Transferring PACE Assessments Upon Home Sale

A significant barrier to investing in renewable energy and comprehensive energy efficiency improvements to homes across the country is the initial capital cost. Property Assessed Clean Energy (PACE) financing is one of several new financial models broadening access to clean energy by addressing this upfront cost issue. Recently, the White House cited PACE programs as an important element of its "Recovery through Retrofit" plan. The residential PACE model2 involves the creation of a special clean energy financing district that homeowners elect to opt into. Once opted in, the local government (usually at the city or county level) finances the upfront investment of the renewable energy installation and/or energy efficiency improvements. A special lien is attached to the property and the assessment is paid back as a line item on the property tax bill. As of April 2010, 17 states have passed legislation to allow their local governments to create PACE programs, two already have the authority to set up PACE programs, and over 10 additional states are actively developing enabling legislation. This policy brief analyzes one of the advantages of PACE, which is the transferability of the special assessment from one homeowner to the next when the home is sold. This analysis focuses on the potential for the outstanding lien to impact the sales negotiation process, rather than the legal nature of the lien transfer itself.