PACE Disclosure
This week’s article will address the recent addition of a new rider to the FAR/BAR Residential Contract for Sale and Purchase, the Property Assessed Clean Energy (PACE) Disclosure. Over the years, the movement towards clean energy and reduced emissions has gained momentum. From electric vehicles to solar panels, the clean energy movement has encompassed most aspects of our daily lives. However, as PACE financing for new homeowners has become more commonplace, so too have the problems associated with it. As more new homeowners choose PACE Financing as a means to obtain certain energy efficiency improvements (i.e. roofs, windows, doors, HVAC units, solar panels, etc.) the issues at closing have increased due to parties being unaware of both the nature of lien that is placed on the property and the complexity of the payoff process.
How PACE Financing Works
As a brief overview, when PACE financing is obtained for energy improvements on the property, a lien is placed on the property and the amount of the financing is treated as an assessment that is added to the tax bill. This lien is a “super-priority” lien which supersedes other types of liens, including taxes, and often creates problems with lenders as most will require satisfaction of the lien in order for the lender’s mortgage to be in first position. Unfortunately, most sellers are under the belief that PACE assessments are always assumable by the buyer in that the buyer would continue to make payments as a part of their tax bill each year. However, this typically is not the case and sellers are often shocked to learn of this late in the transaction.
Is PACE Financing Right For You
This is where the new PACE Disclosure comes into play! The PACE Disclosure requires the seller of a property with an unsatisfied PACE assessment to disclose the existence of such at or before the time the buyer executes the contract in accordance with Section 163.08(14), Florida Statutes. Additionally, if the buyer is obtaining a mortgage to purchase the property, the PACE Disclosure places the buyer on notice that the lender will likely require satisfaction or release of the PACE financing from the property. This information, when disclosed at the beginning of the transaction, allows for the Buyer to be apprised of the extra requirements that will need to be satisfied prior to closing, as well as it informs the sellers that they may be responsible for paying the PACE assessment off in full. Thus, the PACE Disclosure appears to be a useful tool that should be utilized in the contracting phase of the transaction to manage the parties’ expectations and to avoid any unwarranted delays from a late disclosure.
If you have any questions or concerns regarding anything mentioned in this blog, please reach out to your trusted real estate attorneys for legal advice.
Sincerely,
Cameron Allen, Esq., callen@berlinpatten.com
Berlin Patten Ebling, PLLC
This communication is not intended to establish an attorney client relationship, and to the extent anything contained herein could be construed as legal advice or guidance, you are strongly encouraged to consult with your own attorney before relying upon any information contained herein.
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