When Can Escrow or Trust Funds Be Released If the Deed Hasn’t Been Recorded? (Arkansas)

Short answer: In Arkansas the party holding escrow or trust funds generally must follow the escrow instructions and the purchase contract before releasing funds. A deed does not need to be recorded to transfer ownership between the parties, but failing to record creates risk for the buyer and may affect whether an escrow agent should or will release funds.

Detailed answer — how this works under Arkansas law

This answer assumes a typical residential or commercial real estate closing where a neutral escrow agent, title company, or attorney holds funds and documents until closing conditions are met.

1. Recording vs. delivery: two separate things

Under Arkansas property law, the operative act that transfers title is delivery of a properly executed deed to the buyer (and the buyer’s acceptance). Recording the deed is a separate step. Recording provides public notice to third parties and protects the buyer against later good-faith purchasers or creditors who rely on public records.

Because recording is a notice device, a deed that was validly delivered but not yet recorded may still convey title as between the grantor and grantee. But if the deed is not recorded and a later purchaser or creditor records a conflicting interest, the unrecorded grantee could lose priority against that later party. That is why escrow holders and buyers often insist on recording before funds are disbursed.

2. What the escrow/trust holder must follow

The escrow or trust holder (escrow agent, title company, closing attorney) must follow the written escrow instructions or the purchase contract. Typical instructions require some combination of:

Delivery of a signed and acknowledged deed to the buyer (or to escrow for recording).
Evidence of marketable title, such as a title insurance commitment or lien payoff statements.
Receipt of funds (buyer’s wire or certified funds) and satisfaction of prorations, taxes, mortgages, and liens.
Recording of the deed and any mortgage or lien instruments (sometimes required prior to disbursement).

If the escrow instructions specifically require recording before release, the escrow holder should not release funds until the deed is recorded (or until the instructions allow release on other proof). If instructions are silent, the escrow holder must follow generally accepted closing practices and any applicable contract terms.

3. Practical choices escrow agents make

Escrow agents and title companies commonly adopt one of these practices:

Require recorded deed: hold funds until the deed is recorded and then disburse funds.
Release on proof of recording submission: disburse after the deed has been delivered to the county recorder for filing and the agent has a filing receipt or confirmation number.
Release on title insurance commitment: disburse when title company issues a commitment showing insurable title, sometimes before recorded delivery, relying on post-closing recording to perfect public notice.

4. Risks when funds are released before recording

If funds are released but the deed is not recorded (or not delivered), the buyer faces risks such as:

A later bona fide purchaser or lender could record a conflicting interest and claim priority under Arkansas recording law, impairing the buyer’s position.
If the seller fails to deliver the deed after getting the money, the buyer may need to sue for breach of contract, specific performance, or seek other remedies—costly and time consuming.
If a lien or judgment attaches to the property before the deed is recorded, the buyer’s protection may be weakened.

5. Remedies and dispute resolution

If an escrow holder releases funds improperly or a deed is not recorded as promised, parties may have these remedies:

Contract remedies against the seller for breach.
Claims against the escrow agent or title company if they fail to follow written escrow instructions or act negligently.
Interpleader or quiet-title actions to resolve competing claims to the property.
Lis pendens or other lien-based protections while litigation proceeds.

6. Arkansas recording statutes and public notice

Arkansas recording statutes set how and when instruments affecting real property become a matter of public record and who has priority. For practical purposes, check the Arkansas Code provisions governing recording and priority in Title 18 (Real and Personal Property) and consult the county recorder’s office for local recording procedures and fees. See the Arkansas Code and recording resources at the Arkansas General Assembly website: https://www.arkleg.state.ar.us/.

How this applies to common fact patterns

Scenario A — Standard closing with title company

The title company holds funds and receives the executed deed. It records the deed, confirms recording, and then releases funds. This is the lowest-risk approach for buyer and lender.

Scenario B — Buyer asks escrow to release funds while deed is at recorder but not yet indexed

Some closings allow release when the escrow agent has a recording receipt or confirmation number. That reduces delay but still relies on verifiable proof that the instrument was submitted and accepted for filing.

Scenario C — Funds released on seller’s promise to record later

This is risky. If the seller takes funds and fails to record, the buyer may need to sue. An escrow agent who disburses contrary to instructions risks liability.

Helpful hints

Always put clear escrow instructions in writing. Specify whether recording is required before disbursement and what evidence suffices (recording receipt, confirmation number, or title insurance).
Ask for a title insurance commitment before closing. Title insurance protects against many recording-related issues and is standard in Arkansas closings.
If the seller insists on a quicker disbursement, get an express, written warranty, or consider holding funds in a short-term trust until recording is confirmed.
If you are the buyer, insist that the deed be delivered to escrow for recording at closing and that the escrow agent provide proof of recording before releasing funds whenever possible.
If funds are released and the deed is not recorded, document everything and contact the escrow agent, the title company, and an attorney promptly to explore remedies (specific performance, quiet title, or damages).
When in doubt, the title company’s customary practice and the written purchase contract will usually control the escrow agent’s duties.

Disclaimer: This article explains general principles of Arkansas real property and escrow practice. It is educational only and not legal advice. For advice about a specific transaction, contact a licensed Arkansas attorney or a title professional.