The Green Deal, which came into force in January 2013, is a government based initiative designed to reduce carbon emissions and save energy. It is a new way to pay for energy-saving home improvements like loft, cavity or solid-wall insulation, double glazing, a new boiler or even a ‘micro-generation’ system, such as solar panels.
The loan is repaid through savings made on electricity bills and all of the upfront costs are borne by authorised Green Deal installers. Once the loan is paid off, property owners can take full advantage of the energy savings.
There can be Green Deals on residential and commercial property. It applies not only to homeowners living in their own property but also to the landlord community. Before the arrival of the ‘Green Deal’ there was little benefit to landlords in spending money on energy saving measures when this was likely to result in reduced energy bills for tenants without a corresponding increase in rent.
Under the new system however, the landlord can arrange for work to be carried out, but pass the cost on to the tenant through the savings in energy bills that are used to pay for the works.
A Green Deal Assessment is carried out by DECC approved providers. It comprises two documents – an Energy Performance Certificate (EPC), which rates the property’s energy efficiency on an A to G rating scale and an Occupancy Assessment, which assesses how much energy is used in the property.
Property owners that take out a Green Deal Plan will need to have all the appropriate consents obtained for the works. This includes Building Regulation Approval (e.g. for solar panels), FENSA certificates for replacement windows, and, if you live in a flat, the landlord’s consent.
What does this mean for the conveyancing process?
The presence of the loan in situ is the main reason why it needs to be highlighted in the conveyancing process. The Green Deal does not operate like an overriding interest and The Green Deal Framework (Disclosure, Acknowledgement, Redress etc) Regulations 2012 specifically provide that this will not happen.
Selling the property
The seller has to make sure that the buyer is aware of the Green Deal before they exchange Contracts and are committed to the transaction. The easiest way to do this is by making sure there is an up to date EPC for the property that is given to everyone that views it. The estate agent is best placed to handle this, when the property is put on the market.
They also have to give a disclosure document at least seven days before exchange and then the buyer has to give an acknowledgment in the Transfer.
The responsibility for repaying the Green Deal stays with the property. Therefore, it shall be the seller’s responsibility to ensure that the contract contains special conditions acknowledging the Green Deal Plan.
However, the buyer may ask that the whole loan is repaid in full on completion of the sale. If this is the case, this will require negotiation. It remains to be seen what will happen in practice.
Buying the property
Anyone buying such a property has to be made aware of it and, as a separate measure, agree to be bound by the terms of it. They have to acknowledge its existence. If the loan has not been negotiated to be paid by the seller, then the buyer takes on the repayments as they stay with the property not the person.
If a mortgage interest is in place, the lender will need to be aware that the plan exists.
Buyers will need to look at the contents of the EPC to see which works have been carried out, the terms on which the financing operates and how long it still has to run. This could create a problem if the EPC was undertaken before the Green Deal plan was entered into. However, the updated TA6 form asks about the existence of a Green Deal and prompts buyers and sellers as well as their solicitors in relation to the existence of a Green Deal on the subject property.
If the seller does not disclose the existence of a Green Deal plan, and the buyer subsequently receives a utility bill which charges for a Green Deal payment, then the buyer can challenge the obligation to pay it and if successful, the seller will have to make payment in full.
For more information about the Green Deal, visit www.decc.gov.uk/greendeal or speak to Shelley Spyrides, Conveyancing Partner at Bryan and Mercer Solicitors on (01727) 861414.
