Recently, the New York City Department of Finance published a Notice of Adoption of a new rule broadening the scope of the Commercial Property Assessed Clean Energy (C-PACE) finance program. The amended rule, which goes into effect on November 7, 2021, has two key components: it will allow C-PACE financing to be used for the installation of energy efficiency improvements in new construction and it will expand loan eligibility to ground lease holders.
Originally enacted in 2019 as a component of New York's comprehensive Climate Mobilization Act (CMA), the C-PACE program is intended to help owners of real property reduce energy consumption and operating costs, create a healthier occupancy environment, increase the value of their buildings, and comply with city legislation establishing greenhouse gas emissions limits for buildings within the city. Eligibility for C-PACE financing was initially limited to existing buildings, and eligibility for obtaining C-PACE loans through the Sustainable Energy Loan Program (the "Program") was limited to property owners.
The amended rule permits the construction of new buildings, as well as retrofits and renovations of existing buildings, to take part in the Program, and the Program permits loans to be made to eligible owners of leasehold interests, as well as to eligible owners of fee interests.
In addition, after public hearing and comment, the Department of Finance further amended the rule to require the consent of the fee owner when the borrower under a Program loan is an owner of a leasehold interest. Such consent will be contained in a separate agreement in which the fee owner and C-PACE borrower will address each party's responsibility for repayment of the loan.
We will continue to monitor the implementation of the expanded C-PACE program. If you have any questions, please do not hesitate to contact the Morrison & Foerster team.
Alyssa Cannizzaro, a Law Clerk in our New York office, contributed to the writing of this alert.
Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.
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