We often see parties seeking to take out a second mortgage on
real property, usually to access equity in the property and use the
proceeds to further certain business goals and objectives. However,
borrowers and their advisors should proceed cautiously when seeking
to further mortgage a property already encumbered by a first
mortgage.
Let us assume a borrower ("CorpA") is
the registered owner of a parcel of land (the
"Land"). The Land is currently subject
to a $1,500,000 charge on title (the "First
Mortgage"), of which only $1,000,000 of the funds
were advanced to CorpA by the lending institution
("LenderA"). This occurs in situations
where the principal amount listed on the charge is greater than the
initial advance, making subsequent advances possible. This
structure is typically seen in construction projects through
progress draws, but it is also common with revolving lines of
credit, where borrowers need continuous access to funds for capital
expenditures and
