Relative priority
Section 48: Registered charges
95.Section 48 sets out how the order of priority of registered charges can be discovered from a registered title. Rules will govern how the register shows that order and how applications can be made to record that a different order has been agreed between several chargees.
Section 49: Tacking and further advances
96.Section 49 deals with the existing legal doctrine of tacking. The effect of this doctrine is that a chargee who has granted more than one mortgage to a borrower may sometimes gain the same priority for a later charge as he has for the earlier one. This section provides that a chargee may make a further advance on the security of an existing charge if in the meantime he has not received notice from another chargee that a subsequent charge has been created. Rules will govern when a notice is treated as having been received. This is a change from the current legislation but reflects how the lending industry currently works in practice. Additionally, as now, the chargee can obtain the same priority for two charges if the original charge contains an obligation for the further sum to be paid and that fact is recorded on the title register. The section also provides a third and novel method of achieving the same priority for two advances by recording a maximum figure for the total money lent. As long as the sums due to the first chargee do not exceed the figure specified, and have been entered in the register in accordance with rules at the time of the creation of the competing charge, the charges will take the same priority over any subsequent charge. Rules may limit the circumstances in which the third method is available and impose conditions for its use. Unless one of these three methods is used, the first chargee must get the consent of any subsequent chargee to obtain priority for his further charge over any subsequent charge.
Section 50: Overriding statutory charges: duty of notification
97.There are numerous statutory provisions which permit or require the creation of statutory charges. These statutory charges when they arise are often given priority to existing charges by the legislation under which they take effect, and will take priority over further advances made by existing chargees even though details of the statutory charge do not appear in the register. Section 50 imposes a new duty on the registrar to notify such persons as are set out in rules (likely to be chargees whose interests are protected in the register) of statutory charges being entered in the register which have priority to existing registered charges. Previously no notice would have been given to those chargees as the entry of the details of the statutory charge into the register does not change the priority order that existed before the entry was made. The new duty will, for example, enable a chargee to make an informed decision as to whether or not he should make further advances to a chargor on the security of an existing charge where the security had been eroded because of a statutory charge.