Practice Guide 31 – Discharges of charges

Updated: July 2012

Update

This edition of the guide replaces the October 2011 edition. Section 3.7 has been updated to reflect the additional method of execution by a company introduced by the Companies Act 2006.

Scope of this guide

This guide deals with discharges of registered and noted charges and withdrawals of notices of deposit of land and charge certificates. It is aimed at conveyancers and you should interpret references to ‘you’ accordingly. Land Registry staff will also refer to it.

1 Abbreviations and terms used

In this guide:

‘CA 1985’ means the Companies Act 1985

‘charge’ means a legal mortgage or charge over land, unless the context shows that some other type of charge is intended (for example, where the text refers to a ‘noted charge’, a ‘floating charge’ or a ‘fixed equitable charge’)

‘conveyancer’ means an authorised person within the meaning of s.18, Legal Services Act 2007 who is entitled to provide the conveyancing services referred to in paragraphs 5(1)(a) and (b) of Schedule 2 to that Act, or a person carrying out those activities in the course of their duties as a public officer. It also includes an individual or body who employs or has among their managers such an authorised person who will undertake or supervise those conveyancing activities (r.217A, LRR 2003)

‘e-DS1’ means an electronic method of discharge lodged through the portal

‘ED’ means an electronic discharge

‘END’ means an electronic notification of discharge

‘facility letter’ means a letter issued by Land Registry Head Office to a corporate customer setting out the conditions on which the customer may lodge certain applications without the normal conveyancing evidence

‘LPA 1925’ means the Law of Property Act 1925

‘LRA 1925’ means the Land Registration Act 1925

‘LRA 2002’ means the Land Registration Act 2002

‘LRR 1925’ means the Land Registration Rules 1925

‘LRR 2003’ means the Land Registration Rules 2003

‘the portal’ is a secure website platform used to access Land Registry e-services.

2 Introduction

This guide deals with:

• discharges of registered legal charges

• the release of part of a registered estate in a registered title from a registered charge

• the discharge of charges noted under the LRA 1925 and LRA 2002

• the withdrawal of notices of deposit of land and charge certificates

• early completion of applications where no evidence of discharge is lodged.

It covers discharges both in paper form and by electronic means.

Discharges and releases of registered charges must be made in accordance with rr.114 and 115, LRR 2003. R.114, LRR 2003 stipulates that, subject to r.115, a discharge of a registered charge must be in form DS1, and that a release of part of the registered estate from a registered charge must be in form DS3.

R.115, LRR 2003 permits notification of a discharge or a release of part of a registered charge which has been delivered in electronic form. This is covered in:

• section 6 Electronic notification of discharge

• section 7 Electronic discharges, and

• section 8 E-DS1.

Please note that charge certificates have no legal significance under the LRA 2002. You must not lodge them to register a discharge after 12 October 2003. If you do, we may destroy them together with their contents.

3 Discharges and releases of registered charges

3.1 General – forms DS1 and DS3

Appendices A and D respectively to this guide contain links to forms DS1 and DS3. Discharges by these methods are covered in this part of the guide. Please note that we will not accept form DS1 or DS3 if it is sent by fax.

We will not accept any alteration to forms DS1 or DS3 which is not provided for in the LRR 2003. In particular, neither form should be altered if money remains outstanding under the charge as a personal debt of the borrower.

An application to register a discharge in form DS1 must be made in form AP1 or form DS2, and an application to register a release in form DS3 must be made in form AP1. Appendix B to this guide contains a link to form DS2.

Evidence of identity forms ID1 or ID2 will be required if the lender (or an attorney signing for them) is not represented by a conveyancer, and the person lodging the application is unable to confirm identity. However evidence of identity for an attorney signing a DS1 is not required, where the lender has a facility letter arrangement with Land Registry Head Office to sign DS1s this way.

Forms ID1 or ID2 will also be required when the person lodging the application is not a conveyancer. For more details see Practice Guide 67 – Evidence of identity – conveyancers.

3.2 Sole application for discharge

Where an application for a discharge of a registered charge is the sole application it should not be lodged at Land Registry in advance of the form DS1. Repeated applications lodged without the necessary DS1 may be rejected under r.16(3), LRR 2003 as being substantially defective.

3.3 AP1 includes other applications

If application is made to discharge a registered charge under cover of a form AP1 that also relates to other applications but without the form DS1, we will reject the application for discharge as being substantially defective under r.16(3), LRR 2003 and complete the other applications so far as possible. This is known as ‘early completion’, as it is intended to enable the other applications to be completed at the earliest possible time. When the application is completed we will inform the conveyancer who lodged the application that the application to register the discharge has been rejected and that the entries relating to the charge remain in the register. Under r.16(3), LRR 2003 we can reject an application on delivery or cancel it at any time thereafter where it appears to us to be substantially defective. In this practice guide we use the term ‘reject’ for all instances where r.16(3) applies.

In this situation if any requisitions arise in respect of the other applications we will include a reminder that evidence of discharge of the charge has not been lodged. If the requisitions relating to the other applications are complied with but production of the form DS1 remains outstanding we will complete registration of the other applications and reject the application for discharge. Once the other requisitions have been complied with we will not extend further the period for production of the DS1.

Following early completion a further application should be made using form AP1 or DS2 when the DS1 becomes available.

When we have applied early completion we will inform the original applicant if a successful application to discharge the charge is made by a different applicant within six months of the original application being completed.

When a transfer and or a new charge is to be registered as well as the discharge of an existing charge, lodging the AP1 as soon as possible after completion will ensure the priority of the other applications is protected. Where there is a delay in receiving the discharge it is unsafe to delay lodging the AP1 and rely on lodging a further official search of whole to protect the priority of the other applications. Making a further search does not extend the original priority period; rather a fresh priority period is created. If any competing application is lodged before the second search is made, that application will gain priority.

NB: Early completion does not apply to dealing of part applications.

3.4 An existing restriction in favour of the lender

If applications are made to simultaneously discharge a registered charge and register other dispositions and there is a restriction in the register in favour of the existing lender which prevents registration of those dispositions, we will requisition for either evidence of discharge of the relevant charge or evidence that the terms of the restriction have been met. If the requisition is not complied with, we will cancel under r.16(2), LRR 2003 not only the application for discharge but also the applications to register any dispositions caught by the restriction. For instance if applications are made to discharge a registered charge and register a transfer and charge we will cancel the applications to register the transfer and charge as well as the application to discharge the charge. If however the restriction only prevents the registration of a charge, we will complete the registration of the transfer but cancel the application to register the new charge.

3.5 Applications that contain a defect not relating to the discharge

Rather than cancelling the entire application when satisfactory evidence of discharge is lodged, either with the application or while it is pending, but a requisition relating to some other aspect of the application cannot be complied with, we will complete the discharge of the charge. We will also complete so far as possible any accompanying transactions not affected by the requisition. See Practice Guide 50 – Requisition and cancellation procedure.

3.6 Other methods and forms of discharges and releases

R.114(4), LRR 2003 allows the registrar discretion to accept any other proof of satisfaction of a charge that the registrar may regard as sufficient.

In the case of charges secured against unregistered land, we will accept a receipt endorsed on the form of charge itself as proof of discharge.

We will accept discharges in form 53 if dated before 1 October 1998.

3.7 Discharges and releases by companies

Companies registered under the CA 1985, or to which s.718 of that Act applies, may execute either forms DS1 or DS3:

• by affixing the seal in the presence of a director and secretary

• without the use of a company seal, either:

  • by a director and secretary or two directors signing the form as a deed, or

  • (for deeds executed on or after 6 April 2008) by a single director signing the form as a deed provided that the signature is witnessed and attested

• by some other method permitted under the company’s constitution.

In the last case, you must enclose a certified copy of the company’s constitution and any other necessary evidence of the company’s power to execute the form of discharge by that method, with your application to register the discharge, but see also section 3.11 Special arrangements – facility letters.

3.8 Discharges and releases by building societies

Building societies may execute the form DS1 or DS3 as a deed:

• in accordance with s.74(1), LPA 1925

• in some other way permitted by their constitution or rules

• by affixing the seal, which must be countersigned by a person acting under the authority of the society’s board of directors, or

• by the signature, unaccompanied by the seal, of a person with that authority.

The last two methods are now laid down in The Building Societies (Prescribed Forms of Receipt) Rules 1997 and, strictly, apply only to endorsed receipts. We will accept forms DS1 and DS3 executed this way as proof of the satisfaction of the charge.

3.9 Discharges and releases by foreign companies

Foreign companies may execute a deed otherwise than under seal, if the deed:

• is signed by a person or persons who, in accordance with the laws of the territory in which the company is incorporated, is or are acting under the authority (express or implied) of that company, and

• is expressed, in whatever form of words, to be executed by that company.

We will not question the execution of the form DS1 or DS3, provided:

• it appears to have been executed as described above, and

• there is satisfactory evidence that the corporate body executing the deed is a foreign company, and of the territory in which it is incorporated.

3.10 Discharges and releases by any other corporate body

Other corporate bodies, such as industrial and provident institutions and companies incorporated by royal charter or by statute, or other entities having corporate personality, must either execute in accordance with s.74(1), LPA 1925, or prove that they are entitled to execute in some other way. In the latter case, we will accept the discharge if we are satisfied that the instrument or statute constituting or regulating the affairs of the lender allows it to execute a form DS1 or DS3 in the manner proposed, see also section 3.11 Special arrangements – facility letters.

3.11 Special arrangements – facility letters

Bodies corporate which intend to execute a significant number of discharges or releases otherwise than in accordance with s.74, LPA 1925 or s.36A, CA 1985, may ask Land Registry Head Office for a special arrangement.

Provided we are satisfied that they have power to do as they propose, we will make an arrangement that will obviate the need for the evidence that the discharge or release has been properly executed to accompany every application.

The lender will have to undertake to inform us of any change in the power, or the personnel empowered, to grant discharges or releases in the organisation’s name.

A special arrangement of this kind may be set out in either:

• a facility letter, or

• a customised form DS1 (in the case of discharges of whole) or form DS3 (in the case of releases of part).

Where such arrangements were made before 1 April 1998, you must lodge a copy of the facility letter with the form DS1 or DS3. Where an arrangement has been made on or since 1 April 1998, however, you should enter the date of the facility letter in panel 7 of the form DS1 or DS3. If you need confirmation that a facility letter exists, or that a form DS1 or DS3 has been executed in accordance with it, you should address your enquiry to the lender.

Similar arrangements may be made for other types of lender.

3.12 Release of part of the land in a registered title from a registered charge

A release of part of the land in a registered title from a registered charge must be in form DS3. The land must be identified on an accompanying plan or by reference to the title plan. Any accompanying plan must be signed by, or on behalf of, the lender. Form DS3 should also be used where part of the land in a registered title, and the whole of the land in (an) other registered title(s), are discharged from a registered charge.

4 Discharges and releases of noted charges

4.1 General

A charge of a registered estate may have been noted under s.49, LRA 1925 or under s.32, LRA 2002. Most noted charges will have been entered in one of three ways.

• Following an application by the chargee under s.34(2)(a), LRA 2002 for an agreed notice.

• By us on first registration of the registered estate.

• Under s.49, LRA 1925.

A charge may have been noted as a unilateral notice following an application by the chargee under s.34(2)(b), LRA 2002. Separate provisions govern the cancellation of unilateral notices from those governing the cancellation of other notices. These are explained below.

Note: A charge may also be the subject of a caution under s.54, LRA 1925. Rr.222 and 223, LRR 2003 deal with the withdrawal or cancellation of these cautions.

4.2 Notices other than unilateral notices including charges noted under the LRA 1925

An application to cancel a notice (other than a unilateral notice) must be made in form CN1. You must also lodge sufficient evidence that the charge has been discharged as follows.

4.2.1 Discharges of fixed equitable charges

We will accept:

• a form DS1 or form DS3

• an endorsed receipt on the instrument of charge, or

• a letter addressed to Land Registry confirming that the charge has been satisfied, signed by the noted chargee (or an authorised signatory of the noted chargee if it is a body corporate), and including confirmation that there has been no assignment of the benefit of the charge. (If an assignment has been made, the normal conveyancing evidence of devolution of title must be lodged.)

You do not have to lodge the charge itself but (if available) it may be useful as evidence that the applicant is still entitled to the benefit of it.

4.2.2 Discharges of floating charges

We will accept:

• a copy of a declaration of satisfaction in Companies Registry Form 403A stamped as ‘REGISTERED’ by the Companies Registry

• a letter from the Registrar of Companies confirming that the charge has been satisfied

• a letter addressed to Land Registry confirming that the charge has been satisfied, signed by the noted chargee (or an authorised signatory of the noted chargee if it is a body corporate), and including confirmation that there has been no assignment of the benefit of the charge. (If an assignment has been made, the normal conveyancing evidence of devolution of title must be lodged), or

• where a subsequent transfer on sale of the land has been lodged for registration, a certificate signed by the conveyancer or secretary of the chargor company that none of the events which would cause the charge to become fixed, occurred before the date of the transfer.

4.3 Unilateral notices

An application to cancel the entry of a unilateral notice must be made in form:

UN2 – where the application is for removal by the registered beneficiary under r.85, LRR 2003

UN4 – where the application is for cancellation by the registered proprietor under r.86, LRR 2003.

Evidence of discharge is not required in either of these situations.

5 Discharge of a mortgage protected by notice of deposit

Instead of registering a mortgage with Land Registry and holding a charge certificate, a lender used to be able to hold a borrower’s land or charge certificate as security for the loan. Before April 1995, the lender could apply for an entry to be made in the register giving notice that the certificate had been deposited with them.

Although we no longer register such notices, notice of deposit entries still appear on some registers. Where they do appear, they take effect to give notice of the deposit and to operate as a caution against dealings. This position will remain unchanged notwithstanding the abolition of land and charge certificates under the LRA 2002.

We will accept the following evidence to cancel a notice of deposit entry.

• An application in form 86 to the LRR 1925, provided it is dated before 13 October 2003.

• The duplicate part of forms 85A, 85B or 85C (to the LRR 1925), provided it is dated before 13 October 2003.

• A withdrawal in form WCT by the lender in whose favour the notice is made.

• An application in form CCD by the proprietor of the registered estate or registered charge to which the notice relates, provided it is shown that the notice does not protect a valid interest, or that the interest has come to an end.

6 Electronic notifications of discharge (ENDs)

ENDs were a method of discharge of mortgage that were discontinued on 3 January 2010. Certain lenders had the right to transmit ENDs to Land Registry instead of completing form DS1.

As with the paper form of discharge, an END does not, of itself, cause the charge to be cancelled. When the END was sent, it was held as a message on our computer system until an application in form AP1, DS2 or DS2E to discharge the charge was received. Then, provided the rest of that application is in order, we would cancel the entries relating to the charge without a paper form of discharge. Although lenders can no longer transmit ENDs to us, there are still many that await an application to remove the charge entries.

You can check whether an END has been previously transmitted to Land Registry by phoning 0844 892 0307 (or 0844 892 0308 for a Welsh language service).

7 Electronic discharges

7.1 What is an electronic discharge (ED)?

ED is a discharge of a registered charge sent electronically by the lender’s computer system direct to us. For an ED, the Land Registry computer system makes a number of checks and, if everything is in order, cancels the charge entries automatically and, in most cases, immediately on receipt of the discharge. An ED is different to an e-DS1 which is referred to in section 8 E-DS1.

An ED can only be sent for a discharge of whole.

All EDs will be sent via secure virtual private networks. A number of security features have been incorporated to ensure that only lenders can send EDs to us.

An ED cancels the charge entries automatically and, in most cases, immediately. An ED does not require a separate formal paper application to discharge the charge, nor does it need any manual intervention. It is completely automated between various computer systems.

Land Registry introduced EDs because a system for automatically discharging registered charges is required for e-Conveyancing. EDs are now supplemented by the introduction of e-DS1s. Both EDs and e-DS1s currently operate as standalone applications for discharge and both will, in time, form part of an integrated e-conveyancing system.

EDs will also overcome some of the problems associated with form DS1 and the former ENDs procedure, especially the inherent delays. Lenders who use EDs are introducing new processes that automate and speed up the way they deal with redemptions and enable them to send an ED more quickly than a DS1 or an END.

7.2 Will an ED always be accepted?

There may be a small number of situations when an ED is rejected. We will inform the lenders immediately if we cannot accept an ED. They will then investigate the reason why the ED has been rejected and use an alternative method for discharging the charge.

7.3 Will the charge entries always be cancelled immediately?

There may be occasions when we will not be able to cancel the charge entries immediately. For example, there might be an application pending against the title concerned. This would have to be completed first before the charge entries could be cancelled. In this situation, we will accept the ED but the charge entries will not be cancelled until the prior application has been completed. The lenders will tell you if this situation occurs.

Where the charge entries have been cancelled immediately, the lenders will confirm that the charge has been electronically discharged by Land Registry. If the charge entries cannot be cancelled immediately, the lenders will confirm that they have lodged an ED with us and that we have informed them that we are dealing with the removal of the charge from the register.

7.4 How will conveyancers know that the charge entries have been cancelled?

The lender will tell you that either:

• the charge has been discharged, or

• we have confirmed that we have received the ED but cannot cancel the charge entries immediately.

7.5 What you should do if you act for a borrower

The lenders will tell you in their redemption statement that they will discharge the charge by an ED. You must tell them which charges are being redeemed and pay off the charge(s) in the normal way.

Provided the correct payment is received, and the charge is one which can be discharged by an ED, the lenders will send an ED to us. If accepted, the charge entries will be cancelled automatically. The lenders will then write to you to confirm that the charge has been successfully discharged.

If there is another party involved, you will need to agree on a revised form of undertaking to allow for the different method of discharge.

7.6 What you should do if you act for a buyer

You should proceed with the transaction in the same way as you would with any other, except that you will need to allow for the different method of discharge by agreeing on a revised form of undertaking.

You should make the arrangements for completion as you would normally, except for the modified undertaking.

If the redemption is part of a larger transaction you should endorse your application form ‘Charge discharged electronically’. If you lodge the application before an ED has been lodged we will complete the other applications so far as possible but take no action in respect of the existing charge. If the application form refers to the electronic discharge we will inform you when we complete the application that the charge entries have not been cancelled.

Lodging the AP1 as early as possible in this situation will protect the priority of the other applications. If any requisitions arise in respect of the other applications we will follow the procedure set out in section 3.3 AP1 includes other applications.

7.7 How can I check that an ED has been transmitted?

You should telephone the Land Registry office for the property concerned. They will confirm either that:

• the charge entries have been cancelled following receipt of an ED

• an ED has been received, or

• no ED has been received.

7.8 What will Land Registry issue on completion of an ED?

The lenders will tell us whether a redemption has been instigated by the borrower or by a conveyancer. If the redemption is by a borrower, we will write to them confirming that the charge has been discharged.

We will not issue any confirmation to a conveyancer because the lender will send confirmation of the discharge.

8 E-DS1

8.1 What is an e-DS1?

An e-DS1 is an electronic form of discharge submitted by lenders or their authorised agents through the portal. The e-DS1 acts as both the evidence of discharge and the application to remove the charge from the register.

An e-DS1 can only be lodged for a discharge of whole of the land charged and replaces the END.

Unlike an END, an e-DS1 can provide immediate certainty of lodgement of a discharge because real-time validations are in place to assist the user when they are inputting data and, once the lender has submitted the e-DS1, Land Registry will issue an electronic acknowledgment to the user.

8.2 Who can submit an e-DS1?

At this stage, the e-DS1 service is designed for corporate lenders and their agents only. Access to the e-DS1 will be via the portal. Once a user has completed the sign-up process for the portal they will have role-based access, which provides security and negates the need for a lender’s signature. The role-based access will recognise the user and not request any details about their organisation. This ensures that the user can only discharge charges in favour of the organisation they represent.

8.3 How is an e-DS1 submitted?

Once the user has accessed the portal they will be presented with a series of steps which leads them through the process for keying the appropriate data for the e-DS1. When completing the e-DS1 the user will receive real-time validation messages as a response to the information supplied and checked by the system. Once the e-DS1 has been fully completed it must be submitted because there is no facility to save the completed e-DS1.

8.4 Will the charge entry be cancelled immediately?

Although the charge entry will not be cancelled immediately, in many cases the application will be processed automatically by the system so the register will be updated very quickly, in a matter of seconds. However on some occasions we will not be able to cancel the charge entries automatically, such as when there is a prior pending application against the title concerned. This would have to be completed before the charge entries could be cancelled. The e-DS1 can still be submitted but the charge entries will not be cancelled until the prior application has been completed.

Once the lender has submitted the e-DS1 they will receive an electronic message confirming that we have received their application.

8.5 How will conveyancers know that the charge entries have been cancelled?

The lender will be able to tell you either:

• that the charge has been discharged, because they will have been informed of completion of the registration, or

• that we have confirmed that we have received the e-DS1 but the lender has not yet received confirmation of completion of the registration.

8.6 What you should do if you act for a borrower

The lender should indicate in their redemption statement that they will discharge the charge using an e-DS1. You must tell them which charges are being redeemed and pay off the charge(s) in the normal way.

Once the lender has received the correct payment, they will arrange for an e-DS1 to be submitted. The lender can opt for a notification to be sent to them on completion of registration. In addition, if it is a borrower’s redemption, notification will be sent to the borrower on completion.

8.7 What you should do if you act for a buyer

You should proceed with the transaction in the same way as you would with any other, except you that you will need to allow for the different method of discharge by agreeing on a revised form of undertaking. You may wish to use a similar format to that used for an ED.

You should make the arrangements for completion as you would normally except for the modified undertaking. If the redemption is part of a larger transaction you should endorse your application form ‘Charge discharged by e-DS1’. If you lodge the application before an e-DS1 has been lodged we will complete the other applications so far as possible but take no action in respect of the existing charge. If the application form refers to the e-DS1 we will inform you when we complete the application that the charge entries have not been cancelled. Lodging the AP1 as early as possible in this situation will protect the priority of the other applications. If any requisitions arise in respect of the other applications we will follow the procedure set out in section 3.3 AP1 includes additional applications.

8.8 How can I check that an e-DS1 has been transmitted?

You should telephone the Land Registry office for the property concerned. They will confirm either that:

• the charge entries have been cancelled following receipt of an e-DS1

• an e-DS1 has been received, or

• no e-DS1 has been received.

8.9 What will Land Registry issue on completion of registration of an e-DS1?

The lender will tell us whether a redemption has been instigated by the borrower or by the conveyancer. If the redemption is by a borrower, we will write to the borrower confirming the charge has been discharged.

9 Restrictions

Generally, any restriction entry that specifically relates to the charge you are discharging will be cancelled automatically when the charge is discharged. However, if a restriction in favour of the lender entered as a result of an application in form RX1 does not specifically refer to the charge being discharged, a separate withdrawal of that restriction in form RX4 must be lodged with the application to register the discharge. If form RX4 is not lodged, the restriction will remain in the register.

10 Fees

No fee is payable for:

• registering a discharge of a registered charge

• withdrawal of a notice of deposit

• cancelling or removing notice of a charge.

11 Enquiries and comments

If you have a particular concern that is not covered by this guide, please contact Customer Support in advance of the transaction – see Contact details. If the transaction is particularly complex, it may be better if you make your enquiry in writing at the Land Registry office that will process your application.

If you have any comments or suggestions about our guides, please send them to:

Central Operations Group
Land Registry
Trafalgar House
1 Bedford Place
Croydon
CR0 2AQ

(DX 8888 Croydon 3)

You can obtain further copies of this and all our guides free from Customer Support or you can download them from our website in English and Welsh at www.landregistry.gov.uk

12 Appendix A

Form DS1 – Cancellation of entries relating to a registered charge

13 Appendix B

Form DS2 – Application to cancel entries relating to a registered charge

14 Appendix C

Form DS2E – Application to cancel entries relating to a registered charge

15 Appendix D

Form DS3 – Release of part of the land from a registered charge

Remember

Have you used the correct form of discharge for whole/part of the land?

Has the form of discharge been correctly executed and have you enclosed, where necessary, evidence of constitution of a corporate body?

Have you complied with the terms of the facility letter?

For electronic discharges, form END1 should not be sent to Land Registry by way of evidence of discharge of a charge or mortgage. Form END1 simply triggers the transmission of the electronic discharge (the END itself) by the lender to us.

To minimise delays to your application, please check clerical details in all forms and pay particular attention to dates, property descriptions, title numbers and full names of parties.

Please note that Land Registry may be unable to process applications that are incomplete or defective and your application will risk losing its priority if we have to return it to you – see Practice Guide 49 – Return and rejection of applications for registration for more information.