PACE LOANS IN FLORIDA: THE EVIL IS ALWAYS IN THE DETAILS
PACE loans are increasing substantially throughout Florida. What are PACE loans? PACE loans are property assessed clean energy (PACE) programs that allow a property owner to finance energy efficient or wind resistance improvements through a non-ad valorem assessment repaid through the annual tax bill. Section 163.08, Fla. Stat., provides that improvements can include energy efficiency, renewable energy, and wind resistance improvements. These improvements, include, but are not limited to, rooftop solar systems, impact doors and windows, energy saving air conditioning systems, insulated siding, awnings, and hurricane resistant roofing. The benefit to the property owner is that the funds for these improvements are provided upfront. A lien on the property is recorded for the value of the improvements and is then assessed on the property owner’s property tax bills down the road. So what does this really mean? The property owner is borrowing money for improvements to the property, a lien is recoded upon the property, the loan is paid off during the term of the loan through paying more in property assessments.
Governmental entities are usually in full support of PACE loans contending that PACE projects increase property values, create jobs for local contractors and tradesmen, and provides for increased revenue due to permitting fees associated with PACE projects. A perfect example of a local government standing behind and advocating on behalf of PACE loans is Broward County, Florida. Just recently in Broward County, Florida residents have been informed of interest rates for PACE loans ranging from 3.99 % for five-year loans to 7.99% for 25-year loans and have been hearing about the benefits of PACE programs.
Just as any program associated with lending money to borrower’s by securing the loan with the property, there are tons of details that can creep out and create havoc upon unsuspecting borrowers. Just think of the recent first and second mortgage foreclosure crisis that swept through the country and clogged up the Florida courts for years.
Underwriting Issues. Just as was the case with residential mortgages prior to the foreclosure crisis, PACE loans are regularly being issued without a full review of the borrower’s financial picture. The borrower’s ability to repay the loan is not really taken into consideration. Instead, the requirement needed for a PACE loan is to have a good payment history with your mortgage and have significant home equity. What does this mean? In practicality, PACE lenders will typically solicit older homeowners that have built up a great deal of equity in their property over many years of ownership.
Financing Issues. PACE providers have allegedly been reluctant to inform consumers that the lien placed on the property will most likely preclude any additional traditional bank financing on the property while the lien is on the property. The lenders are rightfully concerned because the PACE lien can potentially impair/preclude their rights as a first lien holder. At this juncture, Fannie Mae and Freddie Mac won’t back any mortgages with existing PACE assessments unless first-lien status is given to the FHA loan.
Issues Related to Sale of Property. Property owners with PACE liens on their property can potentially be faced with having to pay the entire loan before being able to sell their property. This needs to be taken into consideration with any property owner seeking to sell their property with a PACE lien.
Disclosures Related to the Loan. The PACE loan providers utilize sophisticated sales personnel that can gloss over the details of the loan and the critical implications of getting the loan. Many borrowers are shocked to see an increase in their property tax assessments after receiving PACE financing. Elderly borrowers on fixed incomes often have difficulty in paying the increased tax assessment or cannot pay the assessment at all. When there is a failure to pay the assessment, the PACE lender has the right to foreclosure upon their interest in the subject property, therefore, potentially taking the borrower’s house away.
Contracting & Construction Issues. The PACE loan provider is not the contractor and instead directs the borrower to PACE approved contractors. This by no means ensures that the contractor is good, reputable, or provides quality labor, materials and/or services. Sweeney Law, P.A. represents many borrowers with PACE related issues, many of the issues stem from poor contracting. Examples of the poor contracting, include, but are not limited to, replacing energy efficient products with cheaper alternatives, failing to complete the work, failing to adequately supervise the work, over-charging for work performed, and failing to complete projects in a timely fashion.
Sweeney Law, P.A. Regularly Handles Florida PACE Loan Issues & Related Litigation
Brendan A. Sweeney, Esq., of Sweeney Law, P.A., has negotiated and litigated complex Florida PACE loan issues throughout Florida. Brendan A. Sweeney, Esq., is LEED AP BD+C (Building Design and Construction) certified, an AV Preeminent Martindale Rated Attorney, that has been recognized as a Florida Legal Elite Rising Star Attorney in 2014, 2015, 2016 2017, and 2018. If you have any Florida PACE loan questions and/or issues then contact Sweeney Law, P.A. at (954) 440-3993 immediately to protect your rights. www.sweeneylawpa.com.