, quitclaim deed) or deed of trust was recorded (recording stamp, document number, or county recorder confirmation).
• Delivery of the recorded deed to the title company or escrow agent.
• Issuance or commitment for owner’s and/or lender’s title insurance.
• A written indemnity or holdback agreement when recording will be delayed for a short, documented reason.
• Simultaneous recording and disbursement instructions so recording and funding occur in the same closing event.

7. If you’re a buyer, seller, lender, or trustee — what to do

• Make sure escrow instructions are clear: spell out whether funds are released only after recording or if certain exceptions apply.
• Ask the title company for a recorded deed confirmation and a title insurance commitment before final disbursement.
• Consider a short holdback when there’s a specific, resolvable issue (for example, a small lien to be cleared) instead of an immediate full release.
• Use a licensed escrow company or title company for closings; they are experienced at coordinating recording and disbursement to minimize risk.
• If a party asks you to accept funds before recording, request a written indemnity or escrow holdback and consult an attorney or your title company.

8. How an attorney can help

An attorney can:

• Review or draft escrow instructions and trust provisions to protect your interests.
• Negotiate holdbacks or indemnities if recordation will be delayed.
• Help resolve title exceptions that prevent recording or issuance of title insurance.

Helpful Hints

• Never accept an oral promise to record. Get it in writing and require documentary proof of recordation.
• Ask the title company for a copy of the recorded document (recorder’s stamp or instrument number) before final disbursement.
• If you’re a lender, require a recorded deed of trust or a clear title report before funding.
• If the seller needs funds before recordation for a narrow reason, negotiate a formal escrow holdback with a clear release schedule and protections.
• Use licensed escrow and title professionals; California regulates escrow companies and title insurers (see DFPI consumer pages: https://dfpi.ca.gov/consumers/escrow/).
• When in doubt, delay disbursement until the recorder’s confirmation appears in the public record or until the title company issues its commitment/policy.

Where to read more

• California Department of Financial Protection & Innovation — escrow consumer information: https://dfpi.ca.gov/consumers/escrow/
• California Legislative Information — search Civil Code and Financial Code for recording, conveyance, and escrow statutes: https://leginfo.legislature.ca.gov/faces/codes.xhtml
• California Courts — self-help materials on property and title issues (search at the court website): https://www.courts.ca.gov/

Disclaimer

This article is for general informational purposes only and is not legal advice. I am not a lawyer. Laws and procedures change and every situation differs. For advice about your specific facts and written documents, consult a licensed California attorney or a licensed escrow/title professional.