ANZ-owned bank Suncorp has become embroiled in another controversy around mortgages for wind farm-related properties, with news that it has refused to lend to property owned by a new neighbour of the Moorabool wind farm in Victoria.
Two years ago, Nicole Fagan and her husband were surprised and frustrated when the bank refused to lend against their rural NSW property, citing a caveat connected to the Iberdrola’s Flyers Creek wind project.
A caveat is a legal notice that someone who is not the property owner has an interest in that piece of land. It’s a tool often used by renewable energy developers so they’re informed of changes over the land, say if it’s being sold, and offers extra certainty to future financiers.
It appears Suncorp is still nervy about renewable energy caveats, rejecting a mortgage application from a tree-changing couple from Melbourne for a property next to the Moorabool wind farm, which is now owned by Beijing Energy International (BJEI) Australia.
Ashley Cutchie and his partner found a property near Ballarat on the edge of the 312 megawatt (MW) wind farm, which they thought was perfect for some perma-culture and coming with a nice bonus: an annual neighbour payment from the wind farm.
“We found this property, we’re both massive fans of renewable energy generally, and then had this experience,” Cutchie told Renew Economy.
“We were shocked at how immature and unsophisticated the valuers and lenders were, given this tech is not going away.”
A property valuer from the couple’s first choice bank, Bendigo, struggled to understand the implications of the caveat, Ash says. As the settlement deadline closed in, they frantically cast about for another option, so their mortgage broker started talks with Suncorp.
Suncorp’s valuer, Herron Todd White, was able to make a positive decision in just 24 hours.
But the bank itself, although pre-approving the loan based on the couple’s income alone, blanched at the caveat saying in a letter to the couple it couldn’t provide a mortgage over the property “due to rural property generating income”.
Cutchie and his partner were left scratching their heads, but couldn’t extract a fuller answer from Suncorp.
“Both banks said there’s a caveat on this property, are you going to remove it? And we said no, of course we aren’t going to give it up,” Cutchie said, given the passive income it provides.
“At this point it was a comedy of errors.”
In the end, the couple did manage to extract a response and a loan from Bendigo Bank’s Tiimley brand.
But they’re baffled by the difficulties purportedly faced by the bank’s valuer Opteon and the swift about-face by Suncorp once it realised there was a caveat on the property.
Renew Economy reached out to Suncorp several times with a list of questions, but did not receive a response.
Two years ago, the banks said it didn’t have a blanket policy against wind farm caveats and assessed every potential transaction on its merits.
Are caveats good, bad, or just ugly?
While caveats over neighbouring properties are unusual, BJEI Australia’s Karl Schubert says in the case of Moorabool, it ensures the wind farm is notified when someone wants to sell.
“This ensures the windfarm has the opportunity to engage with any potential buyers about what agreements are in place, the reason for those agreements, the financial benefits and what if any requirement may exist on the current and future owner,” he told Renew Economy.
“If any issues were to arise, the windfarm would be more than willing to work with the landholder and their financial institution to ensure any confusion or questions about the reason for the caveat existing were understood and did not inhibit the sale or purchase of a property.”
Cutchie said all of his interactions with the wind farm had been positive.
But legal opinion is divided over whether the use of caveats by renewable energy developers is positive for landowners, or not.
Harwood Andrews principal Daniel Fullerton is in the latter camp, pointing out that they can lead to exactly the issues faced by Cutchie.
“It’s very much a liability in that caveats can cause issues when it comes to refinancing and settlement, and generally you require the cooperation of whoever has the title,” he told Renew Economy.
“If the person who has that caveat is not willing to cooperate or is difficult to deal with, it can be a barrier to obtaining finance.”
He says caveats are negotiable, but many farmers and landowners see it as a take-it-or-leave it offer: take the legal restrictions and the money, or miss out entirely.
Landowners can and should insist on clauses requiring caveats to be removed at the soonest possible point, or provisions that require the developer to reasonably comply with different situations.
On the other side of the fence is Dinh Ptok, a partner with Holding Redlich, who says there is a risk from the developer side that property owners can “forget” about promises made when granting options over their land.
However, she does say caveats can restrict host landowners from refinancing a property or granting easements to other parts of the property that aren’t covered by a lease or option with a developer.
In that case, she recommends dealing with this in the option for the lease, and checking before signing anything that the bank holding the mortgage doesn’t need to sign off on a caveat before it happens.
“The developer is not necessarily looking to restrict all dealings (such as a refinance), so long as its interest in the property is not affected by the future dealing,” she told Renew Economy.
“As the renewables project will bring a steady income for the host landowner (in the form of option fees or rent), a mortgagee of the land is unlikely to have an objection to the landowner’s contractual arrangements. Non-competing land interests can co-exist and it will be a matter of co-ordinating these between the interested parties.”
Who gets to put a caveat over land differs from state to state.
In Queensland, the landowner needs to give their permission. In New South Wales and Victoria, they don’t if they’ve already given a developer an interest over the land, such as a lease or an option for an easement.
What developers can’t do is put caveats over neighbouring land, Ptok says.
Caveats put in place in secret over properties next to renewable energy projects is a fear often discussed, or presented as fact, in social media forums.
“The developer will need to have a contractual agreement with the neighbour which gives the developer some sort of interest over the neighbour’s property, before it can put a caveat over that land,” she says.
“A neighbouring owner should therefore not have any concerns about having a caveat ‘slapped onto’ its property merely because its next door neighbour has decided to host a wind farm or solar farm on its land.
“If a neighbouring landowner does find that a caveat has been wrongfully put onto its property, it can take steps to have the caveat lawfully removed without needing to obtain the developer’s consent.”
