Can funds held in trust be released if the deed hasn’t been recorded yet?

Disclaimer: This is general information and not legal advice. I am not a lawyer. For advice about a specific transaction, consult a licensed Alaska attorney.

Detailed Answer — how Alaska law and common practice apply

Short answer: Sometimes — but it depends on the escrow (trust) instructions, whether legal title or equitable title has already passed, and the parties’ willingness to accept the risk of an unrecorded deed. Recording a deed is not strictly required for a deed to be effective between the parties, but recording protects the grantee against later buyers and some creditors. Under Alaska law, recording statutes and general property principles assign priority and constructive notice to recorded interests. For a high degree of protection, escrow agents and buyers usually require recording before releasing funds.

What really matters: deed delivery, recording, and escrow instructions

When someone sells real property, three separate issues control what happens to the money held in trust (escrow):

1. Has the deed been delivered (transfer of title) between the parties? If the seller has validly delivered a signed and notarized deed to the buyer (or to escrow for delivery to the buyer), many courts treat the buyer as having acquired legal title even if the deed isn’t yet recorded. Equitable title often passes once the parties close and the deed is delivered.
2. Who is protected from third parties? Recording the deed gives constructive notice to the world. Until the deed is recorded, a subsequent bona fide purchaser or creditor who pays value without notice of the earlier unrecorded deed may have superior rights. That is why buyers and title companies want the deed recorded promptly.
3. What do escrow instructions require? Funds in escrow are controlled by the escrow agreement or instructions. Common escrow instructions say: release funds only when the deed is recorded or when title is insured. If the instructions require recording first, the escrow holder should not release funds until the deed is recorded or the parties amend the instructions.

Practical result in Alaska

In Alaska, the same practical rules apply. If the escrow agreement conditions funding on recording, the escrow agent should not release money until the deed is recorded or until the parties give written alternative instructions. If the parties agree in writing to release funds before recording, they may do so, but that carries risk — especially if a later claim arises from a third party who lacked notice.

For more on Alaska property and recording law, see the Alaska Statutes, Title 34 (Property): https://www.akleg.gov/basis/statutes.asp#34. Recording and priority rules are set out in the state statutes and interpreted by Alaska courts; recording gives constructive notice to later purchasers.

Common hypothetical (illustrates typical outcomes)

Hypothetical: Buyer pays the purchase price into escrow. Seller signs and delivers a deed to escrow, but due to a clerical error the deed isn’t recorded the day of closing. The parties instruct escrow to release funds only after recording. Several days later a second buyer (who bought from the seller earlier but didn’t record either) shows up claiming the property.

Outcome: Because the first buyer did not have a recorded deed at the time the second buyer acquired an interest, the priority between the competing claimants depends on (a) whether the second buyer was a bona fide purchaser for value without notice, and (b) the exact timing of delivery and recording. To avoid this, escrow typically waits for recording or obtains title insurance that insures against pre-recording defects before releasing funds. If escrow released funds contrary to its instructions, escrow could be exposed to liability.

What an escrow agent can (and cannot) do

• Follow written escrow instructions. If those instructions require recorded deed or title insurance, the agent should wait.
• Accept written joint agreement by buyer and seller to release funds before recording, but document consent and risks in writing.
• If the escrow holder faces conflicting demands, it can (and should) consider an interpleader action or deposit the funds with the court to resolve competing claims.

Remedies when parties disagree or funds already released

• If funds are released improperly, the disadvantaged party can sue for breach of escrow contract or conversion.
• Parties may seek a court order (interpleader, quiet title, or specific performance) to resolve title and money disputes.
• Title insurance can cover some risks that arise from defects or missing recordings; contact your title insurer promptly after a problem appears.

Helpful Hints

• Read the escrow instructions carefully. The single most important document is the written escrow agreement: it controls when funds can be released.
• Insist on recording the deed as soon as possible at closing. Recording creates public notice and reduces risk.
• Obtain owner’s title insurance or lender’s title insurance at or before closing. Title insurance protects against unrecorded claim risks that occur before recording.
• If you are the escrow holder, don’t release funds on an oral instruction. Get written and signed, expressly worded instructions shifting the release condition.
• If there are competing claims or ambiguity, consider filing an interpleader or ask the escrow agent to deposit funds with the court rather than pick a side.
• If the deed was delivered but not recorded, ask your attorney whether you have equitable title and whether immediate recording or a quiet title action is needed.
• When in doubt, hire an Alaska real estate attorney to review escrow instructions, examine title work, and recommend safe steps for release of funds.

Again, this is general information, not legal advice. For guidance about your specific transaction in Alaska, consult a licensed Alaska attorney who handles real estate closings and escrow disputes.