Yes, C-PACE financing can create senior lien issues for property owners. Here’s how:
- Senior Lien Creation: C-PACE financing is secured by a special assessment that becomes a lien on the property. This lien can take priority over other existing mortgages or liens, except for unpaid property taxes. As such, it can create a senior lien position, which may require consent from existing mortgage lenders.
- Lender Consent Required: Because C-PACE assessments can create a senior lien, existing mortgage lenders often require written consent before allowing a property owner to pursue C-PACE financing. This can add complexity and time to the financing process.
- Refinancing Challenges: Unpaid C-PACE assessments can limit refinancing options for property owners. This is partly due to the senior lien status and partly because some financial entities, like Fannie Mae and Freddie Mac, have restrictions on mortgages with C-PACE liens.
- Impact on Property Sales: Properties with outstanding C-PACE assessments can be more difficult to sell because new owners must agree to take on the additional assessments. This can deter potential buyers.
In summary, while C-PACE financing offers benefits like nonrecourse debt and reduced personal liability, it also introduces complexities related to senior liens and lender consent that property owners must navigate.
Original article by NenPower, If reposted, please credit the source: https://nenpower.com/blog/can-c-pace-financing-create-any-senior-lien-issues-for-property-owners/
