Brinston, Charge of Lease, demand debenture, leasing land for wind turbines, Prowind, South Dundas, Stormont Dundas and Glengarry, wind farm, wind farm financing, wind farm leaseholders, wind farm leases, wind power, wind turbines
Ottawa Wind Concerns has learned that a “Charge of Lease” has been placed on the South Branch wind “farm” in the amount of $70 million. The charge is on the leasehold interest in five properties, where property owners have leased land for wind turbines, access roads, substations, and other parts of the wind power generation project.
Earlier this month, details came to light on the 140-turbine K-2 project near Goderich, Ontario, where a charge of lease has been filed on the title for 100 farm properties, in the amount of $1 billion.
The Charge of Lease is basically a financing agreement between a lender (who may represent investors in the wind power project) and the wind power developer, that can function as a line of credit. The basis for the Charge, as we understand it, is that the present value of the contract for the turbines, i.e., the Feed In Tariff contract for power with the Province of Ontario is greater than the present value of the lease agreements with the landowners; the difference between those two values is the security for the loan.
The South Branch contract with the Ontario government runs for 20 years and is worth millions to the developer, who bought the project from Germany-based Prowind.
The importance of the existence of these agreements is the effect they have for the landowner leasing land for the wind turbines. In the opinion of a lawyer advising us (who prefers the term “Demand Debenture” for this arrangement:
It’s not so much that the farmer lessors might on default lose their land (the land itself is not mortgaged, just the turbine contract on that land) but the damage it does to that farmer if he/she wants to sell or to renew an existing mortgage, or place a new one or in any way borrow money for which the lender would want security on his/her land.
Assume a binding Agreement of Purchase and Sale. The lawyer for the purchaser does a title search and discovers the Demand Debenture. The lawyer would immediately tell his/her client that the client is entitled to get out of the deal unless the registration of the Demand Debenture is removed from title, and would also insist to the farmer’s lawyer that this be done otherwise the deal cannot close. A purchaser is not expected to assume any risk of this nature nor to be in the position of “buying a law suit”.
in the case of renewing an existing mortgage or placing a new one, the lawyer for the Bank or other lending institution would take the same position – no renewal or new mortgage unless the customer sees to it that the Demand Debenture disappears from title. Period. End of story.
This is another example of the very serious questions that need to be asked by anyone considering leasing their land for a wind power generation project. There are many serious and long-lasting effects to signing these agreements that need to be properly understood.
In 2013, the Not A Willing Host group of municipalities met in Ottawa at the Association of Municipalities of Ontario convention. At that meeting, one Ontario mayor said, What people need to understand is that basically, they sold their property for the amount of the lease agreement.
** Please see also, the article from the May 5th edition of Ontario Farmer on the charge of lease issue, here.
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Ann Harris (@Anntwerp) said:
The Ontario Liberal government knew about all of this but went ahead anyways knowing very well their own citizens would be seriously damaged by such deals. They have an obligation to ensure the well-being of Ontario citizens.
All McGuinty saw was $$$$$$.
In the case of K2 Wind, where there are numerous victims, because of adverse health impacts from turbines placed too close to their homes and barns or because of loss of property value for the same reason, legal action seems to be the only recourse.K2 Wind is not responding to complaints. What does this mean to the leaseholders’ risk financially?
Not sure what you mean. This is a financing agreement and has nothing whatever to do with complaints. It is however another serious issue to be considered by anyone contemplating signing a lease for wind turbines. As to the complaints, yes, neighbours have the option of initiating nuisance lawsuits based on the noise and property value loss.
If because of class action lawsuits regarding adverse health impacts or property value loss for neighbours, K2 Wind eventually files for bankruptcy, what would happen to the leaseholders ?
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Lending institutions must be on line with this, because there have been ag. lands bought and sold with turbines on the property. I don’t understand why a lending institution needs a security for the difference between the two values because all they would have to do is take ownership of the electricity contract, unless they need a capitol asset in order to back up the loan. That to me means the landowners land is at risk if the developer goes defunct. Farmers were warned that the contract with a wind developer should be a straight land lease agreement with no easements.
They are just lending money on the basis of the lucrative contract with the provincial government in Ontario. The security is the contract but yes, if the developer defaults for some reason, then the lender takes over the developer’s interest in the power project. The chief danger for the property owners is, that the charge of lease is now first up—lenders don’t like to come second in any financing arrangement, so the farm owner may not be able to get financing now themselves, or to see the property as it will be difficult for a purchaser to get financing.