PACE program administration

Calif. Streets and Highways Code §5900, 5901, 5913, 5914, 5922, 5923, 5924, 5925, 5926, 5940, 5954
Added by S. B. 242
Effective date: January 1, 2018

The Property Assessed Clean Energy (PACE) program allows for the financing of renewable energy sources and water efficiency improvements which are permanently affixed to real estate.

For one-to-four unit residential properties, before a property owner executes a PACE contract, and when the public agency overseeing the contract uses a program administrator, the program administrator will verbally confirm that the property owner has a copy of contract assessment documents, and the key terms of the contract. The verbal confirmation will include:

that the property owner may have other persons present on the call;
that the property owner should review the assessment contract, financing estimate and disclosure form with all other property owners;
that the improvement is being financed by a PACE assessment;
the total estimated annual costs the property owner will have to pay under the assessment contract;
the total estimated average monthly amount the property owner would have to save in order to pay the annual costs under the PACE assessment;
that the county annual secured property tax bill, including the installment of the PACE lien, will be mailed by the county tax collector no later than November 1, and that when the lien is recorded after the fiscal year closes but before the bill is mailed, the first installment may not appear on the county tax bill until the following year;
the term of the assessment contract;
that payments on the assessment contract will be made through an additional annual assessment on the property and paid either directly to the county tax collector’s office as part of the total annual secured property tax bill, or through the property owner’s mortgage impound account, and that when the property owner pays their taxes through an impound account they should notify their mortgage lender to discuss adjusting their monthly mortgage payment by the estimated monthly cost of the PACE assessment;
that the property will be subject to a lien during the term of the assessment contract and that the obligations under the assessment contract may be required to be paid in full before the property owner sells or refinances the property;
whether the property owner has disclosed whether the property has received or is seeking additional PACE assessments;
that any potential utility savings are not guaranteed, and will not reduce the assessment payments or total assessment amount;
that the program administrator and contractor do not provide tax advice, and that the property owner should seek professional tax advice when required;
that when the property tax payment is delinquent within the fiscal year, the county tax collector will assess a 10% penalty and may assess related costs, as required by state law. A delinquent payment also subjects the property to foreclosure. When the delinquent payment continues past June 30 of a given year and defaults, the county tax collector will assess penalties at the rate of 1.5% per month (18% per year), and the property will continue to be subject to foreclosure and may become subject to the county tax collector’s right to sell the property at auction; and
that the property owner has a three-business day right to cancel the assessment contract.

The program administrator will record the verbal confirmation and retain that recording for at least five years. The confirmation may be conducted in a language other than English when the property owner desires. The PACE assessment will not proceed when the property owner requests a language other than English and an interpreter for that language is not available.

Beginning January 1, 2019, when a property owner prefers a language other than English, and when that language is Spanish, Chinese, Tagalog, Vietnamese or Korean, all disclosures for the PACE contract will be delivered in writing, before the execution of any contract.

A property owner’s first payment on an assessment contract will be due on the fiscal year following the year in which the installation of the PACE improvement was created, and may not be waived or deferred in the first year.

Third parties, including contractors, may not advertise the availability of PACE assessment contracts unless the third party maintains the relevant licenses and bond and insurance coverage necessary for operating in its jurisdiction, and the program administrator obtains a written agreement from the third party that the third party will adhere to relevant advertising laws and regulations.

The administrator will not provide any payment to a contractor beyond what the contractor charges the property owner for the installation of an improvement. The administrator will also not reimburse the contractor for advertising expenses. The agency may reimburse the contractor for training expenses related to PACE financing when:

the training expenses are actually incurred;
the reimbursement does not exceed $100 per each person who participated in the training; and
the reimbursement is paid directly to the contractor.

Any representation a contractor makes as to the tax deductibility of a PACE assessment contract needs to be consistent with representations made by the Internal Revenue Service (IRS).

The administrator may not disclose to a contractor the amount of funds for which a property owner is eligible under a PACE assessment or the amount of equity in a property.

A contractor will not provide a different price for a PACE-financed project than they would if paid in cash by the property owner.

When a property owner enters into an improvement contract on the reasonable belief that the work will be covered by the PACE program, and the property owner applies for, accepts and cancels PACE financing within the right to cancel period, work under the improvement contract may not continue and the contract will be unenforceable.

When work continues under these circumstances, the contractor is not entitled to compensation, is required to restore the property to its original condition at no cost to the owner and will return all money, property and consideration, or the fair market value thereof, to the property owner. If the contractor delivered any property to the property owner under these circumstances, the property owner will make the property available to the contractor for return within 90 days of the execution of the contract, when it is practical to do so without damaging the property owner’s property.

The property owner may waive requirements for cancelling the contract when:

the contract is executed in connection with emergency repairs necessary to protect people or property;
the property owner initiates the contract for emergency repair; and
the property owner provides a statement handwritten in ink describing the emergency situation, acknowledging the contractor has informed them of their right to cancel and waiving that right.

The improvement contract will not be invalidated in the event that a property owner cancels their PACE financing after waiving their right to cancel.

For each PACE program administered, the program administrator will submit a report to its agency on or before February 1 for activity which occurred between July 1 and December 31 of the previous year, and another report on or before August 1 for activity which occurred between January 1 and June 30 of that year. The report will contain:

the number of funded PACE assessments;
the aggregate dollar amount of funded PACE assessments;
the average dollar amount of funded PACE assessments;
the categories of installed improvements, and the percentage of PACE assessments represented by each category on a number and dollar basis;
the definition of default used by the program administrator;
for delinquent assessments:
- the total delinquent amount;
- the number and dates of missed payments; and
- the ZIP Code, city and county in which the relevant property is located;
for defaulted assessments:
- the total defaulted amount;
- the number and dates of missed payments;
- the ZIP Code, city and county in which the relevant property is located;
- the percentage the defaults represent of the total assessments within each ZIP Code; and
- the total number of parcels defaulted and the number of years in default for each property.
the estimated total amount of energy saved, and the estimated total dollar value of those savings;
the total number of energy saving improvements, and the number of improvements which qualify for the EPA’s Energy Star program, including the overall average efficiency rating of installed units for each product type;
the estimated total amount of renewable energy produced;
the total number of renewable energy installations, including the average and median system size;
the estimated total amount of water saved, and the estimated dollar value of those savings;
the total number of water savings improvements, and the number of improvements which qualify for the EPA’s WaterSense program, including the overall average efficiency rating of installed units for each product type;
the estimated amount of greenhouse gas emissions reductions;
the estimated number of jobs created;
the average and median amount of annual and total PACE assessments based on ZIP Code; and
the number and percentage of homeowners over 60 years old.