Issuing replacement or amended facility letters will only constitute making “further advances” if new money is actually made available
The Court of Appeal considered whether new facility letters issued by the holder of a first ranking legal charge over properties were to be considered restatements or further advances within the meaning of section 49(3) Land Registry Act 2002. The appellant, who held a second and third ranking legal charge over the those same properties, argued that, notwithstanding the agreed fact that no further funds were advanced under the new facility letters, the effect was that new advances were made in place of the original facility. If this was considered to be correct, the holder of the first ranking security was not entitled to tack these further advances to its first legal charge so as to gain priority over the appellants charge.
The decision of the judge at first instance was upheld. No further advances were made under the subsequent facility letters issued by the first charge holder and therefore this was not a situation in which tacking arose.
This is the first time a Court has considered what amounts to a further advance and it has come to the sensible conclusion that a further advance must involve new money being advanced to the borrower. Roll up of interest and additional fees alone will not constitute a further advance.