Loan Repaid, Security Released? Key Steps Borrowers Shouldn’t Overlook

It is a long-standing principle of UK law that a party which has granted security over its assets has the benefit of an “equity of redemption”. In broad terms, this is the right to have the security released, and to recover the relevant assets, once the secured debt has been repaid.

The importance of this principle was recently highlighted by the High Court of England and Wales in Shukla v St James Bank & Trust Company Ltd and another [2026] EWHC 851 (Comm). The Court reaffirmed that the equity of redemption remains good law and cannot be contractually extinguished. It also confirmed that a lender has an implied duty to cooperate so that the loan can be redeemed and the security released, even where the borrower is, or has been, in default.

Although lenders will normally be expected to cooperate with redemption and release, borrowers should not assume that the process will happen automatically. In practice, security documents typically provide that any release will be “at the request of” the borrower, so the borrower and its advisers should identify the necessary steps early and make a clear request for the relevant security to be released in full.

In this article, we will highlight some of the key points which should be considered by a borrower when redeeming a loan and requesting the release of security.

Redemption Amount

Before the loan is repaid and the security released, the borrower will need to agree the redemption amount with the lender. This is the exact amount that must be paid to the lender on the proposed repayment date for the secured debt to be discharged and the security to be released.

The redemption amount should include any interest which will accrue up to and including the proposed repayment date, as well as any fees or costs to be paid by the borrower.

In particular, if the loan is being repaid before the previously agreed repayment date, it is important to check the terms of the loan agreement for any early repayment fees or break costs, and any conditions or restrictions on prepayment.

If, after the redemption amount has been agreed, the proposed repayment date subsequently changes, the redemption amount will need to be updated to take account of any changes up to the new repayment date, such as any additional interest which will have accrued, or any further repayment instalments which will have been made.

Release of Security

The release of the security will typically be documented in a contractual document known as a deed of release, which will need to be executed by the party in whose favour the security was granted (whether that is the lender itself, or another party such as a security agent or trustee). Depending on the terms of the release, it may also need to be executed by the borrower.

Where the secured debt is being repaid in full, the security should be released in full. However, where only part of the debt is being repaid, or only certain assets are being released, the release should be limited to those assets or obligations, and the remaining security should continue in force.

Depending on the lender in question, they may have their own preferred form of release, or they may be happy for the borrower’s advisors to prepare a draft release for approval.

Where possible, the deed of release should be agreed before completion. If the lender agrees, the deed of release could also be executed in advance but held to take effect only once the redemption payment has been made. This can be achieved by either leaving the release undated until payment is received, or by stating clearly in the release that it will take effect only on the occurrence of a specified trigger event. These steps help ensure that the security can be released as soon as possible after repayment.

Redemption Process

The process for redemption of the loan and release of the security will vary depending on the source of the funds for the redemption payment and the wider context of the transaction.

Where the borrower is using its own funds to repay the lender, the process should be relatively straightforward. The borrower pays the agreed redemption amount on the agreed repayment date and, once the lender has received the funds, the security can be released.

However, the process may be more complex if the funds are coming from a third party, such as a buyer (if the relevant assets are being released as part of a sale) or an incoming lender (where the loan is being refinanced).

In these cases, the third party may not be willing to send the funds until the security has been released, but the lender cannot release the security until the funds have been received.

The parties will therefore need to agree how the movement of the funds and the timing of the release will interact, and solicitors’ undertakings may need to be given in order to overcome the competing requirements of the outgoing and incoming parties.

Post-Completion Steps

After the security has been released, certain procedural steps may need to be taken to perfect the release and ensure that the borrower can recover or deal freely with the relevant assets.

Where security has been granted by a UK company, it will most likely have been registered at Companies House. Although there is no statutory requirement to notify Companies House of the release, it is in the company’s interest to do so in order to inform third parties (such as prospective investors, lenders or buyers) that the security is no longer in force.

Depending on the assets in question, it may also be necessary to register or file evidence of the release at other public registries, such as the Registry of Deeds and/or Land Registry for security over real property, or the Intellectual Property Office for security over registered intellectual property.

Where notice of the security has been given to a third party (such as an insurance company or a bank), they should be notified of the release and informed that any restrictions on the use of the relevant assets, or requirement to pay monies directly to the lender, will no longer apply.

Finally, where any original documents (such as title deeds or share certificates) were delivered to the lender in connection with the security, these should be returned to the borrower.

*This information is for guidance purposes only and does not constitute, nor should be regarded as, a substitute for taking legal advice that is tailored to your circumstances.

If you would like any further information or advice, please get in touch with a member of our Banking & Finance team.