Is a creditor’s written waiver sufficient to have a security interest removed?

A private creditor to whom you granted security over your property agrees to release the security even though the debt has not yet been paid in full. Or you are selling land and the secured creditor is willing to waive the security interest because they have agreed alternative security with you. In either case, you receive a document that must be submitted to the cadastre. Its wording determines whether removal will take place through the short procedure for a declaratory entry or whether constitutive registration proceedings will be initiated.

Why it matters whether the document is a declaration or an agreement

The Civil Code expressly lists waiver by the creditor as one of the grounds on which a security interest is extinguished.

The following quotation is reproduced in its original language:

Záložné právo zaniká […] c) ak sa záložný veriteľ vzdá záložného práva […]

§ 151md ods. 1 Občianskeho zákonníka

The cadastre provides for two ways of registering rights. Constitutive registration creates, changes or extinguishes a right over real estate, whereas a declaratory entry merely records a change that has occurred by other means (Section 5(1) and (2) of the Cadastral Act). Rights arising from contracts are entered by constitutive registration (Section 28(1)), while rights that have arisen or been extinguished by operation of law are recorded by a declaratory entry (Section 34(1)).

In Cadastral Bulletin 2/2023, the Geodesy, Cartography and Cadastre Authority (ÚGKK) takes the view that waiver of a security interest is a unilateral act by the creditor. The security interest is extinguished by the creditor’s waiver itself, and the cadastral entry merely records that fact, so removal is made by a declaratory entry. However, if the creditor and the security provider conclude an agreement to discharge the security interest, ÚGKK regards this as a bilateral act, namely a contract. The cadastre records such an agreement by constitutive registration, and the security interest is extinguished only upon that registration.

Which document leads to which type of entry

Document	Ground for extinguishment	Cadastral entry according to ÚGKK
creditor’s written declaration waiving the security interest	waiver of the security interest	declaratory entry
creditor’s confirmation that the obligation has been fulfilled	extinguishment of the secured claim	declaratory entry
agreement between the creditor and the security provider to discharge the security interest	contract	constitutive registration

The time limits also differ. The cadastre removes a security interest within 5 working days of the commencement of proceedings (Section 43(1), letter c)). It decides on an application for constitutive registration within 30 days of receiving it (Section 32(1)), and may decide within 15 days if expedited proceedings are requested (Section 32(3)). The security interest remains in force until the decision approving constitutive registration becomes final (Section 28(3)).

What to watch for in the wording

In the case considered by ÚGKK, the document was entitled an agreement to waive a security interest and referred both to waiver of the security interest and to the general rule allowing a creditor to agree in writing with the debtor to waive a right or forgive a debt (Section 574(1) of the Civil Code). Despite its title, ÚGKK treated the document as a waiver of the security interest and concluded that removal should be recorded by a declaratory entry. In its view, Section 574 concerns the claim itself. When the creditor forgives the debt, the claim is extinguished, and the security interest is extinguished along with the secured claim.

The document’s title and the statutory provisions it cites can therefore affect the procedure followed by the cadastre. A document that does not make clear whether it constitutes a unilateral waiver, an agreement to discharge the security interest or forgiveness of the debt may prompt a request for supplementation and delay removal. It is preferable for the wording to state unambiguously what act the creditor is performing and which security interest it concerns.

What waiving a security interest does not mean

Waiving a security interest extinguishes the security, not the debt. The claim continues to exist and the creditor may enforce it, but can no longer recover it from the property. If the debt is also intended to be extinguished, the document must say so expressly. This constitutes forgiveness of the debt, which requires a written agreement with the debtor.

The creditor must apply for removal without undue delay after the security interest is extinguished. The security provider may also apply, but must support the application with a document issued by the creditor proving that the security interest has been extinguished (Section 151md(3)). Removal takes effect as of the date stated in the application, but no earlier than the date on which the security interest was extinguished (paragraph 2). If the creditor has meanwhile ceased to exist and no one can issue the document, we explain the procedure in the question removing a security interest after the creditor has ceased to exist.

How we can help

We will prepare a declaration waiving the security interest or an agreement to discharge it so that the creditor’s act and the required type of entry are clear. We will also submit the application for removal. We handle both the creation and discharge of security interests as part of our security agreement service. If removal is connected with a sale, we will check the other encumbrances on the ownership record as part of our legal due diligence on the property and prepare the cadastral filings as part of our application for registration in the cadastre service.