Commercial property-assessed clean energy (C-PACE) lending is available in at least 38 states and is becoming a popular financing option for borrowers desiring financing for "green" energy projects designed to increase energy efficiency and renewable energy solutions.
C-PACE lending allows qualifying property owners to finance the upfront costs of eligible green energy projects at a fixed rate via a credit facility that is non-recourse to the borrower and typically cannot be accelerated. In states that permit C-PACE financing, such financing is typically available for a wide variety of real estate types, including:
- hospitality;
- retail;
- industrial;
- multifamily; and
- mixed-use.
Such financing can often be used to finance the purchase and construction of:
- seismic and resiliency systems;
- heating, ventilation, cooling and air-conditioning equipment;
- solar photovoltaics;
- roofing;
- plumbing; and
- other eligible projects.
The C-PACE lending environment is constantly evolving, as states and local municipalities continue to pass enabling legislation and develop new C-PACE programmes. Accordingly, there are open questions, particularly pertaining to super-priority lien status of C-PACE loans to mortgage lenders and the nature of foreclosure protections for C-PACE borrowers. Property owners are also advised to consult any existing property financing documents prior to entering into a C-PACE loan, as many lenders do not permit such financing without mortgage lender consent.
Originally published by Lexology
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