The non-recourse nature of C-PACE loans has several key impacts on borrowers:
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Protection from Personal Liability:
- Non-Recourse Nature: C-PACE financing is non-recourse, meaning that the loan is secured solely by the property and the special assessment attached to it. This protects borrowers from personal liability in case the project encounters difficulties.
- Limited Risk: The risk to the property owner is limited to the loss of the property itself. If the owner defaults, only the property can be used to satisfy the debt, not the owner’s other assets.
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Simplified Debt Structure:
- No Acceleration of Payments: If payments are missed, the lender cannot accelerate the entire loan balance. Only the delinquent payments are collected, similar to how property taxes are handled. This avoids the sudden onset of a large debt burden.
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Transferability:
- Transferrable to New Owner: Upon selling the property, the C-PACE assessment transfers to the new owner, ensuring that the repayment obligation remains tied to the benefiting property. This can impact the sale process but ensures that the benefits and obligations of the loan stay with the property.
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Financial Flexibility:
- No Prepayment Penalties: C-PACE financing typically allows borrowers to prepay their loans early without incurring significant penalties, providing flexibility in managing the property’s financial obligations.
Overall, the non-recourse nature of C-PACE loans offers borrowers protection, flexibility, and a more straightforward debt management strategy compared to traditional financing methods.
Original article by NenPower, If reposted, please credit the source: https://nenpower.com/blog/how-does-the-non-recourse-nature-of-c-pace-loans-impact-borrowers/
