Yes, there are risks associated with C-PACE financing that property owners should be aware of:
- Lien and Priority Issues: C-PACE assessments typically have a senior lien status, which can create priority issues with existing mortgages. This might require consent from senior lenders, potentially adding complexity and time to the financing process.
- Property Sale Challenges: The C-PACE assessment is tied to the property and transfers to new owners upon sale. This can make properties less attractive to potential buyers if they are not willing to assume the additional assessment obligation.
- Refinance Limitations: The senior lien status of C-PACE assessments can limit refinance options. For instance, Fannie Mae and Freddie Mac may not purchase or refinance mortgages with C-PACE liens.
- Long-Term Commitment: C-PACE financing terms are typically long, ranging from 10 to 30 years. This requires property owners to carefully consider their ability to maintain the property and repay the financing over the extended period.
- Escrow Requirements: Senior lenders may require escrow for C-PACE assessment obligations to mitigate risk, which could affect cash flow and payments.
- Limited Availability: C-PACE financing is only available in locations with enabling legislation, which can limit its accessibility for some property owners.
- Default Risks: Although C-PACE assessments do not accelerate upon default, the risk to property owners is still significant, as delinquencies are treated similarly to property tax delinquencies, and the risk to the property owner is limited to the loss of property.
These risks highlight the importance of thorough due diligence and consultation with financial advisors before deciding on C-PACE financing.
Original article by NenPower, If reposted, please credit the source: https://nenpower.com/blog/are-there-any-risks-associated-with-c-pace-financing-that-property-owners-should-be-aware-of/
