PACE Financing Faces Comprehensive Regulation
Monday, September 18, 2017
Legislation supported by Governor Brown will enact new PACE financing regulatory provisions under the California Finance Lenders Law and have specific requirements for persons soliciting PACE loans. Assembly Bill 1284 (Dababneh), defines both a “PACE solicitor” and a PACE “Program Administrator.” The bill also defines a PACE “assessment contract” as an agreement entered into between all property owners of record on real property and a public agency in which, for a voluntary contractual assessment imposed on the real property, the public agency provides a PACE assessment for the installation of one or more property improvements in accordance with a PACE program. The bill is an urgency measure and will become effective immediately when signed by the Governor. However, several important provisions of the bill have delayed operative dates. Commencing April 1, 2018, program administrators are required to make a good faith determination that a property owner has a reasonable ability to pay the PACE assessments. Commencing January 1, 2019, the bill’s licensure provisions for PACE program administrators and solicitors will go into effect.
A PACE program administrator would be regulated by the California Department of Business Oversight when offering financing secured by a property tax lien. The bill represents a comprehensive regulatory scheme for PACE financing designed to protect consumers. While the tax assessment nature of the PACE financing remains unchanged, the entire industry will now be brought under heightened regulatory scrutiny and licensing requirements.
A PACE solicitor acting on behalf of a PACE program administrator must comply with the new regulatory requirements and any rules adopted by the Commissioner of the Department of Business Oversight. The program administrator must also make sure that the solicitor has a pre-determined minimum net worth and must conduct a background check with the Contractor’s State License Board. A PACE solicitor is prohibited from acting on behalf of a program administrator in soliciting a property owner to enter into an assessment contract without complying with the new law and any rules adopted by the Commissioner.
See CLTA News Express 2017/18-23 for additional information.