Quick answer: In Minnesota, funds held in trust or escrow generally should not be released until the closing conditions in the escrow instructions are satisfied. Recording the deed is a key condition that protects the buyer’s title and priority against later claimants. If the deed has not been recorded, releasing funds can create risk for the buyer and potential liability for the escrow holder. See Minnesota’s recording statutes for how recording affects priority: Minn. Stat. Ch. 507.

Detailed answer — what matters under Minnesota law

1. Recording protects priority, but recording is separate from escrow mechanics

Recording a deed places constructive notice on the public record and helps establish priority between competing claims to the same property. Minnesota’s recording statutes govern how recorded instruments affect third parties; for the statutes see Minn. Stat. Ch. 507. Until a deed is recorded, the buyer’s interest may be vulnerable to later purchasers or creditors who acquire rights and record first.

2. Escrow/trust obligations flow from the written escrow agreement or closing instructions

An escrow or trust holder (escrow agent, title company, or closing attorney) must follow the written instructions that govern the escrow account. Typical closing instructions list conditions that must be satisfied before the escrow agent disburses funds — for example: delivery and recording of a properly executed and acknowledged deed, payoff of liens, and issuance of a title insurance policy. If the deed is not recorded and the instructions required recorded delivery, the escrow holder should withhold funds until recording occurs or the parties agree otherwise in writing.

3. Risks if funds are released before recording

• Buyer may lose protection against later bona fide purchasers or lien holders who record first.
• Escrow holder may face liability from the buyer for releasing funds contrary to escrow instructions.
• If the seller refuses to transfer good title after funds are released, the buyer may need to pursue contract remedies (specific performance, rescission, or money damages) and could face added expense and delay.

4. When release before recording might be acceptable

There are circumstances where limited release may be safe if the parties and escrow instructions allow it — for example:

• The escrow instructions expressly permit release before recording (rare but possible).
• Funds are released to pay a lender payoff, and the payoff agent will itself require proof of appropriate recording steps before fully reconciling.
• The buyer receives independent protections such as a temporary escrow holdback supported by an indemnity, a bond, or a simultaneous recording arrangement where the deed is recorded immediately after disbursement.

5. Practical protections buyers and escrow holders can use

Common protections include:

• Escrow instructions that make recording a condition precedent to release.
• Title insurance ordered at closing so the buyer has insurer-backed protection if a title defect appears.
• Same-day recording procedures through the title company or closing attorney so funds and recording occur on the same day.
• Use of an interpleader or court-ordered release if parties dispute who is entitled to funds.

6. Remedies when a deed wasn’t recorded but funds were released

If funds were released and the deed was never recorded or fails to vest good title, potential remedies include:

• Contract remedies against the seller for breach of the purchase agreement.
• Claims against the escrow holder for failing to follow written instructions (if the escrow holder released funds contrary to those instructions).
• Quiet-title action, specific performance, or other equity remedies to correct title issues.
• Pursuing indemnity from title insurer if the buyer purchased a title insurance policy that should have been issued.

7. When to involve the court

If parties disagree and the escrow holder does not want to decide between competing claims, the escrow holder may file an interpleader or ask the court for instructions. Courts can order funds released to the proper party or retain funds until a clear resolution exists.

Key legal authority to review

Recording and priority rules in Minnesota are in Chapter 507 of the Minnesota Statutes: https://www.revisor.mn.gov/statutes/cite/507. Escrow-related disputes are resolved by looking at the written escrow instructions, the parties’ contract, and equitable remedies recognized by Minnesota courts.

Important disclaimer: This article explains general legal principles under Minnesota law and does not constitute legal advice. Consult a licensed Minnesota attorney about the specific facts of your situation before making decisions.

Helpful Hints — practical next steps

• Do not ask the escrow agent to release buyer funds unless the printed escrow closing instructions are satisfied or the parties sign a written amendment allowing the release.
• Ask the title company or closing attorney to confirm whether the deed has been recorded and to provide a stamped recorded copy once it is filed.
• Request a same-day recording commitment whenever possible so recording and disbursement happen together.
• Obtain a title insurance commitment before closing; if the deed is not recorded properly, a title policy may provide coverage for certain losses.
• If the deed hasn’t recorded, preserve evidence (emails, escrow instructions, closing statements, stamped recordings) showing what happened and when.
• If a dispute arises, consider sending a written demand to the escrow holder and other parties requesting they follow the written instructions or interplead the funds into court.
• If you’re unsure what to do, get a Minnesota real estate attorney to review the escrow instructions, purchase agreement, and title documents to advise on immediate steps.