The non-recourse nature of C-PACE financing protects borrowers from personal liability by securing the loan solely against the property and the special tax assessment, rather than the borrower’s personal assets. Here’s how this works:
- Secured by Property: The C-PACE loan is secured only by the property itself and the voluntary assessment placed on it. This means that if the borrower defaults on the loan, the lender can only claim the property as collateral, not the borrower’s personal assets.
- No Personal Guarantee: Unlike many traditional loans, C-PACE financing does not require a personal guarantee from the borrower. This ensures that the borrower’s personal assets, such as their home or other properties, cannot be used to satisfy the debt if the loan defaults.
- Non-Acceleration of Debt: In the event of a default, C-PACE financing typically does not allow the lender to accelerate the entire loan balance. Instead, delinquencies are treated similarly to property tax delinquencies, meaning only the delinquent payments are due, not the full outstanding amount.
- Transferable Debt: If the property is sold, the C-PACE assessment automatically transfers to the new owner, ensuring that the repayment obligation remains with the property, not the original borrower.
Overall, the non-recourse structure of C-PACE financing provides significant protection to borrowers by limiting their exposure to only the property itself, thereby avoiding personal financial risks.
Original article by NenPower, If reposted, please credit the source: https://nenpower.com/blog/how-does-the-non-recourse-nature-of-c-pace-financing-protect-borrowers-from-personal-liability/
