Funding for a greener home

Environmentally friendly home improvements form part of the UK Government’s new energy saving Green Deal

At the end of January this year the Government introduced the Green Deal – a new way of paying for energy-saving improvements to homes and business premises.

Under the scheme the cost of the improvements will be met initially by a Green Deal Provider (GDP). The property owner will then repay the cost together with interest through the electricity bills for the property.

The types of improvement which qualify for Green Deal finance include double glazing, loft or cavity wall insulation, draught-proofing, heating systems, solar panels and even wind turbines.

Anyone interested in financing such improvements through the Green Deal will first of all need to contact a Green Deal Assessor (GDA). The GDA will inspect the property, identify any potential energy-saving improvements which could be carried out, advise what the savings on energy bills are likely to be and, having regard to the cost of the work and the level of the repayments, whether it would be cost effective to carry out the improvements.

If the property owner decides to proceed with the improvements he will need to do so through a GDP. The owner and the GDP will enter into a contract called a Green Deal Plan under which the GDP will arrange and pay for the work to be carried out and the owner will agree to repay the cost of the work over time through his electricity bills. In turn the electricity provider will pass the repayments on to the GDP. The idea is that the repayments will be off-set against the savings on energy bills attributable to the improvements. Overall savings from the improvements will only start to be apparent once all of the repayments have been made.

However, this is not a loan in the conventional sense. As the repayments are made through electricity bills, the loan is attached to the property rather than the individual. Therefore if the owner who entered into the Green Deal Plan sells the property, it is the new owner who will have to continue making the repayments through his electricity bills.

This raises a number of issues when buying a property to which such improvements have been carried out or indeed when deciding whether to enter into a Green Deal Plan in the first place:

• A buyer may be reluctant to carry on paying for improvements carried out by the previous owner and this may affect the value of the property.
• Although the fact that the property is subject to a Green Deal Plan must be disclosed to potential buyers when it is put on the market, a seller may fail to do so and there is no search which can carried out to find out if a property is subject to a Green Deal Plan. The buyer’s solicitor should therefore raise specific enquiries with the seller’s solicitor as to whether there is any Green Deal Plan in place.
• Tenants of rented property will need the landlord’s approval before entering into a Green Deal Plan.
• If the property is subject to a mortgage, the bank’s consent may be required before a Green Deal Plan is entered into.
• The improvements may have required Building Regulations approval, planning permission or listed building consent. A buyer should check to see if they were obtained.
• The Energy Performance Certificate for the property should set out details of any improvements carried out under a Green Deal Plan.

Only time will tell whether many people will take advantage of the Green Deal, but as winters get colder and energy bills get higher Green Deal Plans may become commonplace.

Robert Twigg