DisputeVoice Consumer Protection Series | Roofing Financing Risks

Roofing PACE Loans and Mechanic's Liens: What Every Homeowner Must Know Before You Sign

A new roof is one of the largest home improvement purchases most homeowners will ever make. When a salesperson knocks on your door after a storm and offers what sounds like effortless financing — "just added to your tax bill, no credit check needed" — it can seem like a genuine relief. But that easy financing often comes with one of the most dangerous financial instruments in residential real estate: a Property Assessed Clean Energy (PACE) lien that sits in first position ahead of your mortgage and follows your home to the next owner.

Meanwhile, even homeowners who pay their roofing contractor in full can find a mechanic's lien filed against their property weeks later — placed there not by the company they hired, but by an unpaid subcontractor or materials supplier that contractor failed to pay. Both types of liens can block the sale of your home, trigger foreclosure, and damage your credit. This guide explains how both work, what the law now requires, and exactly what you should do before signing any roofing financing agreement or handing over a final payment.

Part 1: PACE Loans — The "Easy Financing" Trap

What Is a PACE Loan?

Property Assessed Clean Energy (PACE) financing is a government-authorized program that allows homeowners to finance qualifying home improvements — including roofing, solar panels, insulation, and HVAC systems — through a special tax assessment added to their property tax bill. PACE programs are available in California, Florida, Missouri, and a growing number of other states. The financing is arranged by private companies (not the government itself) who typically work directly with contractors, often through door-to-door or point-of-sale sales.

Because repayment happens through your property tax bill rather than a traditional monthly loan payment, PACE financing was historically exempt from mortgage lending disclosures and ability-to-repay requirements under federal law. That exemption made it a fertile ground for aggressive and sometimes predatory sales practices.

The Critical Difference: A Super-Priority Lien

The most important thing to understand about a PACE loan is that it is not structured as ordinary debt. It is structured as a property tax assessment secured by a lien on your real estate. That lien holds what is called "super-priority" status — it ranks ahead of your first mortgage, ahead of any second mortgage or home equity line of credit, and ahead of most other creditors.

The CFPB's December 2024 Rule: New Protections, Effective March 2026

After years of documented consumer harm — including seniors losing their homes, property taxes doubling, and contractors misrepresenting PACE loans as free government programs — Congress directed the Consumer Financial Protection Bureau (CFPB) to apply residential mortgage protections to PACE financing. The CFPB issued its final rule on December 17, 2024. It takes effect March 1, 2026.

Under the new rule, PACE lenders must:

• Provide a Loan Estimate and Closing Disclosure — the same documents required for traditional mortgages
• Conduct an ability-to-repay assessment before approving financing
• Comply with Truth in Lending Act (TILA) and Regulation Z requirements
• Treat PACE financing as "credit" subject to federal consumer lending protections

PACE Loan Red Flags: How Contractors Misrepresent the Product

The CFPB and National Consumer Law Center have documented repeated patterns of misrepresentation by contractors selling PACE products. Based on those documented cases and government enforcement actions, here are the most common misleading claims homeowners encounter:

States Where PACE Financing Is Active

PACE residential programs are currently most active in California, Florida, and Missouri. California has the longest history with PACE and the largest volume of consumer complaints. Florida's PACE program has drawn particular regulatory attention, with the state requiring enhanced disclosures since 2023. If you are in a storm-prone state and a roofing contractor offers PACE financing, you should be especially cautious — post-disaster door-to-door solicitation combined with PACE financing is a documented fraud pattern.

Part 2: Mechanic's Liens — The Trap You Don't See Coming

What Is a Mechanic's Lien?

A mechanic's lien (also called a construction lien or materialman's lien in some states) is a legal claim filed against real property by a contractor, subcontractor, laborer, or materials supplier who performed work or provided materials for an improvement to that property and was not paid. The lien attaches to the property itself, not to the person who owes the money — which means it can affect you even if you paid your contractor every dollar owed.

Here is how the exposure arises: You hire a roofing company for $18,000. You pay in full. Unknown to you, your roofing contractor used a subcontracted crew and a materials supplier and failed to pay either one. Both the crew and the supplier have valid lien rights against your property for work and materials that directly benefited your home — even though you had no direct contract with them and already paid the person you hired.

Who Can File a Mechanic's Lien on a Roofing Project?

In most states, the following parties have the right to file a mechanic's lien for unpaid work on a residential roofing project:

• The general roofing contractor (if you fail to pay them)
• Roofing subcontractors hired by the general contractor
• Individual laborers on the job
• Materials suppliers (shingles, underlayment, flashing, fasteners)
• Equipment rental companies in some states

How the Lien Process Works

While lien procedures vary by state, the general process follows a predictable pattern. Most states require a preliminary notice — sometimes called a "Notice of Right to Lien" or "Prelim" — to be sent to the homeowner within a specified period after work begins (21 days in Nevada, 20 days in California, with similar short windows in other states). This notice is not a lien itself; it is a warning that the sender has the right to file one if unpaid. Many homeowners receive these notices and ignore them, not understanding their significance.

If payment disputes are not resolved, the lien claimant files a formal lien with the county recorder's office. This is a public record that appears in title searches and will block any sale or refinancing of your property until it is resolved. The lien claimant typically then has a set period (90 to 180 days in most states) to file a lawsuit to enforce the lien, after which it expires.

State-by-State Lien Filing Deadlines (Selected States)

Deadlines are subject to change. Verify current state requirements with a licensed attorney or your state's contractor licensing board.

Texas Homestead Protections: An Important Exception

Texas provides among the strongest homestead protections in the country. For a mechanic's lien to be valid on a Texas homestead property, the general contractor must provide a written contract signed by both spouses (if married), executed before work begins, and filed with the county clerk. If these requirements are not met, the lien may be invalid regardless of whether the underlying debt is legitimate. Homeowners in Texas should verify these requirements with a Texas construction attorney if a lien is filed against their primary residence.

Part 3: Lien Waivers — Your Most Important Protection

The single most effective tool a homeowner has against mechanic's lien exposure is demanding lien waivers at every stage of payment. A lien waiver is a written document in which a contractor, subcontractor, or supplier releases their right to file a lien for a specified amount or for all work performed to date.

There are four standard types of lien waivers used in construction:

Part 4: The PACE + Mechanic's Lien Double Exposure

A particularly damaging scenario occurs when a homeowner takes PACE financing arranged by their roofing contractor, and that same contractor then fails to pay subcontractors or suppliers. The homeowner now faces two lien exposures simultaneously: the PACE assessment lien (in super-priority position) and one or more mechanic's liens (which cloud title and must be resolved before any sale or refinancing). Neither lien is connected to the quality of the work — which may itself be defective.

This triple exposure — predatory financing, mechanic's lien risk, and poor workmanship — is the defining pattern of post-storm roofing fraud in high-PACE markets like South Florida and parts of California. The FTC, CFPB, and state attorneys general have all documented it. DisputeVoice has published Lighthouse Reports in cases following this exact pattern.

Part 5: Your Pre-Project Protection Checklist

Before signing any roofing contract or financing agreement, work through this checklist:

• Get at least three written bids — contractor-arranged financing often inflates the project cost substantially. One documented California PACE case involved a roof bid nearly double the non-PACE market rate.
• Compare financing independently — contact your bank, credit union, and a home equity lender before agreeing to any contractor-arranged financing.
• Read the PACE documents completely — look for the lien amount, annual assessment, total repayment amount (not just annual payment), and prepayment penalty terms.
• Ask whether the PACE lien will appear as a property tax assessment on your annual bill — it will, and it will transfer to the next buyer.
• Ask for a list of all subcontractors and suppliers who will be working on your project, before work begins.
• Require conditional lien waivers from the general contractor and any known subcontractors with each progress payment.
• Check your county recorder's office approximately 21 days after work begins for any preliminary notices filed against your property.
• Require an unconditional final lien waiver from the general contractor and all subcontractors and suppliers before releasing final payment.
• Verify that your contractor's insurance certificates cover the subcontracted crews on your project — not just administrative employees.

What to Do If a Mechanic's Lien Has Already Been Filed

If you discover a mechanic's lien has been recorded against your property, act immediately. Liens that are not resolved within the lien's enforcement window expire and can be removed — but if ignored and the lien holder files a foreclosure action, the consequences are severe.

Your options include:

• Contest the lien's validity — if procedural requirements were not met (improper preliminary notice, missed filing deadlines, incorrect property description), the lien may be defective and subject to release.
• File a Notice of Contest of Lien (available in Florida and some other states) — this shortens the lien claimant's enforcement window to 60 days.
• Bond off the lien — a surety bond posted with the court can substitute for the lien on your property, allowing a sale or refinancing to proceed while the underlying payment dispute is resolved.
• Negotiate directly with the lien claimant — if the general contractor failed to pay a legitimate subcontractor, the homeowner sometimes resolves the matter by paying the subcontractor directly and then pursuing the general contractor for recovery.
• Document and report the contractor — a contractor who accepted your full payment and failed to pay subcontractors or suppliers may have violated state contractor fraud statutes. File a complaint with your state's contractor licensing board and consider a DisputeVoice Lighthouse Report to create a public record.

Filing a Complaint: Your Regulatory Pathway Options

If you have been harmed by a predatory PACE loan or a contractor who created mechanic's lien exposure after accepting full payment, multiple agencies want to hear from you:

• CFPB: File a complaint at consumerfinance.gov/complaint or call (855) 411-2372
• FTC: Report at reportfraud.ftc.gov
• Your State Attorney General's Office: Most AG offices have consumer protection units that investigate contractor fraud and lending abuses
• Your State Contractor Licensing Board: Contractors who misrepresent financing terms or fail to pay subcontractors can face license suspension or revocation
• DisputeVoice: A Lighthouse Report creates a permanent, indexed, public record of your experience — searchable by anyone researching the contractor or PACE company involved

Frequently Asked Questions

Can a PACE lien actually cause me to lose my home?

Yes. If you fail to pay the annual property tax assessment that includes the PACE repayment, the government can initiate a tax lien foreclosure proceeding. The PACE lien's super-priority status means it is paid before your mortgage, which also puts your mortgage lender in a difficult position and may trigger their own protective action.

I paid my roofing contractor in full. How can a subcontractor lien my house?

In most states, subcontractors and suppliers have lien rights that run directly to the property — not just to the general contractor. Their legal theory is that their labor and materials directly improved your property, and they are entitled to security against that property if they were not paid. Your payment to the general contractor is generally not a defense against a properly filed subcontractor lien. The remedy is to demand lien waivers from everyone in the chain before releasing payment.

Does the new CFPB PACE rule protect me right now?

The rule was finalized December 17, 2024, and takes effect March 1, 2026. If you entered a PACE agreement before that date, the new protections do not apply retroactively. However, you may still have rights under state law, and the CFPB accepts complaints about PACE practices regardless of when the agreement was signed.

Can I get out of a PACE loan after signing?

The FTC's 3-Day Cooling-Off Rule (16 CFR Part 429) applies to home solicitation sales and provides a right to cancel within 3 business days. Many states extend this window for home improvement contracts. Review your state's cancellation rights immediately. Once the 3-day federal window expires, cancellation typically requires paying off the PACE assessment in full, often including prepayment penalties.

What's the difference between a PACE lien and a regular contractor lien?

A PACE lien is created by your financing agreement and ranks in super-priority ahead of your mortgage. A mechanic's lien is created by statute and can be filed by any unpaid party in the construction chain. PACE liens are typically larger, longer-term, and harder to remove. Mechanic's liens are temporary — they must be enforced within a specific window or they expire — but they can still block sales and refinancing while active.

Related DisputeVoice Resources

• How to File a Complaint Against a Roofing Contractor: State-by-State Guide
• Roofing Warranty Disputes: What the Fine Print Doesn't Tell You
• The FTC 3-Day Cooling-Off Rule and Roofing Contracts
• How to Spot a Roofing Scam After a Hurricane or Major Storm
• The Complete Guide to Roofing Contractor Complaints and Disputes