Detailed answer — how Arizona law treats release of funds before recording

Short answer: In Arizona, money held in escrow or a trust can sometimes be released before a deed is recorded, but doing so carries legal risk unless the escrow agent, parties, and title insurer are protected by clear written instructions or other reliable proof that ownership and title transfer have occurred. State recording law creates consequences for unrecorded instruments, and escrow agents and parties should use common safeguards (recording confirmation, title insurance, or specific escrow instructions) before releasing funds.

Why recording matters under Arizona law

Recording a deed provides constructive notice to the world that ownership changed. Arizona’s recording statutes govern how property records give notice to later purchasers, creditors, and lienholders. For an authoritative source on Arizona recording law, see Arizona Revised Statutes (Title 33, Property), Recording provisions: A.R.S. Title 33 (Property). Because recording affects priority and notice, escrow agents and buyers usually require recording before funds are released.

Common closing sequence and why escrow normally waits for recording

In a typical purchase closing, the escrow holder or closing agent follows written escrow instructions that condition releasing the buyer’s funds on delivery of a recorded deed (or on issuance of a title insurance policy showing a marketable record title). If funds are released but the deed is not yet recorded, a later intervening lienholder or buyer could claim priority over the unrecorded transfer depending on the facts.

When funds may be released before recording — accepted safeguards

Escrow agents and parties commonly rely on one or more of these protections before releasing money when a deed is not yet recorded:

• Escrow instructions that expressly authorize conditional release before or concurrent with recording, signed by all principals.
• A title company’s written commitment or guaranteed preliminary title report stating it will issue the owner’s title insurance policy once the deed is recorded and identifying any required steps to protect priority.
• A closing agent’s written certification that the deed has been delivered for recording and that a recording number or receipt will follow, together with an agreement to return funds if recording does not occur within a set time.
• Delivery of the recorded deed or a recording receipt (instrument number and county recorder confirmation) to the escrow agent prior to disbursing funds.
• A separate escrow holdback in the closing statements that remains until the deed actually posts in the county recorder’s index.

Risks of releasing funds without recording or adequate protection

If funds are released before the deed is recorded and the release lacks clear written protections, several problems can arise:

• The buyer may lose priority to subsequent bona fide purchasers or lienholders who rely on the public record.
• The seller could face claims from creditors or judgment holders that attach to the property before the deed is recorded.
• The escrow agent may be liable to whichever party is harmed if the agent disbursed funds contrary to instructions or without reasonable safeguards.
• Title insurance may refuse to cover claims arising during the gap between funding and recording unless the insurer had agreed in writing to protect the parties.

Practical outcomes under Arizona practice

Because of the recording/priority rules and potential agent liability, Arizona closings normally require one of the following before final disbursement:

• the county recorder’s instrument number or copy of the recorded deed; or
• a title company commitment promising an owner’s policy on receipt of the recorded deed and covering intervening interests; or
• express escrow instructions signed by buyer and seller allowing conditional disbursement and setting a mechanism to resolve failures to record.

What to do if you face this situation

If you are a buyer, seller, or escrow agent dealing with an unrecorded deed but a funded transaction, take these steps:

1. Do not ask the escrow agent to disburse funds until the recorded deed (or reliable proof of recording) is produced, or until a title insurer agrees in writing to protect you.
2. Obtain clear, signed escrow instructions that spell out when the agent can disburse money and what happens if recording fails.
3. If the agent already released funds prematurely, contact the title company and consider seeking immediate legal advice about remedies (breach of escrow instructions, escrow agent liability, quiet title, or claims under title insurance).

Where to look in Arizona law

Recording and notice provisions are found in Arizona’s property statutes (see A.R.S. Title 33). Escrow law and duties may be governed by contract, Arizona statutes, and licensing or regulatory rules that apply to closing and title companies. For the recording statutes and related provisions, see: Arizona Revised Statutes, Title 33 (Property).

Bottom line: Releasing escrow or trust funds before a deed is recorded is possible in Arizona, but only when the parties, escrow agent, and often the title insurer have clear written protections. Without those safeguards, premature release creates real legal and financial risk.

Disclaimer: This article explains general Arizona legal principles and common practices. It is not legal advice. For guidance about a specific situation, consult a licensed Arizona attorney or your closing/title company.

Helpful hints — practical checklist for buyers, sellers, and escrow agents

• Require proof of recording (recorded deed copy or county instrument number) before final disbursement.
• Ask the title company for a written commitment that protects against intervening liens or buyers if funds are to be released early.
• Use explicit, signed escrow instructions that say who may authorize disbursement and what conditions must be satisfied.
• Consider a short-term holdback agreement if recording will occur shortly but not immediately.
• Escrow agents: document every instruction and your documentary basis for releasing funds; obtain written waivers if a party asks you to act contrary to standard protections.
• If funds were released prematurely, preserve all closing records and contact counsel and your title insurer promptly.
• Remember: recording is the public protection mechanism. If you cannot obtain immediate recording, get written contractual or title-insurer protection before you let money go.