C-PACE (Commercial Property Assessed Clean Energy) financing impacts property taxes by adding an assessment to the property tax bill. This assessment is used to repay the C-PACE loan over a term that matches the useful life of the energy-efficient or renewable energy improvements made to the property. Here’s how C-PACE financing affects property taxes:
Key Aspects of C-PACE Financing
- Assessment Mechanism: C-PACE financing is secured by a special assessment lien on the property. This means that the loan repayment is facilitated through regular property tax payments, similar to how utility bills are handled.
- Impact on Property Taxes: The C-PACE assessment increases the property’s tax bill. Since the obligation is tied to the property, it transfers with ownership if the property is sold, which can affect property saleability.
- Senior Lien Status: The C-PACE lien often takes priority over other mortgages on the property, which can influence senior lender consent requirements and impact property refinancing options.
- Tenant Responsibility: In the context of triple net leases, tenants typically cover the property taxes, which include the C-PACE assessment. This allows property owners to benefit from energy-efficient upgrades without directly paying for them.
Benefits and Considerations
Benefits
- Long-term Financing: Offers low-cost, long-term financing options that can reduce upfront costs for property owners, making green improvements more accessible.
- Non-Recourse Debt: The financing is non-recourse to the borrower, reducing personal liability risk.
- Green Benefits: Encourages energy efficiency and renewable energy projects, which can enhance property value and meet environmental goals.
Considerations
- Senior Lender Consent: Requires consent from existing mortgage lenders due to its senior lien status, which can complicate financing processes.
- Potential for Limited Refinancing Options: Unpaid C-PACE assessments can limit future refinancing opportunities.
C-PACE financing provides an innovative way to fund green projects by leveraging property tax assessments, offering both benefits and challenges in terms of property taxes and ownership responsibilities.
Original article by NenPower, If reposted, please credit the source: https://nenpower.com/blog/how-does-c-pace-financing-impact-property-taxes/
