Farmland is intrinsically linked to farm family homes and debt secured against it should be considered relevant debt under personal insolvency legislation, according to IFA Farm Business Chairperson Rose Mary McDonagh.
An IFA delegation recently met with the Minister for Justice Helen McEntee and the Minister of State for Law Reform James Browne to discuss the ongoing reform of the Personal Insolvency Act.
“Farmland is more fixed than typical business assets. The so-called vulture funds seek to immediately sell land belonging to farmers in arrears, which would have a devastating impact on a farm’s potential to generate revenue.”
IFA said it will work with the Minister and her Department to explore if a distinction can be made for farmland in the legislation.
Ms. McDonagh said that Personal Insolvency Arrangements (PIAs) are a welcome aid for farmers in financial distress. PIAs are another option and will offer a solution to some farmers in arrears. The legislation is playing a vital role in rebalancing the relationship between borrowers and the so-called vulture funds.
However, concerns over constitutional property rights are hampering efforts to enhance the ability of the State's personal insolvency regime to benefit indebted farmers.
Although the regime has predominantly been associated with keeping debtors in their family home, the mechanism has been used in a number of landmark cases involving farms in recent times.
Calls have been made to enhance the protections offered by a personal insolvency arrangement (PIA) with regard to debt that is not attached to a principal private residence.
In a debate last week on an amendment to PIA legislation, Fianna Fáil Senator Robbie Gallagher highlighted that cases where there may be no debt attached to someone's principal private residence, but there is a debt attached to the land and the land is the only form of income a farm family may have.
Responding Minister for State at the Department of Justice James Browne said there are very real concerns for the farming community, especially as some vulture funds are now taking on secured debt from other financial institutions and said the issue was raised at a meeting between Minister for Justice Helen McEntee and the IFA in recent days.
Mr Browne highlighted a number of challenges limiting further changes to the legislation to benefit indebted farmers, including Constitutional concerns.
"The issue of property rights, where people have secured the debt of businesses with financial institutions and they have property rights. We have to be very careful not to risk the entire regime."
Another issue centred on secured debt, Minister Browne explained.
"If one has property as a member of the farming community, it is very important to be able to use that property to leverage funds as needed.
"If lending institutions were of the view that they may not be able to get repayment on that debt by way of their security this may make it more difficult again.
"This is something the Minister, Deputy McEntee, and I have discussed with the IFA and we have undertaken to give further consideration to those issues and will do so over the coming months," he said.
It comes in the wake of recent concerns over the willingness of vulture funds to cut deals with farmers to give them more time to repay their debts, even where they would make more money in the long run.
Leading personal insolvency practitioner (PIP) Gary Digney of PKF-FPM Accountants said that in around 90pc of cases he had been involved in, farmers have not sought to have debts written down and in fact, just want more time to repay their loans in full.
However, he said vulture funds had been largely unwilling to agree to this and have instead sought judgments and tried to force land sales.