First in line, last to get paid: how one filing flipped a lender's priority
A British Columbia lender lost priority over roughly $95,000 because it registered a loan modification instead of using the method its own mortgage allowed.
The Supreme Court of British Columbia ruled on June 4, 2026 that a second mortgage outranked a first lender's later advance in a fight over surplus foreclosure money. The decision in First Accredit Mortgage Corp. v. Pitman-Jelley, 2026 BCSC 1029 turned on how the first lender documented an increase to its loan - a detail that should give private mortgage investors pause.
First Accredit Mortgage Corp. registered a first mortgage against a Victoria property in May 2022 to secure an $860,000 loan. In February 2023, Sara Lenox Neher registered a second mortgage securing $250,000. Months later, First Accredit increased its loan to $1.3 million through a document registered in June 2023 and described on title as a "Modification."
The property went into foreclosure and sold under court order for $1.2 million. That covered the first mortgage and its interest but left only about $95,000 - not enough to satisfy both Neher's second mortgage and the larger advance. The money sat in trust while both lenders claimed first call on it.
Both sides had slipped up. Neher never gave First Accredit written notice of her second mortgage, and First Accredit never obtained a priority agreement from her. Under British Columbia law, written notice is what counts; First Accredit conceded it knew about the second mortgage, but the court said actual knowledge does not substitute for the notice the statute requires.
Neher's misstep was not fatal, though. Associate Judge Harper found the extra $424,290.40 advance was made under the terms of the Modification, not the original mortgage. The first mortgage allowed further advances by written agreement without registering a new document. First Accredit instead registered the Modification, which the judge described as "in effect, a third mortgage." Because the money flowed from that document, the second mortgage ranked ahead of it.
The result: Neher is entitled to the disputed funds. The judge noted she could have spared everyone the expense by simply providing written notice, so each side will bear its own costs.
For advisors and fund managers with exposure to private and syndicated mortgages, the case is a plain reminder that security ranking rests on paperwork, not intentions. A lender sitting in first position can still slip behind if it restructures a loan the wrong way - registering a fresh charge rather than advancing funds the way the original mortgage allows. The same discipline applies on the buy side: anyone underwriting or investing in private mortgage debt is depending on the priority that documentation, not assumption, secures.
