Oppotunities for PACE Contractors

If you haven’t heard of PACE yet, it won’t be long.

PACE stands for Property Assessed Clean Energy. It’s a new way to finance clean energy improvements and works with almost any property – residential, commercial or industrial. Most states now have a PACE program for commercial properties. California’s new (October 4, 2017) PACE program is likely to become a model for residential clean energy financing in other states.

Here’s how PACE works. First, find an owner who needs clean energy property improvement. The job could be better insulation, a cool roof, seismic or hurricane retrofit, solar photovoltaic, upgrading to more efficient windows or HVAC. May types of work qualify.

 

Then pitch PACE: 100% of the cost will be financed by a loan attached to the property, not the owner. There’s no up-front cost to the owner. The loan is repaid over 5 to 25 years through tax assessments on the property. If the property is sold before the loan is paid in full, the seller pays only for benefits to the date of sale. If done wisely, improvements will reduce energy costs enough to cover the extra taxes.

Residential PACE programs depend on contractors to sell the concept. Nothing happens until a contractor suggests PACE financing for clean energy home improvement.

Selling with PACE

Once you’ve settled on the scope of work and the price, write a contract for the job with Construction Contract Writer. Then draft an assessment contract for approval by a PACE lender. Three days after financing is approved, you’re free to start work. You get paid directly by the lender.

As you might expect, PACE contracting comes with some limits. For example, in California:

• The bid price has to be the same as if the owner were paying cash.
• The contractor has to meet requirements for licensing, permit and business registration.
• Utility savings aren’t guaranteed and won’t affect the extra amount due on property taxes.
• Owners with a recent bankruptcy aren’t good candidates for PACE financing.
• The lender will call the owner to verify full understanding of the assessment contract.
• The owner has three days to cancel the job after an assessment contract is approved.
• Any claim about deductibility of construction cost has to be based on state and federal law.
• The lender can underwrite training expense for contractors but can’t offer any other incentive.
• As with any loan, the owner has to meet income and ability-to-pay standards.

Interest rates for PACE loans are usually a few percent higher than traditional mortgage loans. Administrative fees can add another 5%. But PACE financing rates compare favorably with rates for credit card loans or line of credit loans.

If financing prevents closing a clean energy deal, find a PACE lender authorized to approve assessment contracts in your community. Click here to see a good selection of PACE lenders.