Well, I spent the better part of the afternoon on Wednesday in the Senate Finance Committee where they were at work on S. 54, a bill relating to clean energy assessment districts. What the bill is about is this: municipalities could ask its voters to designate it as a clean energy assessment district. Should the voters approve, the municipality may incur indebtedness to finance renewable energy projects. Then, if a property owner borrows from the fund created by the municipality and enters into a written agreement, a special assessment will be entered on that property and recorded in the land records.
This assessment, like some others, takes precedence over a mortgage, even an existing one. Here comes the rub: the Vermont Bankers Association has a problem with that! Early this month I asked Hal Miller to look at H. 161, the House version of this bill. The bill was rewritten in the Senate Natural Resources Committee before it went to Finance; so the house bill Hal, Andy and Mark looked at is different from the one that is advancing.
Anyway, the bill can be read on the Senate Calendar beginning on page 643 here:
http://www.leg.state.vt.us/docs/2010/calendar/SC090324.pdf
Take a look at Section 6, 24 VSA 3262 (a)-(f). I found it somewhat confusing when trying to figure out the reserve fund language along with the assessment running with the land in the event of foreclosure or transfer of title. What happens upon a sale of property that has been improved with the use of these funds? If the assessment has an unpaid balance, the obligation runs with the land. OK, so the new owner pays it off. But, didn’t the new owner likely pay a higher price because the improvements were made? Is the new owner paying twice?
Finance is returning to this bill this afternoon at 2; I hope to get back there to hear the rest of the testimony.
Bob et al.,
ReplyDeleteAny law that gives priority to subsequent secured lenders over existing ones is highly problematic. Those of us working on secured transactions and insolvency law in former socialist and emerging market economies often encounter insolvency laws that give the claims of employees priority over secured lenders. This chokes off lending and suppresses the development of a credit-based market economy. (There is also a moral hazard aspect as employees of defunct companies sometimes continue to be officially employed for years, building up entitlements that can wipe out secured creditors.)
All in all, I counsel caution with any provision that alters existing priorities among secured creditors.
Mike Palmer
Cornwall