How can security against a loan be released?

When you take out a commercial loan, you may have to put up some assets as security against the loan in case there is a default on the loan.

This gives a lender the right to claim the asset and sell it to recover what they have lent to you.

However, in some situations, you may seek to release the security and gain full control over your asset again.

When would security be released?

Security on a loan may be released in a number of circumstances, including:

• Repayment – If you have repaid the loan, then you have the right to seek release of your asset, provided you have satisfied all other conditions.
• Refinancing – You may have the option to refinance the loan, which may adjust the collateral needed.
• Substitution – In some cases, the lender will accept a substitute security if both parties agree, although this is less common.

The most common scenario is that security is released once you have satisfied all conditions relating to your loan, including full repayment with any relevant interest and costs.

How do I release my security?

This will depend on the type of security, but generally you will require some signed documents, such as Form DS1 or a deed of release, from the person to whom you have granted security.

A deed of release does what it says on the tin – releases you from your legal commitment to provide security to your lender once the loan has been repaid.

Form DS1 may be used to release you from security on a property, which will need to be submitted to HM Land Registry.

If your company has provided the security, any deeds may need to be submitted to Companies House.

If this is straightforward and the lender cooperates, the cost for this is likely to be in the region of £600 to £900 (plus VAT and disbursements) as a minimum.

In more complex circumstances, costs can rise quickly, so it is important that you seek advice from an expert when seeking to release security on a loan.

For advice on drafting and signing commercial loan agreements, please contact us.