Practice guide 31: discharges of charges

Question 1

1. Introduction

Accepted Answer

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 Land Registration Act 1925 and Land Registration Act 2002
the withdrawal of notices of deposit of land and charge certificates
early completion of applications where no evidence of discharge is lodged
discharges of sub-charges

It covers discharges both in paper form and by electronic means. Discharges and releases of registered charges must be made in accordance with rules 114 and 115 of the Land Registration Rules 2003. Rule 114 of the Land Registration Rules 2003 stipulates that, subject to rule 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. Rule 115 of the Land Registration Rules 2003 permits notification of a discharge or a release of part of a registered charge which has been delivered in electronic form.

Please note that charge certificates have no legal significance under the Land Registration Act 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.

Question 2

2. Discharges and releases of registered charges

Accepted Answer

2.1 General: forms DS1 and DS3

Discharges by forms are covered in this part of the guide. Please note that we will not accept form DS1 and form DS3 if it is sent by fax.

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

If an application is made using form DS1 this should be sent through the post, or through our online channels for transaction: the portal or Business Gateway. Applications made using a paper form DS1 may take longer to complete owing to the extra checks we make as part of our counter fraud processes and systems.

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.

Evidence of identity form ID1 or form ID2 will be required for the lender unless the lender is a UK bank or building society who sends us the application itself, or it is represented by a conveyancer or the person lodging the application can confirm their identity.

Evidence of identity for an attorney signing a form DS1 or form DS3 on behalf of the lender is not required.

Form ID1 or form ID2 will also be required for the person lodging the application is not a conveyancer. For more details see practice guide 67: evidence of identity.

2.2 Sole application for discharge

Where an application for a discharge of a registered charge is the sole application it should not be lodged at HM Land Registry in advance of the form DS1. Repeated applications lodged without the necessary form DS1 may be rejected under rule 6(3) of the Land Registration Rules 2003 as being substantially defective.

2.3 Form 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 rule 16(3) of the Land Registration Rules 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 rule 16(3) of the Land Registration Rules 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 rule 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 form DS1.

Following early completion a further application should be made using form AP1 or form DS2 when the form 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 6 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 form 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 form 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.

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

2.4 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 rule 16(2) of the Land Registration Rules 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.

2.5 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 section 4 Discharge of charges.

2.6 Other methods and forms of discharges and releases

Rule 114(4) of the Land Registration Rules 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.

2.7 Discharges and releases by companies

Companies registered under the Companies Act 1985, or to which section 718 of that Act applies, may execute either form DS1 or form DS3:

by affixing the seal in the presence of a director and secretary
without the use of the company seal, either:
- by a director and secretary or 2 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 Special arrangements: facility letters.

2.8 Discharges and releases by building societies

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

in accordance with section 74(1) of the Law of Property Act 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
by the signature, unaccompanied by the seal, of a person with that authority

The last 2 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 form DS1 and form DS3 executed this way as proof of the satisfaction of the charge.

2.9 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 form DS3, provided:

it has 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. This evidence is not required where the foreign company is already the registered proprietor of a registered charge

Where a foreign company executes a discharge or release under seal by way of authorised signatories, see practice guide 78: overseas companies and limited liability partnerships.

2.10 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 section 74(1) of the Law of Property Act 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 form DS3 in the manner proposed, see also Special arrangements: facility letters.

2.11 Special arrangements: facility letters

Bodies corporate which intend to execute a significant number of discharges or releases otherwise than in accordance with section 74 of the Law of Property Act 1925 or section 36A of the Companies Act 1985, may ask HM 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
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 form 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 form DS3. If you need confirmation that a facility letter exists, or that a form DS1 or form 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.

2.12 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.

Question 3

3. Discharges and releases of noted charges

Accepted Answer

3.1 General

A charge of a registered estate may have been noted under section 49 of the Land Registration Act 1925 or under section 32 of the Land Registration Act 2002. Most noted charges will have been entered in one of three ways:

following an application by the chargee under section 34(2)(a) of the Land Registration Act 2002 for an agreed notice
by us on first registration of the registered estate
under section 49 of the Land Registration Act 1925

A charge may have been noted as a unilateral notice following an application by the chargee under section 34(2)(b) of the Land Registration Act 2002. Separate provisions govern the cancellation of unilateral notices from those governing the cancellation of other notices.

Note: A charge may also be the subject of a caution under section 54 of the Land Registration Act 1925. Rules 222 and 223 of the Land Registration Rules 2003 deal with the withdrawal or cancellation of these cautions.

3.2 Notices other than unilateral notices including charges noted under the Land Registration Act 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.

3.2.1 Discharges of fixed equitable charges

HM Land Registry will accept:

a form DS1 or form DS3
an endorsed receipt on the instrument of charge
a letter addressed to HM 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.

3.2.2 Discharges of floating charges

HM Land Registry will accept:

a copy of a declaration of satisfaction in Companies House Form MR04
a letter from the Registrar of Companies confirming that the charge has been satisfied
a letter addressed to HM 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, or
- If an assignment has been made, the normal conveyancing evidence of devolution of title must be lodged
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

3.2.3 Discharges of a sub charge

It appears that the default position is that both the principal chargee and the sub-chargee have power to discharge the principal charge, but the default position is subject to the terms of the sub-charge. As the law in this area is complex and uncertain our preference is to receive a discharge of the principal charge by the principal chargee and a separate discharge of the sub-charge by the sub-chargee in form DS1 or DS3 as the case may be.

3.3 Unilateral notices

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

form UN2: where the application is for removal by the registered beneficiary under rule 85 of the Land Registration Rules 2003
form UN4: where the application is for cancellation by the registered proprietor under rule 86 of the Land Registration Rules 2003.

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

Question 4

4. Discharge of a mortgage protected by notice of deposit

Accepted Answer

Instead of registering a mortgage with HM 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 Land Registration Act 2002.

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

An application in form 86 to the Land Registration Rules 1925, provided it is dated before 13 October 2003
The duplicate part of form 85A, form 85B or form 85C (to the Land Registration Rules 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

Question 5

5. Electronic notifications of discharge (ENDs)

Accepted Answer

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

As with the paper form of discharge, an electronic notification of discharge does not, of itself, cause the charge to be cancelled. When the electronic notification of discharge was sent, it was held as a message on our computer system until an application in form AP1, form DS2 or form 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 electronic notifications of discharge to us, there are still many that await an application to remove the charge entries.

Question 6

6. Electronic discharges

Accepted Answer

An electronic discharge is a discharge of a registered charge sent electronically by the lender’s computer system direct to us. For an electronic discharge, the HM 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 electronic discharge is different to an e-DS1.

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

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

An electronic discharge cancels the charge entries automatically and, in most cases, immediately. An electronic discharge 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.

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

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

6.1 Acceptance criteria of an electronic discharge

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

6.2 When charge entries are cancelled

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 electronic discharge 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 HM Land Registry. If the charge entries cannot be cancelled immediately, the lenders will confirm that they have lodged an electronic discharge with us and that we have informed them that we are dealing with the removal of the charge from the register.

6.3 How conveyancers know that the charge entries have been cancelled

The lender will tell you that either:

the charge has been discharged
we have confirmed that we have received the electronic discharge but cannot cancel the charge entries immediately

6.4 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 electronic discharge. 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 electronic discharge, the lenders will send an electronic discharge 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.

6.5 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 electronic discharge 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 form 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 Form AP1 includes other applications.

6.6 How to check that an electronic discharge has been transmitted

If you have access to the HM Land Registry portal, you can check by using the application enquiry service. Application enquiry is not available from Business Gateway.

If you do not have portal access, you should telephone the HM Land Registry office for the property concerned. They will confirm either that:

the charge entries have been cancelled following receipt of an electronic discharge
an electronic discharge has been received
no electronic discharge has been received

Question 7

7. E-DS1

Accepted Answer

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. A separate application is needed for each title the charge is to be discharged from, and also if the lender has more than one charge to discharge.

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, HM Land Registry will issue an electronic acknowledgment to the user.

7.1 Who is able 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.

7.2 How an e-DS1 is 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.

7.3 When the charge entry will be cancelled

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.

7.4 How conveyancers will 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

7.5 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.

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 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 electronic discharge.

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 form 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 Form AP1 includes additional applications.

7.7 How to check that an e-DS1 has been transmitted