C-PACE (Commercial Property Assessed Clean Energy) financing offers several benefits, such as providing non-recourse, long-term financing for energy-efficient improvements. However, it also comes with potential drawbacks that developers and property owners should consider:
Potential Drawbacks of C-PACE Financing
- Lien and Priority Issues
- C-PACE assessments are secured by a senior lien on the property, which can take precedence over existing mortgages or loans. This may complicate property transactions or refinancing processes, requiring additional approvals and agreements from current lenders.
- Impact on Property Sale and Refinance
- The presence of a C-PACE lien can limit sale options and make properties less attractive to potential buyers, as the new owner will assume the outstanding assessments. Some lenders, like Freddie Mac and Fannie Mae, may not approve mortgages for properties with these liens.
- Increased Complexity and Time in Financing Process
- Obtaining lender consent for C-PACE financing can add complexity and time to the financing process, potentially increasing costs.
- Risk of Property Loss
- Failure to pay C-PACE assessments can lead to foreclosure, as these assessments are treated similarly to delinquent property taxes.
- Portfolio Limitations
- C-PACE financing is typically structured for individual properties, making it less suitable for portfolio-wide strategies due to the specific cost/savings analysis required for each property.
- Limited Geographic Availability
- C-PACE financing is only available in areas with PACE-enabling legislation, limiting its applicability across different regions.
Understanding these drawbacks is crucial for property owners considering C-PACE financing to ensure it aligns with their financial goals and circumstances.
Original article by NenPower, If reposted, please credit the source: https://nenpower.com/blog/what-are-the-potential-drawbacks-of-c-pace-financing/
