By: Linnea Miller

In recent years, Property Assessed Clean Energy (“PACE” or “C-PACE” for commercial properties) programs have emerged across the country as a powerful tool for financing energy efficiency—from energy-efficient HVAC systems and lighting retrofits to solar panels and water conservation measures.[1] PACE financing provides property owners with the capital needed for substantial upgrades and also allows the repayment to be spread over an extended period—often up to twenty years or more.[2] PACE legislation is not universal across the country because most PACE financing is tied to the property rather than the individual owner and requires the local tax authority to include a PACE assessment as a line item on the property’s tax bill.[3] The resulting agreements are akin to a loan agreement, but one in which the local government assigns a lien and right to collect assessments to pay back to the C-PACE lender.[4] Despite its growing popularity across the country, especially among capital-seeking real estate developers, the PACE program in Florida has received significant legal backlash in recent years, prompting a much-needed legislative overhaul of the state program.[5]

Although commercial developers have only recently begun showing a growing interest in C-PACE, driven by a combination of factors (increasing awareness of environmental issues, the financial incentives offered by energy-efficient upgrades, and continuing real estate market uncertainty post-COVID), the Florida PACE Funding Agency (or “Florida PACE”) was established over thirteen years ago.[6] Florida PACE was amended in 2017 to establish a separate legal entity, public body, and unit of local government, designed to “insulate local governments from liability and the heavy use of staff time for such a voluntary program.”[7] However, ambiguities in the state’s legislation led to the program’s recent embroilment with regulatory and legal complications. After Florida PACE attempted to order county tax collectors to force the sale of properties whose assessments were not collected, several county tax collectors across the state refused, arguing that the program had no jurisdiction to operate—and thus collect assessments—in their particular counties.[8] This consolidated matter is now before the Florida Supreme Court in Alachua County Tax Collector, et al. v. Florida PACE Funding Agency, et al.[9]

In an attempt to clarify Florida PACE’s jurisdiction to operate in certain Florida counties and cities, the Florida state legislature passed Senate Bill 770: Improvements to Real Property on July 1, 2024.[10] The Appellants’ brief filed on August 22, 2024, argued that this recent legislation further supports its position that assessments imposed in certain counties are unenforceable. Consequently, the tax collectors of those counties “cannot be ordered to force the sale of homestead properties due to loans that were imposed in violation of homeowners’ due process rights to a local notice and local hearing.”[11] In conclusion, PACE financing operates within a framework of state and local regulations, which varies significantly from state to state (or, as seen in Florida, from county to county). This patchwork of regulations presents challenges for businesses and legal professionals working across different jurisdictions. It is crucial to stay compliant with diverse requirements to avoid legal pitfalls and ensure the successful implementation of PACE projects, including any projects involving commercial real estate development.

Though Florida Senate Bill 770 authorizes current PACE agreements with counties or municipalities to continue without additional action, this new legislation’s impact will soon be seen across the state. Bill 770’s main impact on commercial developers is an added layer of oversight, required for both residential and commercial PACE financing. This new operational framework will require a list of findings and disclosures to be made prior to executing a financing agreement, including one’s ability to pay the loan. Laws like this raise hope that PACE financing will continue in Florida, enhancing the climate resilience of its structures while protecting consumers and ensuring the transparency and efficiency of the state’s PACE programs.

[1] Ankit Shrivastava & Kinnon McDonald, Green Financing and Tax Incentives for the Commercial Real Estate Industry, ArentFox Schiff (Apr. 12, 2023), https://www.afslaw.com/sites/default/files/2023-04/Green-Financing-and-Tax-Incentives-for-the-Commercial-Real-Estate-Industry.pdf.

[2] Id.

[3] Id.

[4] Ryan W. Hanofee et al., C-PACE Financing: Exploring the Benefits and Risks, Morgan Lewis (Apr. 1, 2024), https://www.morganlewis.com/pubs/2024/04/c-pace-financing-exploring-the-benefits-and-risks.

[5] Seth Johnson, Florida amends PACE program as cases continue at state Supreme Court, Main St Daily News (July 2, 2024, 4:37 PM), https://www.mainstreetdailynews.com/govt-politics/florida-amends-pace-program.

[6] Agency Governance, Fla. PACE Funding Agency, https://floridapace.gov/agency-charter/#:~:text=Agency%20%20Governance,%20for%20such%20a%20voluntary%20program (last visited Sept. 11, 2024).

[7] Id.

[8] Seth Johnson, PACE agency looks to Supreme Court to settle tax collector roadblock, Main St Daily News (Oct. 30, 2023, 6:40 PM), https://www.mainstreetdailynews.com/news/pace-agency-looks-to-supreme-court-to-settle-tax-collector-roadblock.

[9] Alachua County, Florida, et al. v. Florida Pace Funding Agency, Fla. App. Case Info. Sys.,

https://acis.flcourts.gov/portal/court/68f021c4-6a44-4735-9a76-5360b2e8af13/case/148E763E-AE07-4AB1-BED0-0829DC856626 (last visited Sept. 7, 2024, 11:20 PM).

[10] 2024 Fla. Laws 770.

[11] Brief for Appellants at 22, Alachua Cnty. Tax Collector v. Florida PACE Funding Agency (2024) (No. SC2024-0652).