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