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 the loan is not paid in accordance with the loan agreement or there is another breach of the loan agreement.

This could give a lender the right take possession of the charged  asset and sell it to recover what they have lent you.

However, in some situations, i.e. when the loan has been discharged in full, you may seek to release the security and gain full control over the charged 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 in full, 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 with the same lender, which may adjust the security required by the lender.
• 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.

How do I release my security?

This will depend on the type of security, but generally you will require some documents signed by the lender, such as Form DS1 or a deed of release.

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 to remove any charges registered on the title to the property held at HM Land Registry.

If your company has provided the security, any deeds of release may need to be submitted to Companies House to remove the charges registered on the charges register maintained at 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.