Badia)advocats advises GNE Finance on the development of Spain’s PACE programme

Badia)advocats is advising GNE Finance on the development of Spain’s PACE programme, an initiative aimed at improving living conditions for people and fighting climate change.

The firm is proposing legislative reforms that will enable the implementation of an initiative similar to the Property Assessed Clean Energy (PACE) programme, which was created in California, USA in 2008 and later expanded to several other American states.

The overall aim is to obtain a new financing model that will make it possible to address a number of pressing social challenges such as upgrading living conditions in old housing units, improving disabled access to buildings and combating climate change by lowering CO2 emissions through reduced energy consumption. Other goals include eradicating energy poverty and galvanising the labour market and the local economy.

The Spanish legislation targeted for reform is the Consolidated Text of the Law Regulating Local Taxation, enacted by Royal Legislative Decree 2/2004, of March 5 (TRLRHL). The success of the United States’ PACE programme is attributable to an on-tax financing scheme by which local authorities provide a guarantee to lenders who finance renovation works.

In the Spanish tax system, the key to such a guarantee is the tacit mortgage established in article 78 of the General Tax Law, which is by definition applicable to property tax.

Our proposal is to create a property tax surcharge that is equivalent to the amount for capital amortisation and interest payable during the corresponding annual periods by the owners of buildings to which renovation works covered by the programme have been carried out.