What is the Green Deal?
The Green Deal is a UK Government initiative seeded with Government money but with the bulk of its funding sourced from a consortium of banks and energy companies. Its purpose is to promote the energy efficiency of commercial and domestic properties in the UK, and the initiative has been running since January this year.
The Green Deal enables a property owner to make energy saving improvements, such as double glazing, solar panels and ground source heat pumps, without having to meet the immediate capital cost. Provided the improvements meet Green Deal criteria (the most important of which is that the long term energy savings exceed the capital cost) the Green Deal will fund the improvements and the capital cost will be recovered by way of a supplement to the property's electricity bills over a period of up to 25 years.
The Green Deal supplement does not attach to the property itself. Instead it is the responsibility of the person or company who is liable for the energy bills of the property. Almost always this will be the actual occupier – an owner occupier or a tenant. Because of this, it is crucial for all prospective purchasers and tenants to check if a Green Deal is in place.
Buying and leasing with a Green Deal in place
Under section 12 of the Energy Act 2011, an existing Green Deal 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 free of charge detailing the key facts of the Green Deal. A prudent seller/landlord should also obtain written confirmation from the purchaser or tenant agreeing to be bound by any green deal charges.
Prospective purchasers and tenants should exercise caution as such a disclosure may not be forthcoming from a seller or landlord. Whilst compensation will be available to the new owner/tenant for up to 90 days after he has received his first energy bill, when this period of grace expires the new owner/tenant will have no recourse, and no alternative but to pay the Green Deal charges.
Importance of checking for Green Deals
Official figures show that over 9,300 Green Deal property assessments had been completed by the end of April this year and this number is growing fast. It is therefore crucial that you are aware of Green Deals and that one may be in place for a property that you are thinking of buying or leasing for your business. You should not only inspect the Energy Performance Certificate with care to ensure the property is not subject to a Green Deal, but also obtain an appropriate warranty from the seller/landlord. Those who do not exercise caution here may find themselves with an unexpected addition to their electricity bill for a substantial period of time.