Farm debt mediation process
It is compulsory for banks and other creditors to offer mediation to farmers before commencing debt recovery proceedings on farm mortgages.
There are three main phases to farm debt mediation:
- Initiating farm debt mediation
- Undergoing mediation
- Resolving farm debt disputes.
Initiating farm debt mediation
Farm debt mediation can be initiated by the creditor or the farmer.
The circumstances of any farm debt mediation process will depend on the actions and decisions of the farmer and creditor.
General process of creditor-initiated mediation
Creditors are required to offer mediation to farmers before commencing debt recovery proceedings on farm mortgages.
Creditors must notify farmers in writing that they intend to take enforcement action, mediation is available and the farmer has 21 days from the date of the offer to mediate to respond.
If the farmer does not respond, or refuses mediation, a creditor can commence debt recovery action as normal.
If the farmer and creditor agree to mediation, the creditor must notify Agriculture Victoria of their agreement to mediate.
General process for farmer-initiated mediation
Farmers may request mediation with their creditor. The farmer does not have to be in default to request mediation with their creditor.
The creditor may accept or refuse an offer to mediate. If the creditor refuses to mediate and the farmer is in default, then the farmer may apply for a prohibition certificate. This will prohibit a creditor from commencing enforcement action for up to six months or until the day on which the farmer and creditor enter into mediation.
If the creditor agrees to mediation, they must notify Agriculture Victoria of their agreement to mediate.
Agriculture Victoria provides the details of the farmer and the creditor to the Victorian Small Business Commission.
The Victorian Small Business Commission contacts the farmer and the creditor and provides both parties with preliminary assistance, appoints a mediator and identifies a suitable time and location for mediation.
The mediator conducts mediation between the farmer and creditor and discusses options for managing present and future farm debt arrangements.
Mediations will generally be conducted within six weeks from receipt of the request for farm debt mediation, but complex cases can take longer.
Mediation sessions are generally conducted in one session.
Mediation sessions cost $195 per party. Parties are responsible for their own travel and preparation costs in attending mediation.
For more information on mediation processes and sessions, visit the Victorian Small Business Commission.
Resolving farm debt disputes
The outcome of any farm debt mediation process will depend on the actions and decisions of the farmer and creditor.
At the conclusion of mediation, the farmer and creditor may agree to sign a binding agreement to resolve the dispute. The creditor must ensure that any binding agreement between the parties is reflected in any contract, deed, mortgage or other instrument.
The creditor may request an exemption certificate from the Victorian Small Business Commission if the farmer is in default. If the Victorian Small Business Commission considers that satisfactory mediation has taken place, it will issue an exemption certificate, allowing the creditor to commence recovery action.