In the renewable energy sector, the acquisition of a land over which the power plant shall be built is of particular importance in the initial phase of development. It is not rare that previous encumbrances in favour of third parties exist on the areas relevant for the project. It is interesting, therefore, to outline the remedies provided by law in the event that a land on which a surface right has been established is encumbered by a guarantee right in favour of a third party, a creditor of the owner of the same land.
Among the rights that make it possible to pursue a renewable energy plant project, it is generally customary, also for accounting and tax reasons, for the operator to acquire a surface right over the areas deemed suitable for the construction of the plant, whether it is intended for the production of energy from photovoltaic solar or wind power.
In the case under consideration, with the acquisition of the surface right, the owner of such right in rem may build and maintain the plant and related works over the land owned by the grantor.
Let us assume, for example, that a SPV has entered into a notarial contract for the acquisition of the surface right over a plot of land on which a voluntary mortgage is registered in favour of a credit institution. Since the mortgage registration precedes the transcription of the deed of purchase of the surface right, the surface owner's rights may not be opposed to the secured creditor. For the sake of completeness, it should be specified that, on the contrary, if the surface right was transcribed prior to the mortgage registration on the land property, the mortgage does not extend to the surface.
In our case – i.e. mortgage registration preceding the transcription of the surface right – Article 2858 of the Civil Code regulates the remedies available to the third party purchaser. By virtue of Article 2812 of the Civil Code, these remedies are extended in favour also of the purchaser of certain partial rights in rem over the same, including, precisely, the owner of the surface right.
As a preliminary remark, it should be specified that the favourable rules provided for in Art. 2858 may apply only in case the owner of the surface right has transcribed his title and is not a debtor of the mortgage creditor (e.g. as guarantor of the landowner). The surface right owner who acquires the right to build on the mortgaged property by virtue of a transcribed title does not succeed the landowner as debtor in the obligatory relationship, nor does he assume a personal obligation to the mortgage creditor, but remains subject to the possible enforcement action of the creditor on the property itself.
As grantee of a surface right, however, it will have the following alternative options:
(a) pay the secured creditor the amount of his credit right (within the maximum amount secured by the mortgage);
(b) release the land;
(c) initiate the so-called purgation judgment to release the land from the mortgage.
In particular, under the remedy referred to in (a) above, the surface right owner will have the right to pay the sums owed to the secured creditor to release the land from the mortgage, but this could be a difficult procedure if an amicable agreement is not reached with the secured party, especially where the landowner's debt is far greater than the value of the land pledged as security and there are properties subject to a mortgage other than the one on which the surface right was acquired. In such a case, it would be impossible to pay the entire debt in order to discharge the mortgage, unless a negotiated agreement of mortgage restriction is reached with the bank in relation to the land concerned only.
The second hypothesis provided for in Art. 2858 of the Civil Code is the one referred to in paragraph (b): the surface right owner could release the land, thereby also extinguishing its obligations. However, this course of action is not available where the plant for the production of energy from renewable sources has already been constructed on the land, because – unless otherwise agreed with the mortgagee – the superficial owner would also lose the surface ownership over the installed plant.
The last option is the purgation judgment. It is a complex judicial procedure in which the surface right owner may offer the secured creditor the price agreed with the landowner, in this case equal to the surface right installments, in order to free the property from the mortgage. The mortgage creditor may, under certain conditions, oppose to the offer made by the surface right owner. In particular, the secured creditor, where the offer made by the surface right owner does not fully satisfy the receivables secured by the mortgage on the property, within forty days of notification, has the right to object by requesting the sale of the asset, in compliance with certain procedural requirements, including that of increasing the price proposed by the landowner by at least one-tenth.
In conclusion, when there is a mortgage over a land that is of interest for the development of a renewable energy project, the preferable solution is to negotiate its cancellation (or at least the restriction of the encumbrance in order to exclude the relevant assets) prior to the establishment of the surface right.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
