C-PACE: Garden State Commercial Property Assessed Clean Energy

Summary

Note: In 2010, the Federal Housing Finance Agency (FHFA), which has authority over mortgage underwriters Fannie Mae and Freddie Mac, directed these enterprises against purchasing mortgages of homes with a PACE lien due to its senior status above a mortgage. Most residential PACE activity subsided following this directive; however, some residential PACE programs are now operating with loan loss reserve funds, appropriate disclosures, or other protections meant to address FHFA's concerns. Commercial PACE programs were not directly affected by FHFA’s actions, as Fannie Mae and Freddie Mac do not underwrite commercial mortgages. Visit PACENation for more information about PACE financing and a comprehensive list of all PACE programs across the country.

Signed into law in 2021, P.L. 2021, c. 201 established the Garden State Commercial Property Assessed Clean Energy program. The bill directs the New Jersey Economic Development Authority (NJEDA) to create the C-PACE program. Municipalities will may join the Program by adopting an opt-in ordinance and entering into an agreement with NJEDA. Counties may also establish a local C-PACE program pursuant to a local C-PACE program ordinance to facilitate the financing of C-PACE projects throughout municipalities in their jurisdiction.

Through this program, property owners can acquire funding for energy efficiency improvements on eligible properties. Funding is secured through a special assessment lien on the improved real property. C-PACE can be used for new construction, renovation and standalone energy projects. Financing is provided by private capital providers who meet the program’s criteria. The terms of a financing will not be longer than the forecast life of the improvements. In order to acquire financing, all tax payments, charges, and assessments with respect to the property shall be current, the legal or beneficial owners of the property shall not be subject to any bankruptcy proceeding, and the subject property shall not be the subject of a bankruptcy proceeding. The principal amount of the C-PACE assessment, when combined with mortgage loans and other lien obligations on a property shall not exceed 90 percent of the appraised value of the property after including the value created by the C-PACE project. The maximum duration of a C-PACE assessment, shall not exceed the weighted average useful life of the improvements in the C-PACE project or 30 years, whichever is less. The amount of the C-PACE assessment for a property shall be a specific amount, and the terms of repayment of direct financing shall be solely determined and negotiated between a property owner and capital provider. A property owner seeking a C-PACE assessment shall receive written consent of the existing mortgage holders on the property prior to the closing of the financing.