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C-PACE Financing a New Option When Undertaking Clean Energy Upgrades

Commercial Lending Bulletin

Has your borrower asked you to subordinate your loan to C-PACE financing? Have you then had to Google “C-PACE” to discover what they are talking about?

C-PACE, which stands for “Commercial Property Assessed Clean Energy,” is a government financing program that classifies energy saving upgrades as a public benefit, such as water and sewer projects, and therefore allows the cost of the energy upgrades to be funded by private capital and repaid as an assessment on the borrower’s property tax bill, similar to WSSC's front foot benefit charge assessment. The District of Columbia and most Maryland counties have legislation authorizing C-PACE tax assessment financing.

Examples of energy upgrades include new energy efficient windows, heating and cooling systems, solar panels, and even a green roof.

The lender is not actually subordinating its lien priority. Rather, the lender is consenting to a greater property tax bill. Secured lenders on a property seeking C-PACE financing are asked to consent to the C-PACE assessment, which will increase the real estate tax bill paid by the borrower. Your LTV will not be impacted, however, the borrower’s DSCR will be impacted because the increased assessment reduces net income.

Larry Lerman is a commercial transactions attorney who closes deals for real estate owners and investors, banks, and other businesses throughout the Washington metropolitan area. He structures and documents complex commercial lending arrangements and represents parties who are buying, selling, leasing, and financing commercial real estate. If you would like more information about the C-PACE program or if you are asked to sign a C-PACE consent form, please contact Larry at 301-657-0163 or

This content is for your information only and is not intended to constitute legal advice. Please consult your attorney before acting on any information contained here.


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