Conveyancing solicitor, Brett Lawrence, who is manages Slee Blackwell’s South Molton office explains the Government’s energy saving initiative and identifies some potential concerns for homeowners
The Department of Energy and Climate Change has recently introduced the Green Deal. From Monday 28th January 2013 homeowners (but not people who rent their homes) have been entitled to arrange a Green Deal Assessment of their property free of charge.
This involves an assessor, who could work for a number of organisations, reviewing the property in conjunction with its owner and looking at how energy is used. The assessor should then be able to make recommendations about whether energy efficiency improvements can be made to the property and what the likely savings in energy costs would be to the home owner.
How it is paid for?
The homeowner would not be expected to pay up front for the improvements. These could include replacement boilers, new windows or even solar panels being fitted and therefore could be very expensive.
The homeowner would effectively be loaned the money to fund the improvement works and would pay back the loan, together with interest, by having an increased tariff added to the electricity bill of the property. The idea is that the saving in the amount of energy used would outweigh the higher electricity tariff. For example, if your electricity consumption fell by say 20% but the tariff increased by 7% (to take into account repayment of the loan) you would still make an overall saving of 13% of your normal electricity costs. The green deal assessor should be able do the necessary calculations to see if the works would be cost effective.
Issues to consider before agreeing to the scheme
Paying back the funding for the works may take a long time, depending on what was done to the property. As the improvement works benefit the property itself the costs are recovered from the electricity bills of the building rather than the owner who had the works carried out. This creates some legal issues when the property is sold. On the face of things it would seem fair that, as the house benefits from saving energy, a new owner, who gets the benefit of using less energy, should pay the higher tariff. There are however a number of points that we would advise our clients to consider, namely:-
- If you are buying a house with new triple glazing, solar panels and a brand new high efficiency boiler together worth say, £20,000, should you pay more for the property as you would have in the past, given that as the new owner you will effectively be repaying the loan? In short, you probably should not as you will in effect be paying twice. But, how these improvement works will affect the housing market and asking prices is unknown at this stage
- Secondly, if prospective buyers find it difficult to assess the value of a property subject to the Green Deal, what will mortgage lenders and their surveyors think? As things currently stand the Royal Institute of Chartered Surveyors has not changed its guidance on valuing a property subject to a Green Deal Loan, but this may change in the future. If you are thinking about getting works carried out under the Green Deal, be aware that it may not have a positive effect on the value of the property
- If you want to do substantial works to the property under the Green Deal you may need to ask your mortgage lender for consent, which they may refuse. Mortgage lenders have not yet decided what types of work they need to be consulted about and what the policy will be for granting consent. This would probably vary from lender to lender.
- If the works are substantial you may also need planning consent and building regulations approvals.
- As the money saving calculations are based on the energy consumption at the time the property is assessed, you may find that what was a costs saving to the original owner may not be to a new owner. For example if you have a number of efficiency measures taken on the basis that the property is occupied by a large family with high energy use, but the property is then sold to a single person with very low energy usage, the new owner may find themselves far worse off under the Green Deal.
This is not an exhaustive list of potential legal issues that could arise, but they should provide some food for thought for both buyers and sellers as well as those thinking about signing up to the deal.
At this stage it is hard to tell what the full implications of the Green Deal are. The Council of Mortgage Lenders (who set the criteria on which most high street banks set lend mortgages) state that they ”continue to monitor developments” and don’t know what the full effects will be on the housing market.
The best advice is that house owners should be cautious as what may on face value appear a good deal may not prove quite so good in the long run.
Advice about the Green Deal or conveyancing issues generally is available from our experienced property lawyers. Call our FREE legal helpline on 0808 139 1606 or call in to see us at any of our offices in Devon, including Barnstaple, Exeter, South Molton, Braunton and Bideford.
We also have an office in Taunton, Somerset.
Alternatively please feel free to contact Brett Lawrence direct at [email protected]