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MD C-PACE Program: A New Financing Tool for Property Owners and Developers

Owners and developers of commercial property in Maryland considering energy-related improvements should consider using a new financing method offered through the Maryland Commercial Property Assessed Clean Energy (C-PACE) program, currently available in half of Maryland’s jurisdictions.

Through C-PACE, loans used to finance eligible energy projects on commercial properties are repaid over an extended term through surcharges on the property tax bill, with the payment obligation passing with the property when sold. Consequently, C-PACE loans typically require little or no down payment, provide long repayment periods and enjoy relatively low interest rates, making eligible energy saving improvements and construction projects more attractive and cost-effective for property owners. Moreover, while many county C-PACE programs have selected designated lending partners experienced in originating C-PACE loans, a property owner may work with any private finance source it chooses.

The law authorizes counties and municipalities to establish “clean energy loan programs” that permit private loans used to finance “energy efficiency” and “renewable energy projects” on “commercial property” (all defined terms in the legislation or implementing ordinances) to be repaid through surcharges on the owner’s property tax bill.

“Commercial property” is defined broadly as “real property that is:

  1. not designated principally or intended for human habitation; or
  2. used for human habitation and is improved by more than four single family dwelling units.”

Instead of prescribing qualifying energy efficiency and “enewable energy projects, C-PACE leaves local jurisdictions to establish their own eligibility standards. Depending on the program, nonprofit, industrial, multifamily residential and agricultural property may qualify as commercial property eligible for C-PACE.

Parameters vary for each program and include:

  • The category and size of the energy efficiency and renewable energy projects,
  • The qualifying costs for the project,
  • The type of commercial property,
  • The type of property ownership,
  • The amount of the loan and total amount of debt on the property, and
  • The required loan terms and conditions.

Each C-PACE program must also consider the applicant’s ability to repay the loan when evaluating eligible projects.

As noted, C-PACE loans are unique: although originated by private lenders, payments are collected by the county or municipality as a surcharge on the property owner’s tax bill for extended terms of up to 20 years. Like unpaid property taxes, unpaid C-PACE surcharges constitute a first lien on the property, in the amount of surcharge due, from the date it became payable. If the property is transferred, the C-PACE loan, and the lien on the property, continues; future owners assume the obligation to pay the C-PACE surcharges until the loan is repaid in full. However, because of the first priority given to unpaid C-PACE surcharges, the express consent of any mortgagee or beneficiary of a deed of trust on the property at the time the C-PACE loan is originated is required before a C-PACE loan may be collected as a surcharge on the tax bill.  

The distinctive features of C-PACE loans make them less risky to lenders than typical loans since they represent a form of secured lending with priority over all other private liens on the property. Because of the reduced risk to the lender, C-PACE loans typically offer lower interest rates and require a smaller down payment, if any. Depending on the county or city in which the property is located, a C-PACE loan can also finance related costs necessary for installation of the energy improvement (e.g., regulatory compliance costs, engineering and feasibility studies, and labor and materials for ancillary construction).  

Presently, the following Maryland jurisdictions have enacted C-PACE ordinances: Baltimore City and the counties of Montgomery, Baltimore, Harford, Garrett, Allegany, Anne Arundel, Howard, Charles, Kent, Queen Anne’s and Talbot. C-PACE loans have actually been issued to fund projects in Montgomery and Kent counties.   

For Maryland property owners and developers considering improving the energy efficiency of, or introducing renewable energy to, their properties, Gordon Feinblatt lawyers can help determine whether C-PACE is a viable financing option and can assist in navigating the application and closing process.

For questions, please contact Edward J. Levin.


Edward J. Levin
410-576-1900 •