LEO: Real Estate: Disbursement of Proceeds LE Op. 1116

 

Real Estate: Disbursement of Proceeds Prior to Recordation of

Lender's Deed of Trust.

 

July 6, 1988

 

You wish to know whether a closing attorney may disburse builder's

proceeds and builder's construction loan payoff prior to recordation of

the lender's deed of trust. Lender, because of its familial relationship

with builder, would consent to the disbursement of settlement proceeds

prior to the recordation. You advised that both the lender and builder

have agreed to take "whatever remedial steps are necessary" with regard to

the outsale mortgage and/or closing to protect buyers in the event a title

defect is found at the time of recordation.

 

Virginia Code 6.1-2.13 provides "A settlement agent may not disburse

any or all loan funds prior to the recordation of any instrument." The

Committee opines that it would be improper to disburse the builder's

proceeds and the builder's construction loan payoff prior to the

recordation of the lender's deed of trust.

 

Committee Opinion July 6, 1988