C-PACE: An Increasingly In-Demand CRE Financing Mechanism

Currently available in approximately 40 states and the District of Columbia, Commercial Property Assessed Clean Energy (C-PACE) is a state- and locally enabled, state-administered financing program supported by technical guidance from the U.S. Department of Energy. It provides commercial real estate owners and operators with non-recourse, fixed-rate funding for hard and soft costs of completing qualifying energy efficiency, renewable energy, and resiliency improvements. C-PACE financing is available to both new and existing properties and is repaid via a voluntary special assessment added to the property tax bill. While C-PACE programs offer owners and operators a host of benefits, these advantages should be weighed against potential drawbacks. Below are some examples of the benefits and drawbacks:

Other stakeholders also stand to benefit. Investors and lenders of C-PACE loans face lower credit risk thanks to the lien seniority that accompanies C-PACE financing, while potentially earning higher yields compared with the likes of CMBS AAA notes and taxable municipal bonds. At the same time, communities reap increased resilience to natural disasters, reduced carbon emissions, and economic stimulus. As C-PACE financing continues to flourish, Florida-based commercial real estate owners and operators should take the time to better familiarize themselves with how to leverage this increasingly in-demand financing tool.

C-PACE in Florida

Florida’s C-PACE enabling legislation is codified in Chapter 163, Part I, of the Florida Statutes. C-PACE programs, however, are not available statewide: they are only available in eligible communities—that is, those counties and municipalities that have authorized by ordinance or resolution a program administrator to administer the C-PACE program. Further, only five categories of qualifying improvements, as defined in Florida Statutes Section 163.08(4)(b), are eligible for financing: waste system improvements; resiliency improvements; energy conservation and efficiency improvements; renewable energy improvements; and water conservation efficiency improvements. Clearing those hurdles, the property’s owner of record must submit an application to the authorized program administrator, who then must conduct statutorily prescribed due diligence and issue required disclosures before entering into the financing agreement. Meanwhile, the owner must provide notice of its intent to access C-PACE financing to any existing lienholders and/or loan servicers. For owners seeking C-PACE financing in jurisdictions that have yet to authorize a program, resources such as the Department of Energy’s C-PACE Toolkit and PACENation’s data library can help provide a roadmap for convincing local policymakers to authorize C-PACE in their area.

Collections, Delinquency and Foreclosure of C-PACE Assessments in Florida

Per Florida Statutes Section 163.082(1)(e), C-PACE assessments are collected on the real property tax bill, i.e., “on-roll” under the Uniform Method of Collection. As a result, their treatment is nearly identical to that of property taxes with one important exception: C-PACE assessments are not eligible for a discount for early payment. Despite this distinction, C-PACE assessments carry the same lien priority and enforcement mechanism as property taxes. In the event of a C-PACE assessment delinquency, only the unpaid past-due assessment is due and owing; the future obligation to pay assessments is not accelerated. The tax collector then issues a tax certificate on the delinquent amount for investors to purchase, with interest accruing thereon until redeemed by the owner. If the delinquency remains unresolved for two years, the certificate holder may apply for a tax deed sale, at which point the property may be sold through a tax deed sale wiping out junior lien interests.

Bankruptcy Considerations

C-PACE financing is secured by a lien on the property that functions similarly to ad valorem property taxes due to its priority status commonly referred to as “super priority.” As a default rule, C-PACE obligations are first-priority liens superior to other claims against the property, including first-priority mortgages and subsequently recorded liens. However, unlike traditional debt, C-PACE loans cannot be accelerated; therefore, only the currently due and delinquent amounts owed under the C-PACE financing are debts that are addressed in the bankruptcy. The remaining C-PACE obligations that have not been assessed would be treated in the ordinary course as they accrue—similar to future tax assessments that would remain secured by the property as they are assessed. Thus, the first-position mortgage lender’s secured claim would only be primed by the amounts currently due and owing for the C-PACE financing, and not by the unassessed amounts that will come due in the future.

Key Takeaways

While C-PACE financing offers attractive benefits for owners and operators, including nonrecourse, fixed-rate financing with no personal liability and the ability to seamlessly transfer the debt obligation upon conveyance of the property, potential drawbacks such as an increased need for lender approvals and possible challenges in secondary market financing should not be overlooked. Nevertheless, in Florida, the statutory framework that governs C-PACE delinquencies and bankruptcy limits acceleration and preserves flexibility for borrowers, reinforcing the increasing popularity of this unique financing mechanism across the Sunshine State.

Reprinted with permission from the September 8, 2025 edition of the Daily Business Review © 2025 ALM Global Properties, LLC. All rights reserved. Further duplication without permission is prohibited, contact 877-256-2472 or [email protected].