Deeds of Release

A legal document that discharges an earlier claim to the property and offers proof of termination of a legally binding contract.

Author: Rohan Arora
Rohan Arora
Rohan Arora
Investment Banking | Private Equity

Mr. Arora is an experienced private equity investment professional, with experience working across multiple markets. Rohan has a focus in particular on consumer and business services transactions and operational growth. Rohan has also worked at Evercore, where he also spent time in private equity advisory.

Rohan holds a BA (Hons., Scholar) in Economics and Management from Oxford University.

Reviewed By: Himanshu Singh
Himanshu Singh
Himanshu Singh
Investment Banking | Private Equity

Prior to joining UBS as an Investment Banker, Himanshu worked as an Investment Associate for Exin Capital Partners Limited, participating in all aspects of the investment process, including identifying new investment opportunities, detailed due diligence, financial modeling & LBO valuation and presenting investment recommendations internally.

Himanshu holds an MBA in Finance from the Indian Institute of Management and a Bachelor of Engineering from Netaji Subhas Institute of Technology.

Last Updated:December 22, 2023

What Is a Deeds of Release?

A legal document known as a deed of release discharges an earlier claim to the property. It offers proof of termination of a legally binding contract.

A released deed may be included when a lender gives the homeowner the title to real estate after the mortgage is satisfied. The parties are released from prior obligations by a release deed.

When a released deed is popularly executed, the lender retains title to the real estate until the mortgage's conditions have been met. 

An employer and an employee's obligations under their employment activities, such as those related to a severance package, may also be released by a deed of release. 

For business loans, deeds of release can be used to discharge personal guarantee obligations.

It is helpful to think about a deed of release in a situation frequently occurring for many people purchasing a home. Most people use a mortgage from a financial institution to pay for their homes. 

The bank that finances the mortgage does more than give the money in good faith; it also makes a legal claim on the property as security for the loan until it is repaid.

A mortgage-released deed will be created when the borrower satisfies all mortgage payment requirements or makes a full prepayment for gratifying the loan. 

Until then, the lender retains ownership of the property and is officially listed as a lienholder of documentation on it, holding that status until full & complete repayment is received. For the duration of the loan, the title serves as secured collateral, lowering the lender's risk of default.

The legal counsel typically drafts the release deed for the lending institution after repaying the loan. It notes that the necessary conditions have fully repaid the loan. 

Additionally, it declares that the lien has been released, and the homeowner now holds the full title. 

After receiving the title and deed of release, the homeowner is the sole owner of the asset. They are no longer tied by any conditions or commitments made by the lender. The loan account has been terminated.

Key Takeaways

  • An earlier claim to the property is released by a legal document called a deed of release. It provides evidence of the dissolution of a binding contract.
  • When a released deed is executed formally, the lender continues to hold title to the property until the mortgage's terms are satisfied.
  • Deeds of release may be used to discharge personal guarantee obligations for business loans.
  • After repaying the loan, the lending institution's legal counsel typically drafts the release deed. It states that all terms of the loan have been met, including full repayment.
  • The financial institution's legal department drafts the released deed after loan repayment. The release document attests to the loan's complete repayment by the contract terms.
  • A released deed is most frequently used when someone buys a house. Property purchased with a mortgage is used as security for the loan.
  • Employment contracts are another situation where a deed of discharge might be used. The document may release the Company and the Employee from any liabilities arising from their employment agreement.

Understanding deeds of release

A declaration of release is utilized to end a contract or legal dispute and to ensure that no party can pursue the agreement or legal dispute further. 

For instance, both parties must create a release deed when resolving a commercial dispute. A released deed should be drafted to ensure that after a settlement has been reached, the other party cannot sue the other parties. 

Therefore, an agreement of release offers conclusive proof after a disagreement or agreement is resolved. However, a release deed can restrict legal actions. 

Therefore, before executing a deed of release, it is crucial to comprehend the rights that a party is waiving.

Most people use mortgages offered by financial institutions, including commercial banks, credit unions, central banks, and Internet banks, to purchase their homes.

The home is collateral when a financial institution lends money to a borrower, and this legal claim remains in place until the loan is fully repaid.

Once the loan has been repaid in full and the mortgage has been fully satisfied, a mortgage declaration of release is generated. The mortgage borrower will receive the title to the property once the lender, who initially holds it, has made the final payment. 

The title serves as reliable collateral for the duration of the loan, reducing the risk of default for the lender. 

After the loan is repaid, the financial institution's legal department creates the deed of release. The released deed attests to the loan's full repayment following the terms of the contract. 

Additionally, it confirms that the homeowner obtained the property title from the lender. 

​​After drafting a release deed and transferring the title, the homeowner is free from all further obligations to the lender. 

The borrower of a loan must prepare a released deed and file it with the same agency that recorded the mortgage to ensure that all mortgage obligations are met.

Characteristics of A Deeds of Release

A mutual release, which entails both parties agreeing to release one another from the following duty, is a common feature of a deed of release. 

  • Demands
  • Debts
  • Future claims
  • Other relevant activities

On the other hand, a release deed may permit one party to be free from other obligations or liabilities, such as a provision that forbids that party from providing further services or employment.

Things to keep in mind when signing a release deed:

  • Both parties' signatures must be witnessed by a third party who is not a member. 

  • Corporate policies carry out the release deed. 

  • Each party must have enough copies to sign. 

  • The first party will sign all documents before handing them over to the second party for their signature. 

  • The release may allow parties to sign by counterpart, allowing them to do so on separate copies of the same document. 

  • Store copies of the release deed in a secure location.

Advantages of Release Deed

The fact that a release deed is an alternative to court proceedings that is less expensive, quicker, and less stressful is its most significant benefit. 

Another benefit is that everyone is free to express their opinions, negotiate the details, and come to a compromise that benefits all parties (unlike the "win-lose" situation of court). 

The agreement's terms can "release" you and the employee from most future interactions, which may make it simpler for former employees to find employment shortly.

The property owner and the banker are frequent parties to a release deed.

It is entirely voluntary to register a release deed. However, legal professionals advise getting your release document notarized despite this.

A transfer of security for the debt from the banker to the property owner serves as the consideration necessary for a release deed to be legally binding.

The property is not released from liens or other restrictions until the release deed is signed.

Types of deeds of release

Another predicament where a deed of discharge might be used is employment agreements. The company and the employee may be released from any liabilities arising from their employment agreement by the document. 

An employee may occasionally receive a specific payment through a deed of release. For example, this might happen with a severance package. 

The terms of redundancy pay, such as payment and duration of payments after the release, may be included in the released deed. 

Additionally, it could list any nondisclosure agreements or other restrictions that prevent a fired employee from starting a competing company or approaching former customers or clients.

The most typical instance of a released deed is when someone purchases a home. For example, when the individual obtains a mortgage to buy a property, the asset serves as security for the loan. 

As the party to whom the individual owes money, the lender is the one who currently has a lien on the house. A mortgage release deed can be produced once the individual has fulfilled the conditions of their mortgage and paid off the loan entirely. 

Personal guarantees are another instance of a released deed. By providing a personal guarantee, the individual agrees to take on personal liability for any debts owed, regardless of whether the debt is owed by a company the individual owns. 

Whether or not the loan has been fully repaid, a deed of release could be used by the person to cancel a personal guarantee if they so choose.

Deeds of release can be classified into the following categories: 

  • A deed of discharge that ends a personal guarantee enables people to release themselves from personal liability. 

  • The employment contract includes an employee release. It is a part of the settlement between workers and employers or relates to the redundancy agreement or termination agreement. 

  • A mortgage or loan agreement must be terminated to end a credit or loan agreement. 

  • A deed of resolution is frequently involved in the resolution of commercial disputes.

Deed of Mortgage Release

Typically, this deed is used to completely transfer ownership and responsibility to the property owner and sever all ties to the loan company that approved the mortgage.

Employment Release Documents

An employment deed of discharge is also referred to as a "deed of termination." Again, it is more typical abroad than in the United States. 

In employment, a release deed can be used for a company that dismisses team members to completely discharge its obligations to the individual and their commitments to the company. 

The agreement may specify the quantity of their last check or severance bundle and the return of any equipment the individual used at work. In addition, their severance package may include an employment release deed.

Additional Acts of Release

Deeds of release are also applicable in non-mortgage and non-employment contexts. For example, they are helpful in lawsuits as a way of stating that the matter is resolved and any prior claims are no longer valid legally.

Deeds Of Release Vs. a Relinquishment Deed

Since most people are unaware of the differences between the terms of the deed, "Deed of Release and Relinquishment Deed," they can be very confusing.

For the most part, they both mean the same things. However, although the two terms can theoretically mean the same thing, there is a slight difference between them.

Relinquishment deeds are legal documents that permit a person to transfer their ownership of a property to another party. With their permission, the person relinquishes the possession. 

A deed of reconveyance, also called a released deed, is a legal document used to renounce a person's right to a piece of property.

A released deed can start the release and free the parties from any prior obligations. Even though there are no significant differences, the meaning of both terms may change when used in a legal context.

For instance, if a person passes away without leaving a will, his property is distributed to his legal heir (two daughters) if one of the two daughters decides to give her sister ownership of the property for any reason. 

In this instance, the relinquishment deed will refer to the transferable right. Therefore, when relinquishing property, the party to whom the deed is being transferred should be eager to acquire it. 

After claiming the entirety of the property transferred to them, the person must finish the consent.

However, the relinquishment deed cannot be legally imposed upon the other party if they refuse to accept it. 

Additionally, the relinquishment deed can only be applied to the deceased person's family. In infrequent circumstances, it might be given to the co-owner of the asset but only some.

Researched & Authored by Laiba Kamran Shamsi | Linkedin

Reviewed & edited by Parul Gupta | LinkedIn

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