The meaning of 'further advance' in the context of land registration legislation

The meaning of 'further advance' in the context of land registration legislation

 In Re Black Ant Company (in administration) the High Court considered the meaning of 'further advance' within the meaning of the rules on tacking and further advances contained in the Land Registration Act 2002.

Original news

Re Black Ant Company Ltd (in administration and another case [2014] EWHC 1161 (Ch), [2014] All ER (D) 122 (Apr)

The proceedings concerned a dispute between two companies that had charges over the same property. An issue arose as to which of the charges had priority. The applicant company applied for a declaration that its charge would take priority. The Chancery Division dismissed the application and gave consideration to the meaning of a 'further advance' within the Land Registration Act 2002, s 49 (3) (LRA 2002).

What is tacking?

Under the normal rules on priority if:

  1. a debtor grants security to a lender (A) to secure all monies lent to it by A from time to time, and A, on the basis of that security, lends some but not all of the loan, and
  2. the debtor later grants security to another lender (B) to secure all monies lent to it by B from time to time, then
  3. if, with knowledge of B's security, A continues to advance money to the debtor, B will take priority over A in relation to all those amounts lent by A after it was aware of B's security

(Hopkinson v Rolt [1861-73] All ER Rep Ext 2380)

In this situation, 'notice' means actual notice.

The rationale behind this outcome is that A is not obliged to make further advances to the debtor if it is not satisfied with second-ranking security in respect of those advances. This principle can be criticised on the basis that B could also choose not to advance money to the debtor if it is not happy about the existence of the first security. Nevertheless, it is clear that priority is only given to the first security

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