Following a previous article on discharging your mortgage by my colleague, Graham Taylor, many homeowners are surprised to learn that paying off their mortgage does not automatically remove the lender's security from their property's title.
In his article, Graham explained why it is important to formally discharge a mortgage security once the loan has been repaid. While it may not always be essential to deal with the discharge immediately, it is generally best addressed as soon as possible after redemption, before important information is potentially lost or forgotten.
Although this may seem like a minor administrative matter, the consequences of leaving an old security on title can be significant and, in some cases, expensive.
Why paying off your mortgage does not clear your property title
Repaying your mortgage does not automatically remove the lender's security from the Land Register of Scotland or the Register of Sasines. The security remains registered against the property until a formal Discharge is granted by the lender and registered with Registers of Scotland. Where the discharge is dealt with shortly after redemption, the process is usually straightforward. Mortgage account details are readily available, the lender's records remain accessible, and the necessary documentation can generally be obtained without difficulty.
Problems tend to arise when no action is taken for many years.
Why historical mortgage securities can be difficult to remove
It is not uncommon for clients to contact us when they are looking to sell, transfer, remortgage or otherwise deal with their title, only to discover that a security from 15, 20 or even 30 years ago still appears on title. What should have been a relatively simple administrative process can quickly become far more complicated.
Over time:
- Mortgage account numbers are lost.
- Redemption letters cannot be located.
- Solicitors who acted originally may no longer hold a file.
- Lenders may have archived or destroyed records in accordance with their retention policies.
In many cases, lenders can still assist. However, tracing documentation relating to a mortgage redeemed decades earlier can be time-consuming and is not always successful.
What if your original mortgage lender no longer exists?
A particularly challenging situation can arise where the original lender has merged with, been acquired by, or transferred its business to another financial institution. Many homeowners assume that the successor lender will simply arrange the discharge. Unfortunately, that is not always possible. While active mortgage books and lending obligations are generally transferred during acquisitions, historical redeemed accounts may not have been retained in a way that allows the successor organisation to verify the loan and execute a discharge.
As a result, the current institution may be unable, or unwilling, to sign the discharge because it cannot establish sufficient evidence of the original mortgage or redemption.
This can leave property owners in an extremely frustrating position. Everyone may accept that the mortgage was repaid years ago, yet there is no lender willing or able to formally discharge the security.
When court action may be needed to discharge a mortgage
In the most problematic cases, resolving the issue may require a court application.
Where it is impossible to obtain a discharge from the original lender or its successor, it may be necessary to seek authority for The King's and Lord Treasurer's Remembrancer (KLTR) to execute the discharge on the lender's behalf. This process is considerably more complex than a standard discharge and will involve court action, resulting in additional legal costs.
What could have been resolved for a modest cost shortly after redemption can ultimately result in expenses running into thousands of pounds.
Perhaps more importantly, it can cause significant delays to property sales, transfers, remortgages and estate administration matters.
When should you discharge your mortgage in Scotland?
The good news is that these issues are largely avoidable.
The best time to discharge a mortgage is immediately after it has been redeemed and the lender has confirmed that no sums remain outstanding. At that stage:
- The lender's records are readily available.
- Mortgage account details can be easily verified.
- The correct parties can execute the discharge.
- The process is quicker, simpler and more cost-effective.
The longer the matter is left unresolved, the greater the risk that key records will disappear and that obtaining the necessary evidence will become difficult, or even impossible.
How Thorntons can help with a mortgage discharge
Our Residential Property team regularly assists clients with mortgage discharges, historical securities and complex title matters. If you would like to check whether an old mortgage remains registered against your property, or need assistance obtaining a discharge, please get in touch with our team.
