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Farm owners’ property used as security for wind farm financing: what property owners need to know

07 Thursday May 2015

Posted by in Renewable energy, Wind power

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Farm owners’ property as security for wind farm financing: what owners need to know

Wind developers can use farm leases as security for financing the power project
Wind developers can use farm leases as security for financing the power project

Ontario Farmer, May 5, 2015

by Garth Manning and Jane Wilson

It came as a surprise to many in Ontario when it was revealed that the multi-national power developers behind the K2 wind power generation project near Goderich had secured $1 B in financing, and that this arrangement is now registered on title for the 100 farm properties involved as lessors.

The arrangement is between K2 Wind Ontario Inc. and Mizuho Bank Ltd. Canada Branch. It secures a revolving credit facility of up to $1 billion at 25% on a number of items, including the contracts between landowners and K2 for land and road agreements with municipalities.

Another, smaller example has also come to light: a wind power project south of Ottawa in Eastern Ontario, where the five landowners leasing land for a 30-megawatt, 10-turbine project now have charges on their properties for $70 million.

Immediately, questions arise as to what would happen if the power developers were to default on their loans: would the lender then own the farm properties? How would that affect road use agreements with municipalities?

The fact is, this is a common practice. Property owners can refer to the leases imposed by the developers to review this potential situation, and many others that may affect operation and ownership of their land while leasing land for the power projects.

In an Invenergy standard contract, for example, is this clause: “In connection with the Lessee’s financing of the Project, the Lessee….is hereby given the right by the Lessor…to mortgage its interests in the Lease…and to assign this Lease, or any part of parts thereof, and any subleases as collateral security…”

The proper term for this is a “Charge of Lease” but may also be referred to as a “Demand Debenture.” What it means is, the present value of the wind power contract (i.e., the Feed In Tariff or FIT contract with the Ontario government) is greater than the present value of the lease amount. The difference between those two amounts is security for the loan to the power developer. It is a charge against all contracts favourable to the wind power developer, which may also include road use agreements.

It is like a line of credit for the developer and typically, advances against the amount are tied to certain milestones such as stages of construction.

The critical factor, however, is what it means for the lessors, in other words the farm owners who have leased their land for wind turbines, access roads, substations, transmission lines, etc. The importance lies not so much that the farmer lessors might on default lose their land (the farm land itself is not mortgaged, just the turbine contract on that land) but the damage it does to that property owner 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.

Let’s assume a farm owner wants financing for farm operations or improvements. That might now pose difficulty: lenders do not like to be second in line, as they would be where a charge of lease is in place.

If the farm owner wishes to sell, similar difficulties arise: the lawyer for a purchaser in the case of an agreement to purchase will do a title search and discover the Charge of Lease on title, then immediately advise his or her client that the client is entitled to get out of the deal unless the registration of the Charge is removed from title. A purchaser is not expected to assume any risk of this nature.

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 that the Charge disappears from title.

This is one of several important characteristics of signing a lease to have wind turbines, and needs to be thoroughly considered. Other legal issues to be carefully considered may include potential liability for the substantial cost of “decommissioning” turbines at the end of the lease, difficulty obtaining insurance on property with wind turbines, loss of autonomy over building on the property and carrying out regular farming practices, and, last, the potential for nuisance suits from neighbours affected by noise or property value loss.

Property owners should consult with a lawyer before signing any agreement.

Garth Manning is a retired lawyer and former president of the Ontario Bar Association, who lives in Prince Edward County. Jane Wilson is president of Wind Concerns Ontario; she lives in North Gower.

North Gower readers write: “no qualms about suing”

08 Saturday Mar 2014

Posted by in Ottawa, Renewable energy, Wind power

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Many area residents wrote to Farmers Forum after last month’s edition in which North Gower resident and wind power proponent Ed Schouten made remarks about wind “farms.”

Four were published; we reproduce them here.

Will sue for property loss

I intend to get my house appraised now and re-appraised if wind turbines are erected. I will have no qualms about suing both the property owner and Prowind for loss of property value at the very least. I hope others will be prepared to do the same.*

Julian Hughson, North Gower

*Blog editor note, Oh, they are, they are. Ottawa Wind Concerns has legal counsel on retainer and we have already notified Prowind of the intent to take any and all legal actions available.

Need more wind power studies

It sounds to me like a match made in heaven. Companies offer always cash-starved farms substantial funds to be allowed to build windmills on their farms. They sell the power to Ontario Hydro for enormous amounts of taxpayer money. The farmer is happy with his steady income, the windmill company is happy with its profits. But there are a lot of questions that still need answers about the effects of these monsters. In Europe and the United States, most of them are offshore or in isolated areas. Let’s get some reports from other countries of wind farms located near homes, schools and farms.

J.A. Fournier, North Gower

Blog editor: first of all, the wind power developer had a contract with the Ontario Power Authority or OPA to sell power under the Feed In Tariff subsidy program (which is now halted–a new program begins this year). Second, the farm owners, many unwittingly, gave away many rights to their land as part of the contracts including first right of refusal. An Ontario mayor noted at the August AMO conference that in effect, farmers sold their land for the lease amount. The contracts also contain “gag” clauses so that if the farm owners experience health problems or are disturbed by the noise and vibration, they are not allowed to speak of it. Last, there are problems the world over with wind turbine noise. Denmark alone has 170 community groups, and citizens are opposed in the UK, Germany, France, and the US. The global wind lobby has gone to great lengths to discredit these groups, and currently has a campaign which is based on the idea that the activities of community groups themselves are causing symptoms among turbine neighbours.

My retirement affected by wind turbines

As a resident of the proposed wind farm in North Gower, I will be adversely affected as we will be one of the homes closest to the turbines (the minimum distance is 550 meters). I will no longer be able to enjoy my back deck as the turbines will be far closer to my home than the home of the farm planning on erecting the turbines. Along with the health issues associated with turbines, so will our planned retirement of selling our property be adversely affected. The farmer from this area who said keeping the wind farm small will have no negative effects is, oh, so wrong.

Turbines in Europe a dismal failure

I would never have purchased this home if we had known there would be a turbine so close. Never, never, never. Being of European background, I have kept up-to-date on the fall of turbine desire there. They are a dismal failure. Germany, a country on the front line of energy efficiency, has decided not to erect (more) turbines but is instead returning to coal-fired generation.

What more need I say?

Gerry Courtney, North Gower

North Gower wind project is too big

Farmer Ed Schouten’s comment that the Brinston wind power project (it’s not a “farm”) could be a test case for others is interesting: with 6,700 megawatts of wind power already contracted for in Ontario, I think we have quite enough “test cases.”

What we do have is people sick from the environmental noise near wind power projects at Kincardine, Amaranth and Ridgetown, to name a few. It’s really quite simple: if the noise is so loud people can’t sleep, they become ill.

1,200 of his neighbours signed a petition against the project, that was accepted by Ottawa

I disagree with Mr Schouten’s claim that keeping a wind power project small avoids problems. The one proposed by the  Germany-based developer for his farm was a 20-megawatt power plant with eight turbines close to 1,000 families. That’s not “small” in my books. It’s also the reason why over 1,200 of his neighbours signed a petition against the project, which was accepted by Ottawa City Council.

With lawsuits over property values on the rise, and concerns about the health of livestock exposed to the turbine noise and vibration, Mr. Schouten must have a few concerns he hopes the Brinston project will allay.

The question that remains, however, is why is Ontario doing this? Why are we paying millions for wind power projects that have such a high impact on Ontario communities, for power we don’t need?

Ontario never did a cost-benefit analysis on wind power, the Auditor General complained in 2011. That was the real “test case” we needed.

Jane Wilson, North Gower

London School of Economics study finds property value loss near wind power

26 Sunday Jan 2014

Posted by in Ottawa, Renewable energy, Wind power

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Research in Ontario on values of properties neighbouring wind power projects show a a range of loss on the order of 20-48%, as has been reported here.

The London School of Economics is about to publish a study based on transaction for properties near 150 wind “farms” studied over a 12-year period, which finds significant value loss.

Property value loss has been a hot-button issue for the wind power lobby, probably because it is proveable, and is a negative side effect of wind power projects, which can be very invasive in communities. The study is a sharp contrast to studies done by Ben Hoen in the United States, usually at the behest of and with funding from the wind power lobby. Mr Hoen famously produced a study claiming to have looked at over 7,000 properties—that was roundly criticized by people who know something about real property (Sunak & Madlener, Wilson, more).

This is just a preliminary news story; we look forward to reading the whole study on its release.

Property value loss in North Gower due to the proximity of the huge wind turbines (over 500 feet in height) to 1,000 homes, is estimated to be $134 million.

Donations to help us with legal advice are welcome; send to PO Box 3, North Gower ON  K0A 2T0

Proof wind turbines take thousands off your home: Value of houses within 1.2 miles of large wind farms slashed by 11%, study finds

  • Study by LSE found value of homes close to wind farms slashed by 11%
  • Home that costs £250,000 would lose £27,000 in value
  • Homes as far at two-and-a-half miles away could be reduced by 3%

By Sanchez Manning

PUBLISHED: 23:59 GMT, 25 January 2014 | UPDATED: 15:45 GMT, 26 January 2014

The presence of wind turbines  near homes has wiped tens of thousands of pounds off their value, according to the first major study into the impact the eyesore structures have on house prices.

The study by the London School  of Economics (LSE) – which looked at more than a million sales of properties close to wind farm sites over a 12-year period – found that values of homes within 1.2  miles of large wind farms were being slashed by about 11 per cent.

This means that if such a wind farm were near an average house  in Britain, which now costs almost £250,000, it would lose more than £27,000 in value.

Homes located within 1.2miles of wind farms can decrease in value by up to 11 per cent, a study has discovered

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Homes located within 1.2miles of wind farms can decrease in value by up to 11 per cent, a study has discovered

In sought-after rural idylls where property prices are higher, the financial damage is even more substantial. In villages around one of Southern England’s largest onshore developments – Little Cheyne Court Wind Farm in Romney Marsh,  Kent, where homes can cost close to £1 million – house values could drop by more than £100,000.

The study further discovered that even a small wind farm that blighted views would hit house values.

Homes within half a mile of such visible turbines could be reduced in value by about seven per cent.

Even those in a two-and-a-half-mile radius experienced price reductions of around three per cent.

Homes within a two-and-a-half mile radius could see reductions of up to three per cent

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Homes within a two-and-a-half mile radius could see reductions of up to three per cent

The report’s author, Professor Steve Gibbons, said his research was the first strong evidence that wind farms are harmful to house prices.

MORE ‘GREEN C**P’ TO BE CUT AS CARBON TAX IS SLASHED

Green taxes are set to be frozen to reduce soaring energy bills.

Whitehall sources say the Government is preparing to put the brakes on the ‘carbon tax’ on greenhouse-gas emissions, with an announcement expected in the Budget in March.

Prime Minister David Cameron has reportedly instructed aides to ‘get rid of all this green c**p’ to reduce energy bills, which currently average £1,350 a year.

Prof Gibbons, director of the LSE’s Spatial Economics Research Centre, said: ‘Property prices are going up in places where they’re not visible and down in the places where they are.’

The study, which is still in draft form but is due to be published  next month, focused on 150 wind-farm sites across England and Wales. It compared house-price changes in areas that had wind farms, were about to see one built  or had seen one rejected by the  local authority.

Last night Chris-Heaton Harris, MP for Daventry, said: ‘There’s plenty of anecdotal evidence – especially in my constituency – of house-price reductions near wind turbines. The question is, will anybody be liable for these losses in future?’

And Bob Ward, policy and communications director at the Grantham Research Institute on Climate Change and the Environment at the LSE, said: ‘These results are not really surprising as it is already known that people place a value on countryside views.’

A Department for Energy and Climate Change spokesman said: ‘Developments will only get permission where impacts are acceptable.’

A spokesman for Renewables UK, which represents the wind industry, said: ‘We will be analysing the conclusions closely when the final report is issued.’

Property values “plummet” near wind power, says US appraiser

16 Monday Sep 2013

Posted by in Ottawa, Renewable energy, Wind power

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Here from Wind Wise Massachusetts:

Studies Show Land-Based Wind Turbines Cause Property Values to Plummet; Wind Wise Massachusetts Claims Study Showing Otherwise is Misleading

Published Monday, Sep. 16, 2013

 

FALMOUTH, Mass., Sept. 16, 2013 — /PRNewswire-USNewswire/ — A national study that claims there is “no statistical evidence” that real estate prices near wind turbines are negatively impacted is misleading because it lumps homes close to the turbines with those miles away, according to Wind Wise Massachusetts (WWMA).

“The report’s own data found that homes located within one mile to the turbines decreased in value by 28 percent compared to homes located within 3 to 10 miles from the turbines,” according to Virginia Irvine, president of WWMA (windwisema.org), a statewide alliance of grassroots environmental groups and individuals.

“The study’s authors are just perpetuating the myth that wind turbines are not responsible for significant property losses,” she said.

“The report is also comparing apples with oranges as less than 2.5 percent of the more than 50,000 home sales analyzed in recently released Lawrence Berkeley National Laboratory study were within one mile of the turbines and some were as far as 10 miles away,” Irvine said.

In the widely publicized report, the authors stated in the abstract that “…we find no statistical evidence that home values near turbines were affected in the post-construction or post-announcement/pre-construction periods.”

The report -– A Spatial Hedonic Analysis of the Effects of Wind Energy Facilities on Surrounding Property Values in the United States –- was published by the Lawrence Berkeley National Laboratory in August.

Irvine said independent, comprehensive appraisals have found that land-based wind turbines can cause property values to plummet within two miles by 15 percent to 40 percent.

“There is a major difference between turbines in a power plant 10 miles from homes in the country to those that are less than one mile from homes in residential communities,” Irvine said.

“But the sad fact is that whether a wind turbine is near a solo home in the country or in a more heavily populated area, the homeowner is going to see a significant loss in the value of his home,” she added.

“Wind turbines near residential areas are devastating to home values,” according to Michael McCann, president of McCann Appraisal of Chicago.

He said his paired study analysis of homes near wind turbines in more than two dozen communities throughout the country “consistently have found homes losing 25 to 40 per cent of their value.

Contact:  Barry Wanger for Wind Wise Massachusetts, Wanger Associates, 617-965-6469, Barry@WangerAssociates.com

SOURCE Wind Wise Massachusetts