The Lemon Fool

Our son owns a property, towards which we provided a private mortgage.

He will soon have repaid us and we're wondering how difficult it is to remove the charge on the property which was sorted by a solicitor when he bought the property (from us) a few years ago.

On the face of it, we simply need to complete a DS1 and a DS2 between us then our son sends them to the Land Registry, and they'll remove the charge for free.

But there seems to be a couple of possible gotchas. First, on the DS1, there is a reference to executing the form. Is this simply signing it and having the signatures witnessed?

And the DS2 refers to the dreaded identity verification. It references a "Public Guide 20" for details, and also suggests they destroy any forms sent to them, so certified originals are needed, a process which, I assume would need to be carried out by a solicitor? And I presume it is our son, as the property owner who's ID needs to be verified. Or does it also apply to us a private lenders?

All this makes me wonder if the whole process is designed to make it difficult for a layman to do, and whether it would be simpler and not much more expensive to get a solicitor to do.

Does anyone have any practical experience of doing this?

TIA

Staffordian

This isn't quite consistent with my own experience (with bank mortgages).

When I pay one off, the lender tells the LR and the charge gets removed, with no action or form needing signing by me.

Mike4 wrote:This isn't quite consistent with my own experience (with bank mortgages).

When I pay one off, the lender tells the LR and the charge gets removed, with no action or form needing signing by me.

Problem is, I'm the lender, and don't know what to do

staffordian wrote:

Mike4 wrote:This isn't quite consistent with my own experience (with bank mortgages).

When I pay one off, the lender tells the LR and the charge gets removed, with no action or form needing signing by me.

Problem is, I'm the lender, and don't know what to do

Good point, and I haven't even had any single malt tonight!

I had to go through exactly this process recently. Unfortunately, despite extensive attempts to do so, it was impossible to complete the transaction without either the involvement of a solicitor (for the ID1 form) or a visit to the Land Registry offices (which at the time, at least, were closed for COVID reasons.)

Money for old rope for the solicitor and surely something that in this day and age ought to be achievable without paying hundreds of pounds for simple ID checks.

And apologies - I meant to say - it is the person releasing the charge (ie: you and your partner) who has to have the ID check and complete the DS1

Once the LR get the forms they will then confirm with you in writing that you wish to remove the charge.

Thanks wanderer. I think the simplest option will be to go back to the solicitor we used and get them to do it.

An oblique question. Why not just leave the charge in place until such time as your son needs it removed, e.g. to sell the place, then get it taken off during the selling legals?

No need to answer particularly, just pointing out the possibility.

I guess one answer might be that removing it could become difficult should you get run over by a bus....

Mike4 wrote:An oblique question. Why not just leave the charge in place until such time as your son needs it removed, e.g. to sell the place, then get it taken off during the selling legals?

No need to answer particularly, just pointing out the possibility.

I guess one answer might be that removing it could become difficult should you get run over by a bus....

That's a very good point Mike.

Maybe leave it and keep away from buses is the best plan

I had this situation with 2 of my daughters. I got the solicitor who registered the charges to get them removed. But I agree it is simpler to leave them until the next time a solicitor needs to be involved. You formally record that the loan has been repaid and if you do have an argument with a bus, that document should be sufficient for the charge to be released subsequently.

I think it is better to remove the charge as there is evidence that it may be difficult to persuade the revenue that a loan has been repaid if the charge has not been removed. So much so that there's even mention of it in the IHT manual.

For example, from the following website
https://www.kingsleynapley.co.uk/insights/blogs/private-client-law-blog/was-it-a-gift-or-was-it-a-loan

HMRC’s Inheritance Tax Manual states:

"Letters and circumstantial evidence that clearly indicate an intention to absolve the beneficiary of the loan from any liability to repay will not be sufficient to discharge the debt."

And goes on to remind us that a deed must:

* make it clear that it is intended to be a deed by the parties to it, by describing itself as a deed or otherwise, and
* be validly executed (usually by signature) by those persons

The submission of the Land Registry forms (DS1 or whatever) are the execution of the deed in line with the actions set out above.

Of course, if there is a clear paper trail showing repayment of the loan, then you would be in a good position to argue with the revenue but it seems much better to me to remove the charge and avoid any suggestion that the loan still existed on death as if the Revenue concluded it was still outstanding then it would form part of the estate for IHT purposes.