30 January 2013
Last updated at 10:31
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Government launch Green Deal - What are the implications for Conveyancers?
Monday 28th January marked the launch of the Coalition Government’s new energy saving initiative – The Green Deal.
The Green Deal aims to help home and business owners finance energy efficient improvements to their properties such as insulation and new heating systems. The Green Deal process is as follows:
- A Green Deal Advisor will visit the property an undertake an energy survey and complete an EPC (or use an existing one where applicable). An Occupancy Assessment will also take place which records the actual energy use of the property, rather than the assumed standard occupancy energy use as shown on the EPC. This checks to confirm if any of the recommended improvement measures shown on the EPC qualify for Green Deal funding. The Green Deal Advisor will then discuss with the occupant as to which measures they would like to install and produce a Green Deal Advice Report which shows the likely repayments and savings incurred by installing the measures. To qualify for Green Deal funding, each measure must meet the “Golden Rule” which states that the total repayments over the term of the Green Deal finance plan must not exceed the total energy savings made within the life expectancy measure of the measure. This ensures that the current monthly energy payments made by the occupant’s are not increased ( general energy price increases may affect this). An up front contribution may need to be made by the occupant or Landlord for a measure to qualify for Green Deal funding. An example of this would be double glazing due to high payback periods.
- The occupant is then advised to get three quotes from a registered Green Deal Provider to complete the works. The provider will produce a full finance plan based on the quotations including fixed interest rates, and detail the amount which will be paid back through the occupant’s electric bill and the length of the finance term for each measure.
- The works will be completed by registered Green Deal Installers and will be fully guaranteed as per the Green Deal Code of Conduct. An updated EPC will be given to the occupant upon completion of the works.
- In certain circumstances the occupants may qualify for funding outside of the Green Deal package, through ECO (Energy Company Obligation) and the Affordable Warmth Scheme. This is where the occupants may be classed as low income families, are on some form of means tested benefits. If the property has solid walls or are the walls are classed as “hard to treat”. The occupants may qualify for ECO funding in any case.
What does this mean for Conveyancers?
The key thing for anyone purchasing or renting a property will be to know of the existence of any Green Deal finance agreement as this debt is attached to the property and paid off through the electricity bill. It will not be registered as a charge against the property.
As part of the Green Deal Assessment an updated Energy Performance Certificate (EPC) will be produced. The EPC will indicate prominently the presence of a Green Deal Finance Plan.
Under the Energy Act 2011 agents acting on the sale or let of the property, auctioneers, landlords and private sellers all have duties of disclosure before first viewings that the property is subject to a Green Deal. This obligation can be met by producing the full EPC, which must have been updated with the detail of the works undertaken.
At least seven days before contracts are exchanged, buyers must be given disclosure documents providing full details of the deal. Incoming tenants will have to acknowledge and agree to accept liability for the Green Deal plan. If the original bill payer fails to give the proper disclosure, then they may have to repay the whole of the original loan plus interest.
The new owner or tenant will have 90 days to challenge whether they are responsible for repayment of the loan.
There is no proposal to establish a register of properties subject to a Green Deal plan. The Government consider the updated EPC and disclosure and acknowledgement requirements will be sufficient. A new property information form (TA6) is due out in the first quarter of this year, and will include a question about the existence of a Green Deal plan.
The Green Deal Debate
There are currently 45 different types of improvement available under the Green Deal.
The Government have also unveiled its communications campaign to inform people about the Green Deal. A nationwide campaign – ‘Green Deal with it’ – will inform people about the benefits of the scheme and how they can use it to make improvements to their home – making it warmer and ultimately saving money on their energy bills.
Public reaction to the launch of the Green Deal has been particularly cautious and suspicious. John Vidal - writing for the Guardian - believes that the scheme is unlikely to succeed as its appeal will mainly be for private landlords and people wanting to spread costs for particularly expensive energy saving improvements. Vidal claims that for all other consumers, the scheme promises to be ‘over complicated, burdensome, slow, restrictive, needlessly bureaucratic and open to mis-selling. Another argument he proposes in his article is that the scheme is set up to benefit the ‘fat cats’ and their friends in the giant energy and installation companies.
Other critics of the scheme believe that making Green Deal financed improvements to homes may make them harder to sell if repayments are still outstanding at the time of sale. The loan stays attached to the property’s electricity bill until it is paid off, so if the person who arranged for improvements to be made to the property through the Green Deal scheme moves house, the responsibility of the payments falls to the new owner. This could put some buyers off as they are unlikely to want to have to pay for improvements that have already been made or improvements that they can’t actually see (e.g. solid wall insulation). In these cases, the seller would either have to foot the bill or risk losing the buyer. Another concern surrounding the Green Deal is whether or not the savings made as a result of the improvements actually outweigh the cost of investing in them.
Which? the consumer association claim that public reaction to this scheme has been muted due to only 9% of people actually having heard of the scheme and what it is. This low figure is attributed to the newness of Green Deal and is expected to grow in the future. The UK Green Building Council (UK-GBC) has been quick to defend the Green Deal from some of the critics of the scheme. According to UK-GBC energy prices rocketing in the future is a certainty and reducing homes energy consumption is a step towards protecting home owners from inflated energy bills. The UK-GBC also counter Vidal’s claim of the scheme being for the benefit of the ‘fat cats’ and their friends –the giant energy providers and installation companies - by stating that the profit margins on the Green Deal are particularly small.
PSG Energy has a team of fully qualified and experienced Energy Assessors who are to become qualified Green Deal Advisors. For more information about the Green Deal and the services PSG Energy can provide you with, please contact Andrew Sagar at andrewsagar@psgenergy.co.uk or call 01226 320070
For more information regarding the latest version of the Energy Act 2011, please Click Here
For more information regarding the Green Deal launch, please Click Here
For more information from Which?, please Click Here
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