Anti-jamming pacts: benefits for both renewable energy developers and banks | Celent Husch Blackwell LLP

Few propositions are more win-win for both mortgage holders and renewable energy project developers than anti-jamming and waiver agreements.

First, let’s see why we need a non-interference pact. A lot of work is involved in the design and layout of renewable energy projects, including surveys and tests conducted to determine land feasibility. Once land is determined to be suitable for a renewable energy project, the final site plan and design of the project becomes a puzzle that must be put together before finalizing the layout of the project’s infrastructure. Important puzzle pieces include the location of utility infrastructure (such as collection lines and pipelines), site boundaries, environmental impact areas, habitats for various species, and land elevation. Therefore, once the project design and layout has been determined, it is difficult to migrate the project infrastructure without causing ripple effects on the rest of the project design and layout.

This would mean that if the bank had the ability to seize the land participating in the project and terminate the lease of the renewable energy project (and be forced to relocate the project infrastructure), not only the seized land. , means that it will cause problems with the overall layout of your project. If a bank holds a mortgage with a superior right to leasing a renewable energy project, it may have the ability to do so.

A mortgage often presents itself as a burden of title commitment, meaning that the title company must receive a guarantee from the mortgage bank to secure the mortgage in order to obtain a title policy that is satisfactory to lenders and investors. To do. Such guarantees are usually in the form of non-interference and waiver agreements, also known as NDAs. The NDA ensures that the project infrastructure will not require relocation or removal if the underlying land is seized. Banks often hesitate or refuse to sign her NDA. This can often be resolved by educating both parties on what an NDA is and what an NDA is.

What are NDAs?

A non-interference and waiver agreement is an agreement between the Renewable Energy Project as tenant and the mortgage bank as lender, where the lender agrees not to interfere with the renewable energy project’s lease in the event of foreclosure. . It provides renewable energy projects with assurance that title to the land will be retained even if the landlord/landlord fails to meet its mortgage obligations to the lender.

The “Attorment” portion of the NDA is the act of the tenant recognizing the new owner of the property as the new landlord. Here, we require renewable energy projects to accept new owners, banks, as landlords. This is regardless of whether the new owner acquires the property in an ordinary sale or after a foreclosure. When property ownership is transferred, the bank essentially replaces the original landowner of the lease, assuming all rights and responsibilities of the original owner. Most importantly for the bank, the renewable energy project will continue to pay rent and other payments under the lease to its new owner, the bank.

What is an NDA?

A non-interference and waiver agreement is not a contract under which a renewable energy project acquires the right to replace a landlord’s mortgage. NDAs do not contain subordination clauses, in contrast to subordination, non-interference and waiver agreements (or SNDAs). Lenders are not required to allow their ownership interest in the property to precede the renewable energy project’s ownership interest in the property.

What happens in case of foreclosure?

If the collateral is foreclosed, the lender’s rights will not be affected. The landlord can still sell the property. A renewable energy project lease, including any extensions provided therein, remains in full force and effect for the remainder of its term. The attornment clause of the NDA applies and the renewable energy project recognizes the lessor as the new lessor under the lease and the lessor accepts the role of lessor. The lessor then receives all future payments under the lease.

Do NDAs Benefit Lenders?

Yes, NDAs benefit lenders. Renewable energy projects provide an additional source of income for landowners. Additional income is passed on to lenders in the form of mortgage payments, which can reduce the likelihood of default for landowners.

What if the lender doesn’t sign the NDA?

As explained above, renewable energy projects should have title insurance covering the entire project footprint and all of its infrastructure. If the land is blocked by a preferred mortgage and an NDA is not secured, the renewable energy project risks having to dismantle and relocate the project infrastructure in the event of a foreclosure. Renewable energy projects will not only incur these relocation costs, but the project will be out of service during the relocation process.

Rather than risk having to relocate the project infrastructure, renewable energy projects often choose to modify the design and layout of the project infrastructure prior to construction. All project infrastructure will be removed from land blocked by senior mortgages. This leaves the landowners who are the bank’s customers missing out on important rental income. Some landowners decide to refinance with another lender who agrees to sign an NDA rather than miss out on participating in a renewable energy project.

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