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Property Assessed Clean Energy (PACE) programs provide property owners in California with a unique financing mechanism for energy efficiency improvements, renewable energy installations, water conservation upgrades, and related property enhancements. Unlike traditional loans, PACE financing is repaid through an assessment on the owner's property tax bill, creating a repayment obligation that runs with the property rather than the borrower. Since the enactment of AB 1284 in 2017, the companies that administer these programs on behalf of public agencies have been required to obtain a PACE Program Administrator License from the Department of Financial Protection and Innovation (DFPI) under the California Financing Law. The Law Offices of Alan Abergel, P.C. (LOAA) represents PACE program administrators, PACE solicitors, and PACE solicitor agents in all aspects of DFPI licensing, regulatory compliance, document drafting, and defense in enforcement proceedings. LOAA does not represent consumers. The firm represents the companies and individuals that operate within the PACE industry.
PACE programs originated as a public-sector initiative to encourage property owners to invest in energy efficiency and renewable energy improvements that they might otherwise defer due to upfront cost barriers. The program structure begins with a local public agency — typically a city, county, or municipal utility district — adopting a resolution to create or join a Joint Powers Authority (JPA) that authorizes the creation of a PACE loan program within the agency's jurisdiction. The JPA may administer the program directly or, more commonly, contract with a private entity to administer the program on the JPA's behalf.
Under a PACE arrangement, a property owner applies for financing to cover the cost of qualifying improvements, which may include solar panel installations, energy-efficient windows and insulation, HVAC system upgrades, cool roofing, water-efficient landscaping, seismic strengthening, and other improvements that meet the program's eligibility criteria. Once approved, the financing is provided and the repayment obligation is recorded as a voluntary assessment on the property's tax bill. The property owner repays the financing through their regular property tax payments over a term that typically ranges from five to twenty-five years. Because the assessment is attached to the property, it transfers to new owners if the property is sold before the assessment is fully paid — a feature that distinguishes PACE financing from conventional consumer credit and that has generated significant regulatory and consumer protection scrutiny.
PACE programs are available in most areas of California for both residential properties of one to four units and commercial properties. While the name references clean energy, the scope of eligible improvements has expanded over time to include water conservation measures and, in some programs, seismic retrofit work. The commercial PACE market (C-PACE) operates under a somewhat different regulatory and market dynamic than the residential PACE market (R-PACE), though both are subject to DFPI oversight of the program administrators that manage them.
On October 4, 2017, Governor Jerry Brown signed AB 1284 (Chapter 475, Statutes of 2017) into law, establishing a licensing scheme for PACE program administrators under what is now known as the California Financing Law. AB 1284 also renamed the former California Finance Lenders Law as the California Financing Law, reflecting the expanded scope of the statute to encompass PACE program administration in addition to traditional consumer and commercial lending activities.
Under the licensing framework established by AB 1284, a "program administrator" is defined as a person administering a PACE program on behalf of a public agency. The DFPI administers the PACE Program Administrator License, and any person administering a PACE program on behalf of, and with the written consent of, a public agency must hold this license. The statute imposes requirements on program administrators regarding their financial condition, operational capabilities, compliance infrastructure, and the qualifications of their personnel.
AB 1284 also established regulatory definitions and requirements for two additional categories of PACE industry participants: PACE solicitors and PACE solicitor agents. A PACE solicitor is an organization authorized by a program administrator to solicit a property owner to enter into a PACE financing agreement for efficiency improvements on the owner's property. Typically, a PACE solicitor is a contractor licensed by the Contractors' State License Board (CSLB). A PACE solicitor agent is an individual employed or retained by, or acting on behalf of, a PACE solicitor to solicit a property owner to enter into a PACE financing agreement. Typically, a PACE solicitor agent is a home improvement salesperson registered with the CSLB. These definitions created a regulatory chain that extends from the program administrator through the solicitor organizations and individual agents who interact directly with property owners in the field.
The DFPI PACE Program Administrator License application requires applicants to submit detailed information about their business operations, corporate structure, ownership and control, financial condition, and compliance infrastructure. The application is processed through the Nationwide Multistate Licensing System (NMLS), which provides a centralized platform for managing the license application and, once licensed, for maintaining ongoing compliance with reporting and renewal requirements.
Applicants must demonstrate that they have the financial resources, operational capabilities, and qualified personnel necessary to administer a PACE program in compliance with the California Financing Law and the DFPI's implementing regulations. The DFPI conducts background investigations on the applicant's officers, directors, and controlling persons, and may deny the application based on findings that raise concerns about the fitness or integrity of the persons who will manage or control the licensed entity. Surety bond requirements, minimum net worth thresholds, and other financial standards must be satisfied and maintained on an ongoing basis.
LOAA assists PACE program administrator applicants with every stage of the DFPI licensing process. The firm evaluates the applicant's readiness, identifies any issues that should be addressed before the application is submitted, assists in preparation of the application and supporting documentation.
Licensed PACE program administrators must maintain ongoing compliance with the California Financing Law and the DFPI's regulations governing PACE program administration. These requirements address virtually every aspect of the administrator's operations, from the solicitation and origination of PACE financing agreements through the servicing of those agreements and the handling of property owner complaints and disputes.
Consumer protection requirements are a central focus of the regulatory framework. PACE administrators must ensure that property owners receive accurate and timely disclosures about the terms of the financing, the total cost of the improvements and the financing, the impact of the assessment on the property's tax bill, and the consequences of nonpayment — including the potential for a tax lien sale of the property. The disclosure requirements reflect the legislature's concern that some property owners, particularly elderly and low-income homeowners, may not fully understand that PACE financing creates an obligation that runs with the property and takes priority over the mortgage in the event of a tax lien sale.
PACE administrators are also responsible for the conduct of their PACE solicitors and PACE solicitor agents. The administrator must establish and enforce standards for solicitor and solicitor agent conduct, ensure that solicitors and their agents are properly licensed or registered with the CSLB, and implement procedures for monitoring solicitor activities and addressing complaints about solicitor behavior. Administrators that fail to adequately oversee their solicitor networks face regulatory exposure for the acts of their solicitors and agents, making robust solicitor management a compliance priority.
LOAA advises PACE administrators on compliance with these requirements.
PACE program administration generates a substantial volume of legal documentation, from the agreements that govern the administrator's relationship with the JPA and the property owner to the contracts and disclosures that flow through the solicitor network. Each document must comply with the California Financing Law and, where applicable, with federal consumer protection requirements and local program rules established by the authorizing public agency.
LOAA drafts PACE financing agreements, property owner disclosures, right-to-cancel notices, solicitor authorization agreements, solicitor agent enrollment forms, and other documents that PACE administrators need to operate their programs in compliance with applicable law. The firm also prepares the internal compliance documents that the DFPI expects licensed administrators to maintain.
For PACE solicitors and solicitor agents, the firm drafts the agreements, disclosures, and operational documents specific to the solicitation function, ensuring that the solicitor's field activities are conducted in accordance with the program administrator's requirements, the California Financing Law, and the CSLB's licensing and registration requirements for contractors and home improvement salespersons. The documentation framework must be designed so that property owners receive consistent, accurate information about the PACE financing product regardless of which solicitor or agent they interact with — a goal that requires coordination between the administrator's legal documents, the solicitor's sales materials, and the training provided to solicitor agents in the field.
California PACE financing, depending on its structuring, may be subject to federal laws in addition to California laws.
California's legislative and regulatory treatment of PACE financing through the California Financing Law provides a state-level framework that addresses many of the consumer protection concerns that federal lending laws are designed to address, but the interplay between state and federal requirements remains an area where PACE administrators must exercise care. The Consumer Financial Protection Bureau (CFPB) has taken an active interest in the PACE industry, and its interpretive and enforcement positions regarding the applicability of federal consumer financial protection laws to PACE transactions continue to evolve.
LOAA advises PACE administrators on compliance with both state and federal lending and consumer credit laws as they apply to PACE financing. The firm helps clients analyze the regulatory characterization of their PACE products, assess the applicability of specific federal statutes and regulations, and develop compliance practices that account for regulatory uncertainty in areas where the law remains unsettled. For administrators that also hold a California Financing Law license for conventional lending activities, the firm provides integrated compliance guidance that addresses both the PACE and non-PACE components of their business.
PACE program administrators, solicitors, and solicitor agents are subject to regulatory enforcement by the DFPI and, depending on the nature of the alleged violation, by the Department of Real Estate (DRE), the CFPB, and other government agencies. The DFPI's enforcement authority over PACE licensees includes the full range of administrative tools: citations, fines, desist and refrain orders, license suspensions, license revocations, and accusations filed with the Office of Administrative Hearings (OAH). Statements of issues may be filed to challenge the issuance or renewal of a PACE administrator license when the DFPI identifies grounds for denial.
LOAA represents PACE program administrators, solicitors, and solicitor agents in all stages of DFPI enforcement proceedings, including responses to investigation inquiries, negotiation of corrective action, defense in administrative hearings before the OAH, and appeals of adverse administrative decisions. The firm also represents clients in DRE investigations and administrative proceedings where real estate-related PACE activities implicate the DRE's regulatory authority, and in CFPB investigations and enforcement actions involving alleged violations of federal consumer financial protection laws.
The PACE industry has attracted significant regulatory and political attention in California, driven in part by consumer complaints about aggressive solicitation practices, allegations that some property owners were enrolled in PACE financing without adequate understanding of the terms and consequences, and concerns about the impact of PACE assessments on low-income and elderly homeowners. This heightened scrutiny means that PACE administrators should anticipate active DFPI oversight and prepare for the possibility of regulatory inquiries and examinations. LOAA helps clients with licensing applications, compliance legal advice and document drafting and enforcement action defense.
Disclaimer: The information on this page is provided for general informational purposes only and does not constitute legal advice. No attorney-client relationship is created by reading this content. Every legal matter is unique, and you should consult directly with a qualified attorney regarding your specific circumstances.
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