The Green Deal and its Implications for You

What is The Green Deal?

The Green Deal is a UK Government initiative which has been running since January of this year. It is designed to promote the energy efficiency of commercial and domestic properties in the UK.

The Green Deal enables the property owner to make energy saving improvements (e.g. double glazing, solar panels etc) without having to meet the immediate capital cost. The Green Deal, in certain circumstances, will enable the owner to fund the improvements via an approved supplier effectively via a grant. These capital cost will be recovered by the supplier by way of a supplement to the property’s energy bills for a period of up to 25 years.

There are strict limitations on what improvements would be eligible for funding and the improvements would be required to meet this criteria. One of the most important requirements is that the long term energy savings exceed the upfront capital cost. By way of example, if it would cost more to put in the insulation and solar panels than it would save in energy bills over the defined period then the works would not be eligible for funding under the Green Deal arrangements.

Buying and Leasing with a Green Deal in place

Please note that the impact of buying or leasing a commercial property is different to that of a residential property and the Green Deal treats the type of property differently, although some areas will overlap.

It is crucial to consider how the Green Deal supplement affects the property. It is the responsibility of the person, or company, who is liable for the energy bills of the property. Therefore it is crucial for all prospective purchasers and tenants to look and check to see if a Green Deal is in place before they accept liability for the energy bills.

Under Section 12 of the Energy Act 2011 an existing Green Deal arrangement must be disclosed at the time of a sale or lease of a property. Therefore before a transaction completes, a seller or landlord should provide an Energy Performance Certificate for the property along with the key facts of the Green Deal contract which applies to the property.

We would recommend that if you are selling or leasing a property you also obtain written confirmation from the purchaser, or tenant, agreeing to be bound by any Green Deal charges.

If you are purchasing or leasing a property you should be aware that such a disclosure about the terms of the Green Deal charges may not be willingly provided by an owner or landlord. Compensation may be available to the new owner or tenant for up to 90 days after they have received the first energy bill, however, after this period the new owner/tenant will have no recourse and no alternative but to pay the Green Deal charges.

 

Is this relevant to me?

There are conflicting figures relating to how many properties may be affected by the Green Deal. Official figures show that already over 9300 Green Deal property assessments have taken place (calculated to the end of April this year). It certainly appears to be quickly growing in prominence in connection with the sale or lease of commercial properties in a way that it has not as yet affected residential properties. It is therefore crucial that you are aware of Green Deal and that one may be in place for a property you are thinking of buying or leasing for your business.

We would recommend that you inspect the Energy Performance Certificate with care to ensure the property is not subject to a Green Deal. We can also assist you by obtaining warranties from a seller or landlord on your behalf at the time of purchase or lease.

It is also important to remember that other provisions in the Green Deal (which have yet to fully come in to force) will seek to restrict the ability to transfer an interest in buildings which have poor energy efficiency ratings in an attempt to force owners to look to improve the energy efficiency through remedial work. The Green Deal is likely to grow in importance and may well become a tool for negotiation between a buyer and seller.
This Briefing has been produced for information purposes only and is based on the law and other information available at the time of writing. We cannot be held responsible for any losses incurred through acting or failing to act on the basis of anything contained in this Briefing.

If you require advice on any of the matters referred to, please contact us so that we can advise you, taking account of your own particular circumstances and requirements.

July 15, 2014