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North Carolina Joining the Race to C-PACE

by Amanda Sherin, Poyner Spruill on

Commercial Property Assessed Clean Energy (C-PACE) is a program that allows commercial property owners to finance clean energy improvements such as energy efficiency upgrades, water conservation, renewable energy installations and analogous projects. Below is a brief overview of the key components of the C-PACE program:

  1. Property Tax Assessment: C-PACE payments are made through a voluntary property assessment and secured by a lien on the property. Since property taxes and assessments typically have high rates of payment and are secured by liens prior to virtually all other liens, property owners may be able to negotiate lower interest rates.
  2. Longer Terms and Lower Payment Amounts: The property owner benefits from longer payback periods (typically 10-30 years) and, therefore, lower payment amounts.
  3. Transferability: The C-PACE assessment attaches to the property, rather than the owner. When the property is sold, the obligation to make the C-PACE payments is transferred to the new owner. If the new owner refuses to accept the transfer, the seller would need to pay off the outstanding C-PACE balance prior to the closing of the sale. The ability to transfer the assessment and the corresponding payments incentivizes property owners to make energy efficient improvements even when they do not plan to own or occupy the property long-term.
  4. Lender Consent: For mortgaged properties, consent from the mortgage lender to the C-PACE financing and the corresponding lien is typically required. This is likely one of the largest hurdles a property owner will face in seeking C-PACE financing since the C-PACE lien will have priority over a mortgage lien and mortgage lenders typically do not allow for additional debt.
  5. Availability: C-PACE financing is only available in jurisdictions with enabling legislation. Local governments in the state then need to adopt an ordinance or resolution opting to participate in the state program. As of the end of 2024, 39 states and Washington D.C. had enacted enabling legislation and 33 states and Washington D.C. had active C-PACE programs.
  6. Priority of C-PACE Lien: The C-PACE assessment is only given priority for any current or delinquent amount due.

C-PACE Expected to be Available in NC in 2025

As mentioned, C-PACE must be authorized by state legislation and subsequently adopted by local governments. On July 8, 2024, Governor Roy Cooper signed Senate Bill 802[1] into law. The bill names The North Carolina Department of Commerce (NCDOC) as “Program sponsor” and The Economic Development Partnership of North Carolina (EDPNC) as “Statewide administrator”. These two entities are currently working to develop and activate the state’s C-PACE Program. The first step in the process is for EDPNC to create a C-PACE toolkit that sets forth the guidelines, application criteria and other program details. Once the toolkit is reviewed and approved by the NCDOC, North Carolina local governments that seek to participate will need to adopt a resolution authorizing the use of the C-PACE tool. Once these steps are complete, commercial property owners may begin submitting applications to be approved by EDPNC. It is expected that the North Carolina C-PACE program will be active in some local jurisdictions in early 2025.

[1] https://www.ncleg.gov/EnactedLegislation/SessionLaws/PDF/2023-2024/SL2024-44.pdf

Amanda Sherin, Partner with Poyner Spruill LLP in Raleigh, works with lenders, corporations, and other entities on a variety of loans, deals, and business transactions. She also assists companies with corporate governance and compliance, mergers and acquisitions, business entity formations, and general corporate and contractual matters.