Property Assessed Clean Energy (PACE)
Property Assessed Clean Energy (PACE) is a financing option that allows property owners to fund energy efficiency, renewable energy, and wind mitigation projects with little or no up-front costs. PACE provides private financing to property owners for energy efficiency, renewable energy, and wind resistance property improvements, such as roof, HVAC, impact windows/doors, and/or solar panels. The PACE providers and property owners enter into a financial agreement for property upgrades and repayment is through an assessment placed on the property. PACE is not a government funded program.
Thinking about a PACE assessment?
Here are some questions you should ask:
Is PACE free for me?
No. The PACE Program is not free. To participate in the program, you must qualify for the PACE funds that finance the improvements. You owe the amount of the PACE lien plus interest. The term of this financing shall not exceed the useful life of the improvements made to your property. The PACE assessment will be collected in the same manner as real estate taxes. This PACE assessment will appear on the property owner’s tax bill. Failure to pay the PACE assessment may cause a tax certificate to be issued against the property, and failure of payment thereof may result in the loss of property subject to the PACE assessment, including homestead property, in the same manner as failure to pay property taxes. When the assessment is paid off in full, the lien will be removed, and you will no longer see this line item on your property tax bill.
Can I refinance my home while I still am making payments to the PACE program?
Maybe. PACE Program liens may impede your ability to refinance your home loan or to receive a home loan modification because some lenders will not want to enter into new loan terms while a PACE Program lien is assessed against your home. You may be required to prepay the PACE assessment as a requirement to refinancing.
Do I repay the PACE funds monthly?
Maybe. The PACE Program funds are paid with your property tax assessment. If you have a mortgage, your lender may include the property taxes in your monthly payment. If so, your monthly mortgage payment will increase accordingly. However, your mortgage lender will typically not make the adjustment until they receive the first tax bill with the assessment. You may be able to make additional, non-scheduled payments to reduce your balance. You should inquire with your PACE provider for further information.
Can I sell my home before I have paid off the PACE program lien?
Yes. The PACE Program lien is automatically transferred to the buyer when you sell your home. But Fannie Mae, Freddie Mac and the Federal Housing Administration the Department of Veterans Affairs may not insure mortgages with PACE assessments. Other lenders are not required to accept PACE Program liens. As a result, you may be required to prepay the PACE assessment as a requirement to selling your home.
Can I make additional, non-scheduled payments to reduce the balance and annual assessment of the PACE assessment?
Maybe. You should inquire with the PACE agency/authority/district about making additional payments or paying off your balance early. You do have the right of pre-payment without penalty, however, PACE agencies/authorities/districts, may have extra requirements before they accept an additional payment.
Can I cancel my PACE financing agreement?
Maybe. The property owner is guaranteed a three-day right to cancel the financing with the PACE agencies/authorities/districts. The property owner must consult the contractor’s contract to cancel the project. Florida Statute 520.72 Cancellation of contract: “Every home improvement finance seller or home improvement seller shall furnish to the buyer a notice of the right to rescind the contract. Either party to a home improvement contract may cancel the contract by the exercise of the right to rescind until midnight of the third business day following the execution of the contract by giving notice to the other party by either certified mail or registered mail. The party invoking this section is not liable to the other for any damages incurred by cancellation under this section.”
Are there requirements that I need to meet for the financing?
Yes. The law requires that to be able to receive a PACE financing you must have paid all your property taxes and not have been delinquent for the last 3 years, that there are no involuntary liens on your home and no notices of default, and that you are current on your mortgage. The PACE Program is not required to look at whether your family budget can afford the additional payments on your property tax bill.
Do I pay interest for the financing?
Yes. PACE Programs charge interest over the repayment term you selected (up to 30 years). PACE Programs are only allowed to charge fixed interest rates, and variable or negative amortization financing terms are not permitted. Please review the Financing Estimate to see the interest rate applicable to your PACE assessment, which may be higher than other financing options available to you. Before agreeing to a PACE assessment, you should ask about any low interest loans available, like utility sponsored programs, federal weatherization programs or a lower rate loan at your bank or credit union with a second mortgage or a home equity line of credit.
Are there other costs?
Yes. PACE Program assessments also charge borrowers an up-front fee, typically based on a percentage of project costs, and may also include administration, project and assessment fees as part of the annual payment, which is payable each year during the repayment term you selected. Please review the Financing Estimate to see the fees applicable to your PACE assessment.
Do I have any recourse if I am not happy with the improvements?
Maybe. A licensed contractor must do all PACE Program improvements requiring a license under applicable law. However, your recourse against the contractor if you are not happy with the improvements may be limited by the nature of the PACE Program financing. That is why it is important to carefully select the contractor and read all paperwork carefully.
For energy improvements, does the contractor have to give me an energy audit?
No. The law does not require any verification of energy savings for improvements to your home financed through PACE. Any figures about energy savings given to you by a contractor should be independently verified by you.
Could I lose my property if I have trouble making the increased tax payments?
Yes. If you default on your PACE financing obligations by failing to pay your property taxes, a tax certificate will be sold on the property. After two years of an unpaid tax certificate, your home could be forcibly sold through the Tax Deed Application process.
It is important that you protect yourself and your property so take your time before you sign. Ask for printed copy of all documents and read any documentation relating to the PACE financing and BEFORE YOU ALLOW ANYONE TO WORK ON YOUR HOME. do not sign anything that seems too complex or confusing. Shop around and ask about other contractors that you may be able to use. PACE providers have a variety of contractors with varying interest rates.