No. C-PACE is an assessment tied to the property.

C-PACE financing improves infrastructure and can increase collateral value. Replacing aged equipment typically reduces a building’s operating costs.

1. C-PACE Assessments Cannot be Accelerated. While the full assessment amount is recorded on the property records, only the annual payment may be collected, even in a default situation. The past due portion that is senior to a mortgage lender’s claim is typically, only 1-3 percent of the property value. For example, consider a $1 million C-PACE financing on a property valued at $5 million. The annual assessment for a 20-year term financing would be $87,185. If the property owner did not pay the C-PACE assessment in year 1, the C-PACE funder can collect only the delinquent payments. The PACE funder’s claim is limited to $87,185 or 1.75 percent of property value. The remaining payments are due according to the original repayment schedule.

2. C-PACE Financing Does Not Restrict a Senior Lender’s Foreclosure Rights. Unlike other debt, C-PACE does not require an inter-creditor agreement. Rather, in the event of a default on the senior lender’s debt, the senior lender can foreclose on its mortgage interest in the property in the same manner as if it were the sole financing on the property. C-PACE does not affect any existing remedies under the loan documents. The C-PACE capital provider may not prevent, restrict, or otherwise impact the senior lender’s foreclosure.

3. Senior Lenders May Escrow the C-PACE Assessments. Some senior lenders require property owners to escrow the annual C-PACE assessment obligation monthly in the same manner as property tax and insurance escrow requirements. The C-PACE escrow mitigates any risk associated with failure to pay the C-PACE assessment when due. In addition, a lender may request the C-PACE capital provider to capitalize an interest reserve to carry the payments through a construction period.

4. C-PACE Funds Are Fully Available as of Date of Closing. The C-PACE financing typically closes simultaneous with the senior lender, and all the C-PACE funds are deposited into an escrow account. Therefore, senior lenders have the comfort of knowing that all funds are available to be drawn as of the closing date.

5. C-PACE Financing May Increase the Value of the Senior Lender’s Collateral. Most states require that an engineer establish the monetary savings expected to result from the C-PACE project. Therefore, a PACE project directly reduces a building’s operating costs, increasing its net operating income and valuation.

6. C-PACE Financing May Improve Debt Service Coverage. C-PACE interest rates are typically lower than other forms of financing (e.g. mezzanine debt or preferred equity) and offer longer maturities, resulting in lower payments and a higher debt service coverage ratio.

7. Relationships matter. Nearly every C-PACE project involves a customer who wants to complete a project to upgrade their property. C-PACE funded projects make good business sense for the building owner, and therefore the building’s mortgage lender, too.

CPACE is billed around the same time as the annual tax bill and collect through a third-party collector called Amerinat.

Set the PACE STL requires the mortgage holder to consent to the assessment.