Also known as: anaconda clauses · dragnet clause
Written by attorneys · grounded in primary & secondary sources — see below
A mortgage provision that extends the security interest to future advances or other obligations owed by the mortgagor to the mortgagee. The clause permits a single recorded instrument to cover both the initial loan and later extensions of credit without new documentation for each advance. Validity and priority of the secured amounts turn on the mortgage terms and applicable state rules governing future advances.
Midwest Metals mortgaged its factory to First Bank for a $400,000 term loan. The recorded mortgage capped secured principal at $500,000 and included language covering all future advances. Valley Finance later recorded a second mortgage. First Bank then disbursed another $200,000. The final $100,000 of that advance exceeded the stated maximum, so Valley Finance held priority over that portion in foreclosure.
River Therapeutics gave Blue Therapeutics a mortgage containing a dragnet clause for research-related advances. West Pharma later recorded a second mortgage on the same building. Blue then made a working-capital advance after learning of West Pharma's lien. Because the advance occurred after the intervening recording and the documents described it only as general working capital, West Pharma gained priority over that advance.
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Priority rules vary by jurisdiction. Some states cut off priority for optional advances made after the mortgagee receives notice of an intervening lien. Others enforce the recorded terms and maximum amount regardless of notice. The clause itself does not automatically preserve priority once notice is received.
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No. The clause operates only prospectively. Preexisting indebtedness is secured only when the mortgage specifically identifies that debt. General language referring to other obligations does not reach debts already owed at the time the mortgage is executed.
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Courts construe the clause narrowly. Advances must usually arise from transactions similar in character to the original mortgage transaction. A clause limited to research-related credit will not reach an unrelated acquisition loan even if the language is broad.
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Yes. When the recorded mortgage sets a maximum principal amount, advances exceeding that cap lose the benefit of the original recording date against intervening lienholders. Later creditors may rely on the stated ceiling shown in the public record.
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