SENATE BILL NO. 308
AN ACT TO AMEND CHAPTER 21, TITLE 25, DELAWARE CODE, RELATING TO MORTGAGES AND OTHER INSTRUMENTS SECURING OPTIONAL FUTURE ADVANCES AND TO ACCORD LIEN PRIORITY TO SUCH MORTGAGES AND OTHER INSTRUMENTS.
Be it enacted by the General Assembly of the State of Delaware:
Section 1. Chapter 21, Title 25, Delaware Code, is hereby amended by adding a new §2118 to read as follows:
"§2118. Mortgages and other instruments securing optional future advances
(a) Any mortgage or other instrument given for the purpose of creating a lien on real property may, and when so expressed therein or when so expressed in a separate loan agreement specifically referred to therein and incorporated by reference (which loan agreement need not be recorded) shall secure not only existing indebtedness, but also future advances, whether such advances are obligatory or to be made at the option of the lender, or otherwise, as are made within five (5) years from the date thereof, to the same extent as if such future advances were made on the date of the execution of such mortgage or other instrument, although there may be no advance made at the time of the execution of such mortgage or other instrument and although there may be no indebtedness outstanding at the time any advance is made. Such lien, as to third persons with or without actual knowledge thereof, shall be valid as to all such indebtedness and future advances from the time the mortgage or other instrument is recorded or entered in the proper office as provided by law. The total amount of the indebtedness that may be so secured may decrease or increase from time to time, but the total unpaid balance so secured at any one time shall not exceed a maximum principal amount which must be specified in such mortgage or other instrument, plus interest thereon, service charges, and any disbursements made for the payment of taxes, assessments, or insurance on the property covered by the lien, with interest on such disbursements.
(b) As against the rights of creditors or subsequent purchasers for a valuable consideration, actual notice or record notice of advances to be made at the option of the lender, under the terms of such mortgage or other instrument, including the terms of such separate loan agreement specifically referred to therein and incorporated by reference, shall be valid only as to such advances as are to be made within five (5) years from the date of such mortgage or other instrument.
() Any such mortgage or other instrument, and all such existing indebtedness, future advances and disbursements thereunder, interest thereon, and service charges, shall have preference to and priority over any lien which is subsequent in time to the time such mortgage or other instrument is recorded or entered in the proper office as provided by law.
(a) Nothing herein shall be construed to limit any agreement between the lender and the borrower as to the time period for the repayment of such existing indebtedness, future advances and disbursements, interest, and service charges."
Approved July 11, 1974.