PACE Loans & Your Title: What a Lien Means & How to Fight
Explains PACE financing for homeowners: how PACE liens take priority over mortgages, block refinancing, and what legal remedies exist to fight them.
PACE Loans and Your Title: What a PACE Lien Means and How to Fight It
Disclaimer: This article is for informational purposes only and does not constitute legal advice. Consult an attorney licensed in your state before taking legal action regarding a PACE assessment.
Overview
You financed your solar panels through something called "PACE" — Property Assessed Clean Energy. The salesperson described it as an easy way to pay, tied to your property taxes, with no money down. What they likely did not explain: PACE creates a first-priority lien on your property that sits ahead of your mortgage, cannot be refinanced past, and in some cases can trigger tax foreclosure.
PACE financing is not a traditional loan. It is a property tax assessment — a lien recorded against your title that you repay through your property tax bill over 10 to 30 years. Understanding exactly what you signed, what rights you have, and how to fight an improper PACE lien is essential for any homeowner caught in this trap.
PACE Is a Lien, Not a Loan — and It Comes First
The defining feature of PACE financing is its lien priority. Under state PACE statutes, the assessment is treated like a property tax — it attaches to the property, not the borrower, and it takes priority over nearly all other liens, including your first mortgage. This means:
- Your mortgage lender's security interest is now subordinate to the PACE assessment.
- If the property is foreclosed for non-payment of property taxes (which includes PACE), the mortgage lender can be wiped out.
- Most mortgage lenders will not allow PACE assessments on properties they finance — and when they discover one, they may call the loan due.
Many homeowners learn about the lien priority problem only when they try to refinance or sell. The title report surfaces a PACE assessment the homeowner barely understood, and the lender refuses to proceed.
How PACE Blocks Refinancing and Sale
When you apply to refinance, your lender requires a clean title. A first-priority PACE lien does not look clean to an underwriter. Fannie Mae, Freddie Mac, FHA, and VA all have policies restricting or prohibiting mortgages on properties with PACE assessments.
Similarly, when you sell, the buyer's lender will not close with a PACE lien in first position. The assessment must be paid off at closing — and PACE payoffs often total $25,000 to $50,000 or more. Sellers are shocked to discover that the "easy financing" they signed up for now requires a five-figure payment just to transfer ownership.
TILA Disclosure Requirements for PACE
In 2024, the Consumer Financial Protection Bureau (CFPB) finalized a rule applying Truth in Lending Act (TILA) requirements to PACE financing. This was a significant shift — PACE had long operated in a regulatory gray area. Under the CFPB rule:
- PACE lenders must provide TILA disclosures, including APR, finance charges, total of payments, and payment schedule.
- Borrowers have a right of rescission — the ability to cancel the transaction within 3 business days.
- Failure to provide required disclosures can extend rescission rights for up to 3 years.
If your PACE financing was originated before the CFPB rule took effect, different standards may apply. However, if the financing was originated after the effective date and disclosures were absent or defective, you may have strong TILA claims.
Three Legal Pathways to Fight a PACE Lien
1. Three-Day Rescission (TILA)
If your PACE financing is covered by TILA, you have 3 business days to cancel after signing. If required disclosures were not provided, the rescission period extends to 3 years. Send written notice by certified mail to the PACE lender — keep all records.
2. TILA Violation for Undisclosed Costs
Beyond rescission, TILA violations — failure to disclose finance charges, APR, or total cost — can support claims for statutory damages, actual damages, and attorney's fees. These claims create leverage for negotiating a lien release or buyout reduction.
3. Lien Priority Dispute
In some cases, you may be able to challenge the lien priority itself. Arguments include:
- The PACE assessment was not properly authorized under state law.
- The assessment amount exceeds the property's increase in value.
- The financing was procured through fraud or misrepresentation, voiding the underlying contract and the lien.
These are complex, fact-intensive arguments that require an experienced real estate or consumer protection attorney.
Red Flags Attorneys Look For
When evaluating a PACE case, experienced attorneys examine:
- Annual fee increases. PACE payments often contain built-in escalators that are not clearly disclosed.
- Unverified savings projections. Salespeople promise energy savings that were never independently calculated, and the PACE payments far exceed any utility bill reduction.
- Lien recording before contract signing. In some documented cases, the PACE lien was recorded before the homeowner signed the contract — a potential fraud indicator.
- Contractor kickbacks. PACE programs rely on contractors to enroll homeowners, creating an incentive structure that rewards aggressive, misleading sales tactics.
- Absence of ability-to-repay underwriting. Unlike traditional loans, PACE financing historically did not require income verification or credit assessment — a feature that drew CFPB scrutiny.
- Deceptive claims about tax deductibility. Some salespeople falsely claim PACE payments are tax-deductible like mortgage interest.
FAQ
Can I refinance my home with a PACE lien?
Generally not with conventional, FHA, or VA financing. Most mortgage programs require PACE assessments to be paid off at closing. Some portfolio lenders may accommodate PACE, but they are rare. Paying off the assessment is typically required.
What happens if I do not pay my PACE assessment?
PACE payments are collected as part of your property tax bill. Non-payment follows the same path as property tax delinquency — penalties, interest, and ultimately tax foreclosure. The PACE lien survives foreclosure in first position.
Is PACE financing illegal?
PACE is legal in states that have authorized it by statute — approximately 37 states for residential PACE. However, the sales practices, disclosure failures, and underwriting deficiencies surrounding PACE can create independent legal claims even when the financing vehicle itself is lawful.
How do I find out if there is a PACE lien on my property?
Contact your county recorder or assessor's office and request a property lien search. Many counties offer online access. You can also obtain a title report through a title company. Look for assessments recorded under your state's PACE program name (e.g., CaliforniaFIRST, HERO, Ygrene, Florida PACE).
Can I discharge PACE in bankruptcy?
PACE assessments are generally treated as tax obligations, not dischargeable debt in bankruptcy. This is one of the most dangerous features of PACE — it cannot be wiped away in Chapter 7 or Chapter 13. Legal challenges to the assessment itself (fraud, rescission) are often the only path out.
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