Jane Witek, Head of Residential Conveyancing provides an overview of the government Green Deal Plan.
The GD helps people pay for energy efficiency improvements like insulation and new boilers, through a daily charge on their electricity bills (the GD is an unsecured loan regulated under the Consumer Credit Act). It is a government initiative designed to reduce carbon emissions and save energy.
The GD allows property owners to pay for energy-improvement measures with no up-front payment. The householder will repay the cost over 25 years, using the savings made through reduced energy requirements. However, it is impossible to predict or guarantee a rise or fall in future energy costs.
An example of a GD plan would be a homeowner who takes various measures to improve energy efficiency at a cost of say £15,000.00. The homeowner will then repay the agreed sum, together with interest, (fixed for the period), over, say, 25 years. Assuming the actual running costs of electricity and other energy will have been reduced, there should be no net loss to the owner. In theory, there should be no net increase in the annual outgoings of the property, and the property will benefit from the improvements.
The GD is going to involve a number of companies becoming a Green Deal Provider, who will oversee all aspects of the GD scheme. The Green Deal Provider must provide the property owner with a ‘Green Deal Plan’ setting out the way the property will be assessed, financed and who will carry out the installation. Once the ‘Green Deal Plan’ has been agreed the provider will co-ordinate all relevant parties to set the plan in motion. A list of Green Deal Providers can be found at www.greendealinitiative.co.uk.
GD plan instalments can only be paid by the “bill payer for the time being” as the person benefitting from the energy savings while they occupy the property. The current bill payer is the customer of the GD provider and subsequent bill payers will be bound by the terms of the plan, and will be entitled to receive the benefits of the plan. The GD is not a charge against the property.
The GD finance can pass between bill payers. For this to happen the requirements of EU Consumer Protection Directives must be met. These require that customers are:
- aware and informed of what they are being asked to pay for;
- made aware of and have the opportunity to become acquainted with key terms of any agreement before it can become binding on them.
Obligations are placed on those selling or letting-out GD improved properties to meet the disclosure and acknowledgement obligations and protect consumers when they are considering buying or renting.
The regulations require owners to disclose key terms of the GD plan to a prospective buyer or tenant and to secure the acknowledgement of the buyer or tenant that they will be bound by the plan.
The Energy Performance Certificate for a GD property will have a banner text at the bottom of the first page which will indicate the presence of the GD.
When a GD property is placed on the market for sale or rent, the terms of the GD will not automatically be inherited by the buyer or new tenant. Therefore, certain information will be required to be given to the buyer or tenant. The Green Deal (Disclosure) Regulations 2012 set out the duty on the estate agent, auctioneer, landlord or private seller to disclose to the viewer of the property (before the first viewing) the fact that the property is subject to the GD. This will be disclosed by disclosing the full EPC, which will have been updated with the detail of the works undertaken.
Before contracts are exchanged to sell a GD property, the buyer must have disclosure of what they are taking on. Under the Regulations, the “disclosure document” must be given to the buyer at least seven days before exchange, and then, in the “document which effects the transfer of ownership”, an acknowledgement must be given by the buyer. Any future, or existing, tenant will have to acknowledge and agree to accept liability for any GD plan taken out by a Landlord.
If the original bill payer fails to give necessary disclosure they may have to repay the value of the loan (and interest). A new owner or tenant (if they have not received the necessary disclosure) may challenge the obligation to repay the GD loan. They must do so within 90 days of notification by the energy provider that the GD affects the property. This action by the new owner would leave the debt with the outgoing seller.
Further information about the GD can be found at www.direct.gov.uk/savingenergy or telephone 0300 123 1234.
