PACE (Property Assessed Clean Energy): What Homeowners Need to Know
PACE programs provide a unique type of financing that allows homeowners to finance energy efficient, water saving and other environmentally beneficial improvements through their property taxes. But financing home improvements through PACE programs can involve risks.
Some salespeople and building contractors have in the past misrepresented the cost of PACE projects and the financing, claiming no money down or out-of-pocket-costs are required and giving the impression these services are free. PACE is NOT a free government program. Homeowners must pay for a PACE contract through increased assessments in their annual property tax bills. As such, PACE assessments can also make it more difficult to sell or refinance a property because a lien is placed on your home until the PACE contract is paid off.
It is important to check the license of the construction contractor and the PACE program administrator before signing a PACE contract.
Some risks associated with PACE financing:
- Homeowners may be asked to approve incomplete work, allowing a contractor to be paid before the homeowner has approved the quality of the work or materials.
- Contractors may offer to do additional upgrades that do not qualify for PACE financing, such as cabinets, tile, counter tops, and/or conversions of existing structures.
- Property taxes can increase substantially with the added cost a PACE contract.
- Homeowners who cannot afford the increased property taxes from a PACE contract could lose their homes through a foreclosure action.
- Electronic PACE contracts, while legal, can sometimes limit the view of the entire contract. Request a paper contract to better understand what you are signing.
- Unauthorized use of a homeowner’s electronic signature.
- Projected or promised energy savings and tax rebates or refunds can be overestimated.
Resources
- California Public Utilities Commission (CPUC): California Solar Consumer Protection Guide (available in multiple languages and audio)
- Contractors State License Board (CSLB): Solar Smart – Information to Consider Before Going Solar
- Solar Consumer Protection Government Task Force press release: State and County Agencies Join to Advise Fresno Area Utility Customers of Steps to Avoid Fraud when Going Solar (PDF)
- Monterey County press release: District Attorneys Announce $4 Million Consumer Protection Settlement with “PACE” Program Administrator Renovate America, INC. (PDF)
PACE Consumer Advocacy Groups (partial list)
- Bay Area Legal Aid
1735 Telegraph Avenue
Oakland, CA 94612
(800) 551-5554
www.baylegal.org
- Bet Tzedek
3250 Wilshire Blvd. #1300
Los Angeles, CA 90010
(323) 939-0506
www.bettzedek.org
- East Bay Community Law Center
2921 Adeline Street
Berkeley, CA 94703
(510) 548-4040
www.ebclc.org
- Elder Law & Advocacy
5151 Murphy Canyon Road #110
San Diego, CA 92123
(858) 565-1392
www.seniorlaw-sd.org
- Housing & Economic Rights Advocates (HERA)
1814 Franklin Street, Ste. 1040
Oakland, CA 94612
(510) 271-8443
www.heraca.org
- Inland Counties Legal Services
1040 Iowa Avenue, Suite 109
Riverside, CA 92507
(888) 977-4257
www.inlandlegal.org
- Legal Aid Society of San Diego
110 S. Euclid Avenue
San Diego, CA 92114
(877) 534-2524
www.lassd.org
- National Housing Law Project
1663 Mission Street, Suite 460
San Francisco, CA 94103
(415) 546-7000
www.nhlp.org
- Neighborhood Legal Services of Los Angeles County
13327 Van Nuys Blvd.
Pacoima, CA 91331
(800) 433-6251
www.nlsla.org
- Public Counsel
610 South Ardmore Avenue
Los Angeles, CA 90005
(213) 385-2977
www.publiccounsel.org
- Watsonville Law Clinic
315 Main Street #207
Watsonville, CA 95076
(831) 722-2845
www.watsonvillelawcenter.org
- UC Irvine, School of Law Consumer Law Clinic
401 E. Perltason Drive
Irvine, CA 92697-8000
(949) 824-8536
www.law.uci.edu
Frequently Asked Questions
Below are answers to some of the most common PACE contract and assessment questions. Please contact our Consumer Services Office or call 1-866-275-2677 for additional assistance or other questions you may have about the PACE program.
What are the costs and risks associated with PACE?
Costs vary based on the project (i.e. solar panels, windows, HVAC). Homeowners should know the money borrowed and associated costs are added to your property taxes for the term of the PACE contract. Be sure you can manage the increased property tax payment.
How can I verify the license of the contractor and the lender?
Before signing a contract, be sure to check the license of both the contractor and the lender.
- To verify a contractor, contact the Contractors State License Board at www.cslb.gov.
- To verify a PACE administrator, go to www.dfpi.ca.gov or call 1-866-275-2677.
Is there a list of vendors from which consumers can choose and verify?
Yes, the DFPI provides several lists of PACE program administrators, PACE solicitors, and PACE solicitor agents. Please be patient when accessing the links below. Load times may vary depending on your internet connection.
- PACE program administrators: https://dfpi.ca.gov/pace-program-administrators
- PACE solicitors: https://dfpi.ca.gov/pace-program-administrators/pace-solicitor-search/
- PACE solicitor agents: https://dfpi.ca.gov/pace-program-administrators/pace-solicitor-agents-search/
According to the new law, the vendor did not verify my financial ability to pay. What do I do now?
You should contact the DFPI at 1-866-275-2677.
Why is it not a good idea to sign the contract on an electronic device?
An electronic device sometimes doesn’t show a contract in its entirety. A paper contract allows you to review the terms and conditions in full.
What should I ask before I sign the contract?
- How long is the term of the contract?
- What is the total cost over the life of the PACE assessment?
- How much will my property taxes increase?
Can consumers get out of a PACE contract if they can’t afford the increased property taxes?
PACE contracts are signed financing agreements that are difficult to void. One of the local PACE consumer advocacy groups listed above may be able to help. To avoid becoming delinquent, please refer to your local county tax assessor for more information.
History
The PACE program began in Berkeley in 2007 and has been shaped and expanded over the years by new state laws and federal guidance from the IRS and Department of Housing and Urban Development (HUD).
On October 4, 2017, Governor Jerry Brown signed AB 1284 which set forth a licensing scheme for PACE program administrators, the companies that administer a PACE program on behalf of a public agency.
The Department of Financial Protection and Innovation began licensing PACE program administrators and regulating the PACE industry in 2019. The DFPI assists consumers with issues involving PACE financing or program administrators.
PACE program administrators must comply with the law as follows:
- PACE program administrators must have oral confirmation from the property owner of the key terms of the PACE assessment. The “Key Terms” oral confirmation is required before the property owner signs the financing contract.
- PACE program administrators must obtain from property owners applicable documentation regarding the property owners’ finances in order to determine the reasonable ability to pay the financing.
- PACE program administrators must determine the property owner’s reasonable ability to pay when approving financing (i.e. income and assets versus debt obligation and household expenses) and before any work is commenced pursuant to the financing contract.
- PACE program administrators must review the amount of financing relative to the value of the home just as in a mortgage (i.e. amount financed is no more than 15 percent of the value of the property up to the first $700,000 and is less than 10 percent of the remaining value of the property above $700,000).
Links to PACE Consumer Laws
Assembly Bill 1284 (Dababneh, Chap 475, Stats. 2017)
Assembly Bill 1284 (Dababneh, Chap 475, Stats. 2017) – California Financing Law: Property Assessed Clean Energy program: program administrators.
AB 1284 requires Property Assessed Clean Energy (PACE) program administrators to be licensed by the Department of Financial Protection and Innovation (Department) and provides state oversight of contractors and third parties who solicit property owners. The bill requires PACE solicitors and PACE solicitor agents to enroll with program administrators and meet certain standards. The bill authorizes the Department to bring enforcement actions against PACE program administrators, PACE solicitors, and PACE solicitor agents. In addition, this bill prohibits a program administrator from approving an assessment contract unless the program administrator determines the property owner has a reasonable ability to pay the annual payment obligations for the PACE assessment. This bill renames the California Finance Lenders Law as the California Financing Law as of October 4, 2017. The licensing provision takes effect January 1, 2019.
Senate Bill 242 (Skinner, Chap 484, Stats. 2017)
Senate Bill 242 (Skinner, Chap 484, Stats. 2017) – Property Assessed Clean Energy program: program administrator
This bill establishes certain consumer protections related to Property Assessed Clean Energy (PACE) assessments, including (1) requiring an oral confirmation of assessment terms; (2) requiring the translation of agreements, (3) requiring two reports annually to local agencies, and (4) restricting various additional acts for the purpose of protecting consumers of PACE financing.
Assembly Bill 2063 (Aguiar-Curry, Chap 813, Stats. 2018)
Assembly Bill 2063 (Aguiar-Curry, Chap 813, Stats. 2018) – California Financing Law: PACE program administrators
AB 2063 prohibits a Property Assessed Clean Energy (PACE) program administrator from executing a PACE assessment contract, and a contractor from beginning any work for a home improvement, before the property owner’s ability to pay is determined. This bill revises the factors program administrators must use to determine a property owner’s ability to pay for PACE financing, including bankruptcies, late mortgage payments, and household income.
Senate Bill 645 (Jackson, Chap 837, Stats. 2018)
Senate Bill 645 (Jackson, Chap 837, Stats. 2018) – Property Assessed Clean Energy Program: wildfire safety improvements
SB 465 expands the Property Assessed Clean Energy (PACE) program by allowing PACE financing in high risk fire hazard zones for wildfire safety improvements. The bill imposes the same procedures for PACE financing of wildfire safety improvements for local agencies in high fire hazard zones, as defined, as for PACE financing of seismic retrofits and electric vehicle charging infrastructure. This bill provides a January 1, 2029 sunset date.
Senate Bill 1087 (Roth, Chap 798, Stats. 2018)
Senate Bill 1087 (Roth, Chap 798, Stats. 2018) – Property program: program administrators
This bill makes various changes to provisions in the California Financing Law related to the oversight of Property Assessed Clean Energy (PACE) program administrators and PACE contractors. Among other things, the bill 1) removes the confidentiality requirement for certain agreements between the Commissioner of the Department of Financial Protection and Innovation and PACE program administrators and PACE contractors; and 2) requires the Department to maintain on its website the identities of enrolled and barred PACE contractors.