Yesterday saw the launch of the Green Deal scheme, the cornerstone of the Coalition’s pledge to be the ‘greenest government ever’, though it seems to have failed to live up to the hype.
Letting agents and landlords will now have new obligations of disclosure. Lenders, as well as current and prospective tenants and purchasers, must be informed about any Green Deal loan. Tenants have the option of requesting a Green Deal loan, but only with their landlord’s consent. Any future tenant would have to take over the loan repayments.
The scheme went live on 1 October 2012, but has so far seen just five takers, raising a few concerns. One of the most obvious barriers that are deterring consumers is the cost of the loans. The not-for-profit Green Deal Finance Company will charge consumers interest rates that range between 7.67% and 9.34% depending on the length of the loan. There will also be an assessment fee costing between £75 and £120, a set-up charge of £63, and an additional £20 annual admin fee. Despite there being in place a cashback scheme for early adopters to encourage uptake, it would seem that there is very little interest.
Coupled with high interest rates is the off-putting fact that the loans remain attached to the home. Although seen as a good idea during the conception phase of the Green Deal, as only the person who benefits from the improvements has to pay, landlords are reluctant to make their properties unattractive to prospective tenants by having loan repayments forced upon them through their electricity bills, which they had personally never asked for. These loans can take as long as 25 years to pay off.
It would also work against a landlord wishing to sell a property, as shown by the Great British Refurb Campaign, who found that 41% of people would either decide against buying a property with a Green Deal loan attached to it, or seek independent advice. Just 7% said they would be comfortable buying a house with such a loan on it.
Due to the Energy Act 2011, those selling or letting out Green Deal improved properties will have new obligations, such as the duty to disclose key terms of the Green Deal plan. It will also be required that the tenant or the buyer acknowledge that they will be bound by the Green Deal plan.
If the terms are refused by a buyer, the Green Deal plan can be cancelled, but the Government will go after the the previous owner for compensation. A Green Deal ombudsman can be used for arbitration in the event of a dispute.
The presence of a Green Deal on a property will be indicated at the bottom of the first page on its Energy Performance Certificate. Letting agents and landlords both have duties of disclosure before first viewings that the property is subject to a Green Deal. Producing the full EPC can meet this obligation as long as it is fully up to date with the detail of the works undertaken.
In the private rented sector, future tenants will be required to acknowledge and agree to accept liability for the Green Deal plan. Failure to give the proper disclosure by the original bill payer may result in them having to repay the whole of the original loan plus interest. A new tenant will have 90 days to challenge whether they are responsible for the repayment of the loan.
Stephen O’Hara chairman of the Property and Energy Professionals Association, who have worked with the Government on the Green Deal initiative, said, “Whether the majority opt to access a Green Deal loan or decide instead to fund any improvements through a different channel, it will be the uplift in the installation of energy-saving home improvements that will be the true measure of success for this initiative.
“As fuel bills continue to rise, more consumers are likely to be looking at ways they can reduce their energy consumption in order to lower their bills. The opportunities that the Green Deal offers are vast and we hope that the Government will now invest in building wider consumer awareness of the scheme and its many benefits.
“While we are unlikely to see an early surge in Green Deal loan applications, over time we expect to see more and more home owners and even tenants in rented accommodation look into the scheme and explore how it could work for them.”