The Property Assessed Clean Energy (PACE) programs are a creative and effective approach to financing solar energy systems. Many were looking for a solar financing solution and after a very limited experiment in Berkeley, PACE expanded like wild fire to 23 states.
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The reason for its rapid expansion was apparent: people want to go solar, but they don’t have the big bucks to shell out on day one. If you are looking at a monthly electricity bill of $150, it is hard to have an intelligent conversation with someone about putting up $40,000 for a residential solar system. Solar, yes, but please don’t ask me to come up with $40,000 in these difficult economic times.
PACE was a great way for people to go solar without the pain. Just put it on your property tax bill, and you would pay the assessment along with your property tax bill over the life of the solar energy system.
There was just one problem, and I must confess that even though I am a lawyer, I did not immediately apprehend the gravity of the issue. And I was not alone. The problem now seems obvious. If you hold the mortgage, you do not want a superseding lien to come before you in the event of foreclosure.
Let’s take a home that was purchased for $400,000 with a mortgage of $360,000. Now the homeowners want to install a solar energy system on their roof and put the $40,000 payment on their tax bill. The value of the property declines and is now worth only $350,000 and the homeowner defaults. With one stroke of the pen, the bank holding the mortgage now is in second position behind this new assessment for the solar energy system of $40,000.
PACE may not be for everyone and there are other choices available, but we hope that legal clouds hanging over PACE are resolved. Rep. Steve Israel, D-N.Y. has introduced legislation that may save PACE. We hope that his efforts succeed. It is a program that can help a lot of people go solar.