Further Advances and New Money: When Existing Mortgage and PPSR Priority Must Be Reassessed

Published 2 October 2026

Introduction

When a lender releases additional funds under an existing facility, the priority of that new money is not automatic. The common law rule against tacking—established in Hopkinson v Rolt (1861) 9 HL Cas 514; 11 ER 829 (‘Hopkinson v Rolt‘)—means a first mortgagee who makes a voluntary further advance after receiving actual notice of a subsequent security interest may lose priority for that amount.

The Personal Property Securities Act 2009 (Cth) (‘PPSA‘) provides a different framework for personal property, allowing a security agreement to secure future advances under Section 18(4) of the PPSA. This article explains how the tacking rule and PPSA priority rules apply to private lenders, so you can assess when a further advance requires fresh due diligence.

Understanding Further Advances & Commercial Triggers for Private Lenders

Defining a Further Advance Versus Varying Existing Facility Terms

A further advance involves a lender releasing new money under an existing mortgage or security structure. It is different from varying existing facility terms, such as changing the interest rate, loan term, repayment schedule or other conditions without releasing additional funds. A restructure or replacement facility may be characterized as new lending rather than a variation, depending on its terms.

The distinction affects priority. A further advance may be treated as new secured lending and may be subject to the rule against tacking if an intervening second mortgage or subsequent security interest exists. A variation of existing terms does not, by itself, involve a new advance or alter the amount of money released by the lender.

Common Commercial Triggers for Additional Drawdowns

Private lenders may release additional funds when the borrower’s financing needs change during a project or facility term. Common commercial triggers include:

• construction top-ups that increase the approved facility limit;
• staged development funding and mandatory progress payments; and
• additional drawdowns under a revolving facility or line of credit.

The facility documents should show whether the lender is contractually bound to make the further advance or retains discretion to refuse it. A drawdown required by an existing commitment may be treated differently from optional new lending when the lender later assesses priority against a second mortgage or subsequent security interest.

The Tacking Principle & How Private Credit Funds Can Retain Priority

The Traditional Equitable Rule Against Tacking

The equitable rule against tacking limits the ability of a first mortgagee to preserve priority for voluntary further advances. In Hopkinson v Rolt, the court established that a first mortgagee may lose priority over a subsequent mortgagee for additional funds advanced after receiving actual notice of the later mortgage.

The rule applies to the new money, rather than necessarily disturbing priority for the original advance. For example, if a lender provides an initial advance, a second mortgage is later registered, and the lender then voluntarily releases more funds after receiving notice, the second mortgagee may rank ahead of the first mortgagee for that further advance.

Exceptions for Obligatory Advances & Protective Expenses

Priority may be retained where the further advance was obligatory or was used to protect the mortgaged property.

An obligatory advance arises where the lender was contractually bound to provide funds before receiving notice of the subsequent mortgage, such as mandatory progress payments under a construction facility or staged development funding.

Protective expenses may also retain priority because they preserve the value of the security for all mortgagees. Examples include:

• paying council rates, land tax or insurance premiums;
• funding emergency repairs; and
• completing works needed to preserve or improve the property.

A voluntary advance for unrelated lending purposes may not receive the same treatment.

The Risk of an Intervening Third-Party Mortgage or Subsequent Security Interest

How Actual Notice Affects a First Mortgagee

A first mortgagee may risk losing priority for a further advance when a third-party mortgage or subsequent security interest intervenes between the original advance and the later drawdown. The rule against tacking usually focuses on whether the first mortgagee had actual notice of the later mortgage before making the further advance.

Registration alone will not usually establish actual notice. Under Section 300 of the PPSA, registered data does not, by itself, give a person notice or actual or constructive knowledge of a registration. A lender’s records, communications and the knowledge of the relevant decision-maker may become important when determining whether actual notice existed.

The Impact of Insolvency on Priority Disputes

A borrower’s insolvency can bring late-stage advances and competing security interests under close examination. Administrators and liquidators may scrutinise whether a lender increased its secured exposure shortly before insolvency and whether the transaction affected other creditors.

That scrutiny may raise questions about voidable security interests and unfair preferences. A mortgagee that makes a further advance during financial distress may need to address not only its priority against a subsequent mortgagee, but also the wider insolvency consequences of the transaction.

PPSR Registrations & Capturing Future Advances for Non-Bank Financiers

How the PPSA Treats Future Advances

Section 18(4) of the PPSA allows a security agreement to provide for future advances. A future advance includes an advance made after the security agreement was created, whether or not the lender was contractually required to make it.

Section 58 of the PPSA provides that a security interest has the same priority for all advances, including future advances, secured by the agreement. This creates a different position from the common law rule against tacking that applies to real property security, where a first mortgagee may lose priority for voluntary advances made after notice of a subsequent mortgage.

Utilising All-PAAP General Security Agreements

An All Present and After Acquired Property (All-PAAP) General Security Agreement can cover a lender’s present and future personal property. Section 20(2)(b)(ii) of the PPSA recognises a written security agreement stating that a security interest is taken in all of the grantor’s present and after-acquired property.

An existing PPSA registration may therefore capture future advances without a fresh registration if the security agreement expressly contemplates them. The lender should check that:

• the agreement covers the relevant collateral;
• the additional funds are secured by its terms; and
• the registration remains effective and perfected.

Essential Due Diligence & When Mortgage Funds Must Run Fresh Searches

The Importance of Updated Title Searches

A lender should obtain an updated title search before releasing further funds under an existing mortgage, particularly in short-term and bridging finance, and should consider advice from private lender and non-bank finance lawyers.

The search can identify:

• an intervening caveat;
• a second mortgage; or
• a subsequent security interest registered after the original advance.

A fresh PPSA search may also be required where personal property forms part of the security. Checking the current title and PPSA position helps the lender assess whether another mortgagee or secured party has acquired an interest that may affect priority for the new advance.

Implementing Priority Deeds & Intercreditor Agreements

A Deed of Priority can regulate how competing mortgagees rank when the first mortgagee continues to release future advances. The document may:

• establish a priority cap;
• define the secured money covered by the first mortgage; and
• record the second mortgagee’s subordinate position.

The parties should address whether the cap applies to:

• the original debt;
• future advances;
• interest;
• fees; and
• enforcement expenses.

Clear drafting reduces uncertainty about how priority rules apply if the borrower defaults and the available security proceeds are insufficient to repay both lenders.

A Queensland Case Study on Priority Deeds & Step-In Rights for Property Development Financiers

The ProLend Solutions Dispute Over Step-In Payments

The Queensland Court of Appeal’s May 2026 decision in ProLend Solutions No 50 Pty Ltd v Monaco Solicitors Pty Ltd [2026] QCA 68 concerned development funding provided by ProLend as first mortgagee and Monaco as second mortgagee. The parties had entered into a Deed of Priority and a step-in deed allowing ProLend to complete the development after the borrower defaulted. Following the default, ProLend took two key steps:

• paid the builder to complete the works; and
• paid approximately $1.9 million in infrastructure charges needed to register the subdivision.

The dispute concerned whether those payments formed part of the “First Priority Amount” and ranked ahead of Monaco’s second mortgage claim when the sale proceeds could not repay both lenders.

Court Findings on Broad Secured Money Definitions

The Court of Appeal held that the payments could fall within the first-ranking entitlement because they were owed by the borrower and secured by ProLend’s mortgage. The mortgage used a broad definition of secured money that covered liabilities arising for any reason and amounts paid by ProLend when exercising its rights.

The court treated the step-in payments and infrastructure charges as expenditure required to preserve and realise the development. It rejected an implied cap based only on the scheduled priority figure. A priority deed will not necessarily limit the first mortgagee’s priority unless its wording clearly and consistently creates that limit.

Conclusion

A further advance under a mortgage can lose priority where the first mortgagee had actual notice of a subsequent mortgage, unless an exception applies, such as an obligatory or protective advance. For personal property, Section 18(4) and Section 58 of the PPSA, allows a security agreement to secure future advances and preserve the same priority for those advances.

With those distinctions in mind, contact GRM Law to review your lending documents, title searches, PPSA registrations and priority arrangements before releasing additional funds. Our Queensland private lending lawyers can help assess competing security interests and strengthen the documentation supporting your priority position.

Frequently Asked Questions

Disclaimer: This is general information only and is not legal advice. For advice on your circumstances, contact GRM LAW.