What are the formalities for releasing security over the most common forms of assets?
Securities automatically cease to exist on full and complete satisfaction of the secured obligation. However, under certain conditions the securities must be released when the security contract expires or the parties agree to release the security. Further, if a loan is novated any accessory security interest will be extinguished.
However, if the creation of the pledge requires a physical transfer of the assets to be effected, these assets must be returned to the former pledgor on discharge of the secured debt. All signs used to perfect a pledge that are unsuitable for physical transfer must be removed.
A mortgage exists for as long as it is registered in the Land Register, despite fulfilment of the secured obligations. On fulfilment of the secured obligations, the lender must issue a cancellation order for the mortgage, which the owner of the mortgaged property must file with the Land Register to deregister the mortgage. From the moment of deregistration, the mortgage ceases to exist.
Dominican Republic Guzmán Ariza
The formalities will depend on the type of security.
For instance, to release a mortgage, the following documentation is required:
- the release agreement;
- identification of the parties;
- a certificate of good standing from the Dominican tax authorities;
- the owner’s certificate of title;
- the original creditor’s certificate;
- identification of the person who is depositing the file; and
- confirmation of payment of filing taxes and stamp duty.
To release a chattel pledge, the following documentation is required:
- the original pledge agreement certificate,
- a total or partial release agreement;
- identification of the moveable assets to be released; and
- a formal request deposited with the peace court (the lowest-ranked court, designated by law as the registrar of such securities).
The parties are free to agree on a partial release of security under certain conditions agreed in the credit agreement. Normally, in the case of bank loans, financial institutions release no collateral until the principal has been paid. This is reinforced by the fact that almost all government institutions require a release receipt as part of their formalities.
Italy Willkie Farr & Gallagher LLP
A deed of release should be entered into between the secured creditor and the debtor to confirm the release of a security over the debtor’s assets. Alternatively, a unilateral release may be executed by the secured creditor. The sale of a collateral asset that is subject to a security interest does not trigger release of the security without the consent of the secured creditor.
New Zealand Buddle Findlay
In most cases security is released by the lender executing a deed poll of release. This is a simple document, usually less than one page long. In relation to land, there is an online procedure for releasing a mortgage.
Peru Miranda & Amado Abogados
Security will be released in accordance with the provisions of the relevant security document and any inter-creditor or collateral agency agreements, typically once all secured obligations have been performed in full to the creditor’s satisfaction. Usual formalities include the execution of a private document between the creditor and the security provider agreeing to release the security and subsequent registration of such release in the relevant public registers.
In the case of guaranty trusts, once all secured obligations have been paid in full, the trust estate must be liquidated by the trustee in accordance with the terms of the relevant trust agreement and the applicable regulation, following which termination of the trust will be registered in the public register.
Romania Volciuc-Ionescu SCA
The release of the security interests is generally straightforward: the secured lender issues a statement on the discharge of liabilities (in notarial form for immoveable mortgages), which is followed by deregistration from the relevant registers (eg, the Electronic Archive for moveable assets, the land book for real estate and the shareholders’ register for shares).
United Kingdom Ashurst LLP
English law-governed security is typically released by way of a deed of release. From an English company's perspective, it is preferable for such release to be recorded at the Companies Registry by way of filing the relevant release forms; however, this is not required in order for such release to take effect. Where security over registered land is released, the appropriate Land Registry release forms are required to be filed at the Land Registry in order for the release to take effect.
USA Sullivan & Cromwell LLP
The release of a security interest is typically effected either through a written agreement between the borrower and secured parties or, if the loan documentation so provides, automatically upon the satisfaction of relevant conditions. There are also provisions of the Uniform Commercial Code relating to the release of security interests in certain situations. In addition, a security interest typically attaches to the proceeds from sale of collateral.
Usually the security agreement contains a section describing the procedure for documenting the full or partial release of the secured party’s security interest, requiring the lender (or, in a syndicated deal, the collateral agent) to execute a written release upon the borrower’s payment in full of the loan obligations. Some security agreements provide for the automatic release of security interests upon the payment in full of the borrower’s loan obligations, although even in such cases, borrowers typically prefer to document the release of the security interest in writing, as acquirers and future lenders usually want written evidence of the release. The release of a security interest is often documented in a ‘payoff letter’ executed at the time of release.
If the security interest being released was perfected through the filing of UCC-1 financing statements, UCC-3s are filed at release to terminate the outstanding UCC-1s. In the case of perfection by possession (eg, for certificated securities perfected by control), the certificated securities are returned by the secured party to the borrower.
The procedure for terminating a security interest in real property varies by state, but typically involves the lender’s delivery to the borrower of a ‘satisfaction of mortgage’ document and the filing of a copy with the relevant real estate recording office.
In the case of security interests in intellectual property, the parties also typically enter into separate release agreements, which are filed with the US Copyright Office or US Patent and Trademark Office, as applicable.
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