Wrapping Up 2017

Dear Members,

This is my last email for 2017. It’s been a GREAT year here at The Fund and I hope you have had a good year as well. Best wishes for the holiday season! I look forward to the challenges 2018 will bring and will do everything I can to make it another great year for Fund Members.

PACE Agreement Pay-Off Issues

Property Assessed Clean Energy programs (PACE) provide funding for certain energy efficiency and wind resistance improvements desired by homeowners. The funding is paid back through a non-ad valorem assessment on the owner’s real property tax bill.

The way in which PACE loans are paid off has a few unique twists, creating issues for some Members post- closing. These issues have come to light since the September 2017 Concept article on the topic. You can read the full article here.

Some PACE assessments are not reflected in the owner’s TRIM Notice, but do show up on the tax bill when issued in November. PACE assessments may be delayed for up to 18 Months – projects funded before June 30 generally appear on the current year’s tax bill and those funded on or after July 1 will typically appear on the NEXT year’s tax bill.

• The consensus is that the annual PACE assessment should not be prorated, but charged 100% to the seller. Some non-ad valorem assessments are prorated but this is because they are for on-going services (e.g., wastewater, garbage collection). PACE assessments are different because they are paying back monies used for improvements made to the home.
• If the new lender requires you to escrow the taxes for the year of closing, you will be short in November if you don’t inquire about the PACE assessment and collect for it.
• Obtain information from the Seller (or PACE servicer) about the payment schedule so that the PACE amount can be properly calculated. This step is necessary because the payoff from the PACE servicer may not include the amount of the first assessment (which is scheduled to be paid/collected with the current year’s tax bill in November.)
• Require the buyer and seller to execute a re-proration/post-closing adjustment agreement for both ad valorem and non-ad valorem taxes to address the possibility that a proration or charge is inaccurately calculated.

Correspondence from PACE administrators indicates that the final release of lien (satisfaction of the PACE Agreement) will not be recorded until the property tax payment window closes in March and taxes are confirmed paid. This could result in a significant delay in getting the release.

FHA recently changed its course and will no longer insure mortgages on properties where there is an outstanding PACE assessment/loan. The concerns come from loss of priority for mortgages (PACE assessments come ahead of mortgage just like property taxes) and the lack of appropriate disclosures to the consumer/property owner before they enter into the PACE agreement. I am not sure what this all means from a day to day perspective. If this is FHA’s policy, then it seems to me PACE assessments will have to be paid off at closing if there is an FHA mortgage involved, i.e., the buyer will not be able to “assume” the PACE assessment.

Legislative Session

The 2018 legislative session kicks off on January 9. There is a fair amount going on – I hear that the atmosphere in Tallahassee is tense and there is not much collegiality amongst the troops. Regardless, we are keeping our eyes on legislation regarding the Marketable Record Title Act (expanding the exception for certain types of covenants), limits on promotional items an insurance agent can give away, safe-harbor language for deeds containing a spousal waiver of their homestead rights, and remote/on-line notarization. It is this latter bill that will most dramatically affect your day to day practice.

Let me know how we can help you!

Best Regards,
Melissa Jay Murphy
Senior Vice President and General Counsel