What is an All Monies Clause?

What is an All Monies Clause?

‘all monies’ is also spelt ‘all moneys’

When someone borrows money from a bank they enter into a written loan agreement with the lender. This agreement includes a mortgage over real property as security for the money being borrowed.

Often these loan agreements are worded in such a way that the property being mortgaged is being used as security for all debts with that lender. This includes further monies lent at some future time. This has the effect of giving the bank priority over other unsecured creditors and possibly even property over subsequent mortgagees (other lenders lodging a second or third mortgage).

Example
Tom borrows $100,000 from ANZ and buys a $200,000 property. 50% LVR.
Let’s assume it is interest only.
Tom later goes out and takes out a personal loan with ANZ for $30,000. Tom spends it on a holiday.
Tom later goes bankrupt because he owes someone called Bike Kee $100,000.
If ANZ sells the property $100,000 will be left over. But Tom still has 2 creditors:
• $30,000 ANZ for the unsecured personal loan
• $100,000 Bike Kee the loan

The personal loan was ‘unsecured’ but the mortgage agreement for the house he purchased with borrowed money from ANZ had an ‘all monies’ clause which effectively meant the $30,000 borrowed years later was effectively included under this mortgage – it became secured by the mortgage.

So in this instance, it would be likely that ANZ would take priority and get back its $30,000 and Bike Kee would get whatever is left (and some unsecured knee caps).