Swift progress of the Farm Debt Mediation Bill

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The proposed farm debt mediation scheme is a step closer to becoming law after the Farm Debt Mediation Bill (No. 2) was approved by the Committee of the Whole House in Parliament yesterday.

The bill is progressing swiftly, with the third reading expected to occur this week. From there the bill will receive Royal Assent and formally be passed into law.

Structural parts of the bill, allowing for the approval of mediators, are expected to come into force on 1 February 2020. The bill itself will become fully operational on 1 July 2020.

The new law establishes a mandatory farm debt mediation scheme. Secured creditors will be required to offer mediation to farmers before taking any enforcement action in relation to farm debt. Farmers will also be able to request mediation with a secured creditor at any time.

The key aspects of the bill are:

  • The legislation will apply to debts incurred by farmers for the purpose of conducting a primary production business (being agriculture, horticulture or aquaculture).
  • Creditors with security interests in farm property (which includes land, equipment and stock) will not be able to take any enforcement action under that security interest unless the creditor has first obtained an enforcement certificate.
  • To obtain an enforcement certificate a creditor must have offered mediation to farmers and must have participated in that mediation in good faith. An enforcement certificate will last for three years.
  • Any action taken by the creditor in violation of this would be void.
  • Farmers would be able to request mediation with a secured creditor at any time.
  • If a creditor declined a request to mediate (with no good reason) or failed to participate in the mediation in good faith, a farmer could obtain a prohibition certificate, preventing the creditor from taking any enforcement action for a period of 6 months.
  • MPI will administer the scheme and will be responsible for overseeing approved mediator organisations and for issuing enforcement and prohibition certificates.

The new law will be of interest to farmers and to lenders operating within the farming sector. Some operations on the boundary between “lifestyle farming” and “business operations” may also fall within the scheme.

For more information, please contact Scott Whitaker


Disclaimer: the content of this article is general in nature and not intended as a substitute for specific professional advice on any matter and should not be relied upon for that purpose.

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