Process and legal
Redemption
The repayment in full of a commercial mortgage. On redemption the first charge is discharged and the lender's security is released.
Redemption is the repayment in full of a UK commercial mortgage. On the redemption date the lender’s solicitor receives cleared funds covering outstanding principal, accrued interest to that date, any early redemption charges, redemption administration fees, and any other costs charged under the facility agreement. The first charge is then discharged at HM Land Registry and the lender’s security is released.
How redemption typically happens
Three trigger events drive redemption on UK commercial mortgages:
- Property sale: borrower sells the property. Sale proceeds settle the loan at completion. Buyer’s solicitor sends the loan repayment direct to the lender’s solicitor.
- Refinance: borrower draws a new commercial mortgage from a different lender (or sometimes the same lender on new terms). The new lender’s funds settle the existing loan.
- Maturity: a fixed-term loan reaches the end of its agreed term and the borrower repays from accumulated capital or a planned exit.
A fourth, less common, trigger is enforced redemption: the lender accelerates the loan after default, and the borrower repays under threat of receivership.
The redemption statement
To redeem, the borrower’s solicitor requests a redemption statement from the lender, typically 5 to 10 working days before the redemption date. The statement itemises:
- Principal outstanding.
- Accrued interest to the redemption date (with a daily rate so the figure can be adjusted if the date slips).
- Early redemption charges, if applicable.
- Redemption administration fee.
- Discharge of charge fee.
- Any unpaid arrangement, monitoring or default fees.
The redemption figure can move daily because interest accrues. A redemption that slips two days carries two days of additional interest at the contract rate.
After redemption
The lender executes a DS1 form discharging the first charge at HM Land Registry. The borrower’s solicitor files the DS1, which removes the charge from the property’s title register. On corporate borrowers, the lender also executes a deed of release for the debenture and PG, filed at Companies House on the same timeline.
Practical timing: the discharge at Land Registry can lag the redemption date by 2 to 6 weeks. The borrower’s property is functionally unencumbered from the day of redemption but the title register only catches up later.