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Realtors: Do You Understand Recent Changes to PACE?

Nov. 30, 2017


By Don Knapp

Back in early October 2017, Gov. Jerry Brown signed into law two bills designed to tighten consumer protections for property assessed clean energy financing, or PACE. The legislation—widely supported by local elected officials, business associations, and community-based nonprofits including Build It Green—makes PACE a stronger, safer financing option for new and existing homeowners.

As a real estate professional, are you up to speed on these changes to PACE and what they mean for your clients? Build It Green is here to provide you with information from multiple sources. Start with this Los Angeles Times overview of the two bills. Or, read the full bill text for AB 1284 and SB 242.

The PACE provider, Renovate America, also provided a fact sheet that detailed the key changes and safeguards put in place, which affect how PACE can be delivered to homeowners. BIG has excerpted this fact sheet text below.

Key Changes to PACE: SB 242

SB 242 (Skinner-Dababneh), approved by both the Senate and the Assembly and signed by Governor Brown, will establish state-of-the-art consumer protections, further setting PACE apart from other form of financing. The legislation:

  • Requires a recorded, live, confirmation of terms call between the PACE provider and property owner before they sign their assessment contract, as a reinforcement to the written disclosures;
  • Requires that PACE providers who undertake the confirmation of terms call with a property owner in one of the five major non-English languages in California – Spanish, Chinese, Korean, Tagalog and Vietnamese – also provide the property owner with their contractual documents in that language.
  • Establishes an expanded “right to cancel” for a property owner using PACE, enabling the property owner to cancel their separate home improvement contract if they cancel their PACE financing within their three-day right to cancel – protecting them from being obligated to pay for a project without a viable means of financing.
  • Establishes a ban on compensating contractors beyond the cost of the home improvement project, as well as prohibiting paying for contractor co-marketing and limiting contractor reimbursements to $100 for bona fide training expenses.
  • Requires contractors to quote a property owner the same price as cash for a home improvement project using PACE financing.
  • Prevents PACE providers from disclosing to contractors the amount of funds the property owner is eligible for under a PACE assessment.
  • Establishes data reporting requirements to local government partners, including data that speaks to the projected energy and water savings and local economic and job impacts, as well as on categories of products installed and homeowners served.

Key Changes to PACE: AB 1284

AB 1284 (Dababneh-Skinner-Calderon), also approved by both chambers and signed by Governor Brown, will significantly enhance PACE underwriting, regulate PACE at the state level, and enforce compliance with all PACE laws by PACE administrators and individual contractors. The legislation:

  • Strengthens and standardizes the current underwriting standards in PACE based on home equity and on-time mortgage and tax payment history; and requires that the most accurate Automated Valuation Models are used for establishing the value of the home.
  • Establishes new underwriting standards predicated on income verification and ability-to-pay to determine that property owners can meet their annual PACE obligation in addition to their current debt obligations and basic household expenses.
  • Establishes a licensing and regulatory framework for the PACE industry in California, which will be subject to oversight by the California Department of Business Oversight (DBO).
  • Requires PACE providers to undergo background investigations and satisfy net worth requirements in order to obtain a license.
  • Requires PACE providers to enroll and train home improvement contractors and their individual sales reps; and holds PACE providers accountable for screening and monitoring the contractors and individual sales reps enrolled in their programs.
  • Empowers the DBO with enforcement authority to take action against PACE providers who do not meet their obligations to promote the interests of consumers, which includes prohibiting
  • PACE providers from working with contractors or individual sales reps who engage in activity harmful to consumers.

A Broad Coalition of Support

The following groups and elected officials have voiced support for this new PACE legislation:

Businesses and Business Associations

  • Bay Area Council (1284)
  • CalAsian Chamber of Commerce
  • California Association of County Treasurers and Tax Collectors (1284)
  • California Bankers Association (1284)
  • California Building Industry Association
  • California Business Properties Association
  • California Chamber of Commerce (1284)
  • California Credit Union League (1284)
  • California Escrow Association (1284)
  • California Hispanic Chamber of Commerce (1284)
  • California Land Title Association (1284)
  • California Mortgage Bankers Association (1284)
  • Dividend Finance
  • Energy Efficient Equity (1284)
  • National Federation of Independent Business
  • Orange County Business Council (1284)
  • Owens Corning
  • PACENation
  • Renew Financial
  • Renovate America
  • TechNet (1284)
  • United Trustees Association (1284)

Local Government Organizations

  • California League of Cities
  • California State Association of Counties
  • Local Government Commission
  • Los Angeles County
  • Rural County Representatives of California (242)
  • South Bay Cities Council of Governments (242)
  • Southern California Association of Governments (242)
  • Western Riverside Council of Governments (242)
  • Local Governments and Elected Officials
  • Supervisor Scott Haggerty, County of Alameda
  • Councilmember Willie Rivera, City of Bakersfield
  • Councilmember Juan Garza, City of Bellflower
  • Mayor Jesse Arreguin, City of Berkeley
  • Councilmember Ben Bartlett, City of Berkeley
  • Councilmember Kate Harrison, City of Berkeley
  • Vice Mayor Linda Maio, City of Berkeley
  • Councilmember Jesus Escobar, City of Calexico
  • Councilmember Armando Real, City of Calexico
  • Councilmember Jawane Hilton, City of Carson
  • Councilmember Dee Andrews, City of Long Beach
  • Councilmember Roberto Uranga, City of Long Beach
  • Councilmember Mitchell Englander, City of Los Angeles
  • Mayor Pro-Tem Jose Solache, City of Lynwood
  • Supervisor Dave Rogers, County of Madera
  • Councilmember Steve Napolitano, City of Manhattan Beach
  • Supervisor Kathrin Sears, County of Marin
  • Councilmember Greg Raths, City of Mission Viejo
  • Councilmember Tony Madrigal, City of Modesto
  • Councilmember David Pollock, City of Moorpark
  • Supervisor Brad Wagenknecht, County of Napa
  • Councilmember Dan Kalb, City of Oakland
  • Councilmember Abel Guillen, City of Oakland
  • Deputy Mayor Chuck Lowery, City of Oceanside
  • Mayor Victor Lopez, City of Orange Cove
  • Mayor Jan Harnik, City of Palm Desert
  • Councilmember Tonya Burke, City of Perris
  • Vice Mayor Teddy Gray King, City of Piedmont
  • Councilmember Diane Williams, City of Rancho Cucamonga
  • Councilmember Jon Harrison, City of Redlands
  • Councilmember Christian Horvath, City of Redondo Beach
  • Councilmember Laura Emdee, City of Redondo Beach
  • Mayor Thomas Butt, City of Richmond
  • Councilmember Margaret Clark, City of Rosemead
  • Supervisor Sue Frost, County of Sacramento
  • Councilmember Steve Hansen, City of Sacramento
  • Councilmember Tony Barrera, City of Salinas
  • Councilmember Chris Cate, City of San Diego
  • Mayor Kevin Faulconer, City of San Diego
  • Council President Pro Tem Mark Kersey, City of San Diego
  • Councilmember Chris Ward, City of San Diego
  • Councilmember Deborah Cox, City of San Leandro
  • Councilmember Chris Orlando, City of San Marcos
  • Councilmember Stephen Houlahan, City of Santee
  • Councilmember Jewel Edson, City of Solana Beach
  • Councilmember Jorge Morales, City of South Gate
  • Board Supervisor Kristin Olsen, County of Stanislaus
  • Mayor Pro Tem Michelle Martinez, City of Santa Ana
  • Mayor Ed Wilson, City of Signal Hill
  • Councilmember Ben Benoit, City of Wildomar
  • Mayor Stan Henry, City of Cathedral
  • City Councilmember Randall Stone, City of Chico
  • Mayor Mary Salas, City of Chula Vista
  • Mayor Pro Tem Emmanuel Martinez, City of Coachella
  • Councilmember Emma Sharif, City of Compton
  • Mayor Jorge Marquez, City of Covina
  • Councilmember Clint Lorimore, City of Eastvale
  • Councilmember Dianne Martinez, City of Emeryville
  • Councilmember Mark Henderson, City of Gardena
  • Supervisor Ryan Sundberg, County of Humboldt
  • Supervisor Mike Wilson, County of Humboldt
  • Councilmember George Nava, City of Brawley
  • Board of Supervisors, County of Imperial
  • Councilmember Mark West, City of Imperial Beach
  • Councilmember Glenn Miller, City of Indio
  • Councilmember Ralph Franklin, City of Inglewood
  • Mayor Pro Tem Tim Shaw, City of La Habra
  • Councilmember Colin Parent, City of La Mesa
  • Vice Mayor Aleksandar Tica, City of Live Oak
  • Councilmember Jim Gazeley, City of Lomita
  • Mayor Mark Waronek, City of Lomita
  • Councilmember Jeannine Pearce, City of Long Beach

Clean Energy/Environmental Organizations

  • Advanced Energy Economy
  • Brightline Defense
  • Build It Green
  • California Energy Storage Association
  • California Solar Energy Industries
  • Association (CALSEIA)
  • Center for Sustainable Energy
  • Cleantech San Diego
  • Climate Action Campaign
  • Efficiency Demand Management Council (242)
  • Environmental Defense Fund
  • League of Conservation Voters California (242)
  • Natural Resources Defense Council
  • Sierra Club California
  • Vote Solar