The C-PACE lien: what happens if payments stop or the building is foreclosed

This is a walk through the C-PACE lien with the statutes open: what kind of lien it is, what happens when an instalment is missed, and what is left standing if your senior lender forecloses. Every rule below is attributed to the state or programme it comes from, and every source was checked on 20 October 2026.

If you are still working out whether C-PACE is debt at all, start with is C-PACE a loan?, which also covers what non-payment means for your accounts. This guide stays on the lien itself.

The short version

In all three statutes below, a C-PACE assessment is secured by a lien on the property. What makes it workable for a mortgage lender is the scope of the lien’s priority. In Maine’s statute, only the portion in arrears at foreclosure takes precedence over other liens, the lien cannot be accelerated, and the remainder transfers with the property. The CREFC Primer describes the same pattern as the general structure: only the currently due or delinquent portion is senior to the first lien.

Not every statute says this, and the details differ in ways that matter. The source of each rule — a statute, or only programme documents — is worth knowing before you sign.

What kind of lien it is, and where it sits

Three statutes, three ways of saying it.

Texas. Local Government Code section 399.014 says a contractual assessment and any interest or penalties on it is a first and prior lien against the real property from the date the notice of contractual assessment is recorded until it is paid, and has the same priority status as a lien for any other ad valorem tax. The same section says the lien runs with the land, and that the portion of the assessment not yet due is not eliminated by foreclosure of a property tax lien. Section 399.013 requires the local government to record a notice of each contractual assessment in the county’s real property records, including the amount, the legal description and a reference to the statutory assessment lien.

Maine. Title 35-A section 10205 says a commercial PACE assessment is a lien on the property until paid in full, and that filing a notice of the commercial PACE agreement in the registry of deeds creates the lien. On priority, the lien — together with associated interest, penalties, attorney’s fees and collection costs — takes precedence over all other liens or encumbrances except municipal real property taxes and liens of municipal sewer, sanitary and water districts. From the date of recording it is subject only to liens listed in specified other statutory sections. The statute then adds the condition that matters for anyone with a mortgage: priority over a lien that existed before the C-PACE lien is subject to the written consent of that existing lienholder.

Minnesota. Section 216C.436 of the Minnesota Statutes (2025 edition) requires the implementing entity to secure payment with a lien against the property and to collect repayments as a special assessment, payable in up to 30 equal annual instalments. It also requires that liability for the special assessments runs with the property.

All three statutes put your existing lender in the room before the lien exists. Texas section 399.010 requires written notice to the mortgage holder on or before the 30th day before the assessment contract is executed, plus the holder’s written consent. Maine requires the lender’s written consent before an assessment may be approved, filed in the registry of deeds. Minnesota requires notice to and written consent from the mortgage lender before any assessment is imposed. How that conversation goes is a separate guide: where C-PACE sits in the capital stack.

Non-acceleration: statute or contract?

Non-acceleration means that if you fall behind, the capital provider can pursue what is overdue, but cannot declare the whole remaining balance due. It is the feature that makes a senior lien tolerable to a senior lender. Where it comes from varies.

In some states it is statutory. Maine’s statute says the lien may not be accelerated or extinguished until fully repaid, and repeats that a commercial PACE assessment is not eliminated by foreclosure and cannot be accelerated. Minnesota’s statute requires every commercial PACE programme to provide that payments and assessments are not accelerated due to a default, and that a tax delinquency exists only for assessments not paid when due.

Elsewhere you may find it in the programme documents. Philadelphia’s C-PACE Program Guidelines, released 15 December 2025, state that the special assessment cannot be accelerated or extinguished until fully repaid, and that if a delinquent C-PACE lien is enforced, the outstanding balance will not accelerate.

And some statutes are silent. Texas Chapter 399 does not contain the word “accelerate”. It protects the not-yet-due portion against foreclosure of a property tax lien, but if you want a non-acceleration promise on a Texas deal, look for it in the local programme’s documents and your assessment contract, and have counsel confirm it.

The CRE Finance Council’s C-PACE Primer (file dated 7 January 2025) describes the market norm: non-accelerable in the event of default, but any amounts unpaid or delinquent at a particular moment prime the senior mortgage. Treat that as a description of how deals are usually built, not as the law in your state.

When an instalment is missed: Philadelphia, step by step

Philadelphia’s guidelines are unusually specific, so they make a useful worked example. These rules apply to Philadelphia C-PACE only; the guidelines say projects are governed by the version in effect when the project’s Statement of Levy and Lien Agreement is signed.

• December: the Philadelphia Energy Authority, the programme administrator, invoices the annual special assessment payment.
• 31 March: the payment is due in full.
• From 1 April: the payment is past due. Interest begins to accrue immediately at the City’s delinquency rate, which the guidelines describe as an additional incremental 1.5% per month. Penalties and interest are paid to the capital provider.
• The following January: the administrator records a lien on the property for the delinquent amount. It may try to collect before doing so.
• Enforcement: the assessment may be enforced in the same manner as real property taxes. It is not subject to the City’s tax lien sale process, but a C-PACE lien can be subject to a Sheriff’s sale.

Three further details are worth knowing. The guidelines say a C-PACE lien is not subject to discount for early payment and that no reduction or forgiveness will be granted. Before the capital provider is paid from recoveries, it must pay outstanding municipal liens such as gas, water or demolition liens. And collection costs incurred by the Program Administrator above the amounts recovered fall on the C-PACE lienholder.

Note what does not happen at any point in that sequence: the remaining balance does not come due.

When the senior lender forecloses

Here is the scenario lenders ask about most: your mortgage goes bad and the bank forecloses. What is left?

Maine’s statute answers it directly. When a lienholder that is not a C-PACE lienholder forecloses, judicially or not, the C-PACE lien survives to the extent of any unpaid instalment, interest, penalties or fees not paid from the sale proceeds. Only the portion of the assessment in arrears at the time of foreclosure takes precedence over other mortgages or liens; the remainder transfers with the property at resale. Unless the C-PACE lender agrees otherwise, payments falling due after the transfer remain secured by the lien and are the responsibility of the transferee.

The CREFC Primer describes the same outcome in market terms: only the currently due or delinquent portion is senior to the first lien, and the not-yet-due amount will not be extinguished by the foreclosure of any existing or future first mortgage. On any ownership change, including a tax sale, the assessment becomes the new owner’s obligation; the new owner must bring unpaid assessments current but is not obligated to repay the outstanding principal balance.

The senior lender keeps its own remedy. A March 2021 Stites & Harbison white paper, written about Kentucky’s programme, says C-PACE capital providers cannot prevent, restrict or otherwise impact the senior lender’s foreclosure remedies, and that the senior lender can foreclose on its mortgage as if it were the sole lienholder.

So in a Maine foreclosure, the arrears come out of the sale proceeds in priority order, and whoever ends up owning the building takes over the instalments still to come.

How this differs from residential PACE

Residential PACE is a different product. The commercial version described in this guide is built around the lender consent shown above: in all three statutes in this guide, an existing mortgage holder has to agree before the lien is created. We have set out the full comparison, including what went wrong in residential PACE, in residential PACE vs C-PACE.

What to check in your assessment agreement

Philadelphia’s guidelines say plainly that remedies for delinquency and defaults are set out in the Statement of Levy and Lien Agreement and the financing documents, and that the guidelines cannot override them. The same is broadly true wherever you close. Before you sign, ask:

• Is non-acceleration in the statute, the programme rules, the contract, or all three? In Texas, you are relying on the documents.
• What is the delinquency rate, and from when does it run? In Philadelphia it starts the day after the due date.
• When is a lien recorded, and how is it enforced? Tax-style enforcement, a Sheriff’s sale, or an assignment to the capital provider, as Maine’s statute provides in some cases.
• What else counts as a breach? Philadelphia’s guidelines note that other events of default may follow from failing other obligations in the agreement.
• What happens on transfer? Philadelphia’s guidelines say the agreement may transfer to a new owner, with the process set out in the agreement itself.
• What does it cost to pay it off? The CREFC Primer says prepayment is allowed, with call protection in early years. Get the schedule in writing.

None of this makes a missed instalment harmless. Minnesota’s statute requires the loan documents to disclose the risk of foreclosure if a tax delinquency results from a default. If the structure is not right for your building, we would rather say so now. Talk to us before you sign the term sheet.

C-PACE Desk is an advisory and placement service, not a lender, fund or programme administrator. Nothing here is legal advice; confirm the rules for your state and programme with counsel.