On 1 July 2018 the Farm Business Debt Mediation Act 2017 (Qld) (“the Act”) will commence which was brought about in an attempt to implement important changes with how farmers resolve disputes with banks concerning farm business debts.
Historically, farmers have at times been hard done-by by sometimes anxious lenders where farmers either miss a payment on a mortgage or as a result of changing values and LVR’s affecting the lender’s security. Rather than assisting farmers by giving them time to refinance or bring up arrears, historically, lenders have imposed impossible covenants forcing farmers into financial difficulty, further default and foreclosure.
The purpose of the Act is to outline efficient and equitable ways for farmers and mortgagees to attempt to resolve matters. It also prevents lenders from foreclosing on debts where the parties have not had an opportunity to participate in mediation. Lenders are not limited to the major banks but also include any person to whom a farmer owes a farm business debt secured by a mortgage over a farm property.
A mortgagee must not take enforcement action under a farm mortgage unless the legislation does not apply to that mortgage or an exemption certificate is in force for the farm mortgage. If a mortgagee intends to take enforcement action under a farm mortgage they are first required to serve a notice of their intention that informs the farmer of their right to request mediation. There are serious penalties included in the Act to ensure that lenders comply and give the appropriate notices to farmers.
A result of non-compliance includes deemed executive liability provision where an executive officer of a corporation is taken to have committed the offence. There are also restrictions on mortgagee enforcement action to ensure that compliance is achieved. A farmer is able to instigate mediation, however, if they are not in default under the farm mortgage and the mortgagee refuses mediation there are no consequences. If the farmer is in default under the farm mortgage and the mortgagee refuses to attend a mediation, there may be grounds for the farmer to apply for an enforcement action suspension certificate. The result of that prevents a mortgagee from taking enforcement action under the farm mortgage.
Time will tell whether implementation of the Act will assist farmers in any real way or rather delay the inevitable foreclosure in circumstances where a farmer does not comply with his/her obligations.
If you require loan or mortgage advice in relation to a lending matter, please contact one of our Lawyers in the Commercial or Dispute Resolution Departments at McLaughlins Lawyers, your Gold Coast Lawyers.
Author: Matt Kollrepp
Director: Ian Kennedy
Date: 11 April 2018