Detailed answer — When escrowed/trust funds may be released before recording in Utah
When parties close a real estate sale, money and signed documents often change hands through an escrow agent, title company, or trustee. Recording the deed in the county recorder’s office is a separate step that provides public notice of ownership. Whether funds held in trust (or escrow) can be released before the deed is recorded depends on three things: the written escrow/trust instructions, the underlying purchase contract, and Utah law about recording and fiduciary duties.
How recording works in Utah (why it matters)
Recording a deed gives constructive notice to the public that the buyer owns the property. Until the deed is recorded, a later bona fide purchaser or a creditor could claim interests that may complicate the buyer’s rights. For the statutory framework on recording and notice in Utah, see Utah Code Title 57 (Recording of instruments): https://le.utah.gov/xcode/Title57/.
Key legal principles that affect release of funds
- Contract and escrow instructions control: Most title companies and escrow agents follow written escrow instructions or the purchase agreement. If those instructions make recording a condition precedent to releasing funds, the escrow agent should keep funds until the deed is recorded.
- Fiduciary duty and risk avoidance: Escrow agents and trustees have duties to follow instructions and to avoid exposing the parties to unnecessary risk. A title company will often refuse to disburse sale proceeds until it has evidence the deed has been recorded or until it has issued owner’s title insurance showing the transaction is complete.
- Practical exceptions: The parties can agree in writing that funds are released upon signature of the deed (rather than recording), or they can agree to a staggered release (e.g., holdback accounts) to protect against specific contingencies such as unresolved liens, prorations, or repairs.
Common scenarios and what typically happens
Below are typical fact patterns and the usual legal/industry responses in Utah:
- Deed executed but not yet recorded because of a short delay: If the delay is brief and the escrow agent or buyer provides acceptable assurances (for example, a receipt from the county recorder or a title company commitment), many escrow agents will release funds. However, they are not required to do so if their instructions condition release on actual recording.
- Seller demands funds immediately but buyer wants recording first: If escrow instructions require recording before disbursement, the escrow agent should refuse the seller’s demand until the condition is satisfied. If the instructions are ambiguous, the escrow agent risks liability if it disburses funds prematurely.
- Title or lien issues discovered before recording: A title company will generally withhold disbursement until liens are cleared and the deed can be recorded free of outstanding encumbrances or until funds are set aside to resolve them.
- Trustee holds funds under a trust instrument: A trustee must follow the trust terms. If the trust document conditions release on recording or on other events, the trustee must follow those terms unless a court orders otherwise. Utah’s trust laws are found in Utah Code Title 75: https://le.utah.gov/xcode/Title75/.
What you can do if funds are being withheld
- Review the written escrow instructions and purchase contract. Look for any clause that makes recording a condition to disbursement.
- Ask the escrow or title company for written reasons they are withholding funds and for an estimated timeline to recording.
- Consider a limited release or escrow holdback. Parties commonly agree to escrow a portion of proceeds to cover outstanding issues while allowing the rest to be disbursed.
- If the seller refuses to deliver a signed deed or to cooperate in recording, the buyer can request the escrow agent retain funds and pursue court remedies such as an interpleader, specific performance, or a quiet title action.
- If you are the buyer, ask whether you can record the deed yourself (if the deed has been delivered) or whether the title company can record and certify the recording before release.
Who bears the risk if funds are released before recording?
If an escrow agent releases funds before recording and that release conflicts with the instructions or results in loss to a party, the agent can be liable to the disadvantaged party. If the parties expressly agree to release funds prior to recording, they accept the attendant risk unless otherwise allocated in a written agreement. For statutory guidance on recording and priority (which affect risk and notice), see Utah Code Title 57: https://le.utah.gov/xcode/Title57/.
Practical checklist before asking escrow to release funds
- Confirm the deed has been signed and delivered to the escrow agent.
- Ask for proof of recording (recorder confirmation number or stamped copy) or agree in writing to accept an alternative (e.g., title company certification).
- Confirm any liens, tax proration, or payoff amounts are satisfied or that funds are set aside for them.
- Get written modification of the escrow instructions if all parties agree to release prior to recording.
- Keep written records of all communications and documents related to the disbursement request.
Helpful Hints
- Always get the escrow agent’s policy in writing: a short written instruction change is safer than oral promises.
- If you are the buyer, insist the escrow agent provide proof of recording before releasing full funds when possible.
- Consider a partial disbursement or holdback to cover any unexpected claims if recording is delayed.
- If a party refuses to cooperate with recording, consider filing a court action (e.g., for specific performance or to compel recording) rather than authorizing an unsecured release of funds.
- Ask whether title insurance can be issued or updated prior to final disbursement; insurers sometimes provide interim protections.
- If a dispute arises and the escrow agent is unsure how to proceed, the agent can file an interpleader with the court to ask a judge to decide who gets the money.
Quick references: Utah recording statutes: https://le.utah.gov/xcode/Title57/. Utah trust and fiduciary rules: https://le.utah.gov/xcode/Title75/.
Disclaimer: This article is for general informational purposes only and is not legal advice. I am not a lawyer. Laws change and each situation is different. For advice about a specific transaction in Utah, consult a licensed Utah attorney or your title/escrow provider.