Green Finance SF

One of the documents received by a home buyer in San Francisco is the preliminary title report. The preliminary title report is a document that lists all of the liens, encumbrances, and restrictions that are publicly recorded against the property. It is issued by the title company as part of their preparation to issue title insurance. Essentially, the document will provide a list of items that the title company will not provide insurance for. Examples of things that are commonly found on title reports include city and county taxes, CC&Rs (conditions, covenants and restrictions), and mortgages.

Below is one of the newer items that you may see on a San Francisco preliminary title report:

Green Finance SF Special Tax District Notice

Clear as mud, right? What is this special tax district and what is it for? Will it increase your tax bill?

The City and County of San Francisco Special Tax District No. 2009-1 was created by the Board of Supervisors in 2009 to provide financing for homeowners wishing to finance energy/water conservation improvements to their homes. Examples of items that you could finance would include things like photovoltaic solar panels, hydrothermal solar energy systems, upgrading heating or water heating systems, and a variety of other programs that increase energy efficiency.

Awesome, right? Well, not from the viewpoint of Fannie or Freddie. Because an owner that applies to use the financing program would create an additional tax lien against their property, and tax liens are always senior to other obligations recorded against a home (like a mortgage), Fannie and Freddie announced that they would not accept/purchase/underwrite any loans that have a energy-related tax lien in a senior position to their mortgage. Since every energy-related tax lien, by definition, will be senior to a mortgage, Fannie and Freddie effectively killed the program before it got underway.

In fact, if you visit the Green Finance SF website you’ll find prominently featured on the first page a notice that the program has been suspended. While the city says it has joined with other municipal entities to urge a resolution to the issue, there hasn’t been any noticeable movement and I’m not aware of any resolution on the horizon.

So next time you see an item like this on a preliminary title report you have no reason to be concerned. While your property may be situated in a special tax district, the program has been suspended.