Many landlords see the Green Deal as an opportunity to improve their assets and the lives of their tenants and do want to apply Green Deal measures in their buildings. However, when it comes to implementing these plans, especially within the common parts of a Shared Ownership or a mixed tenure block of flats, the legal implications can be more complex.
For instance, it's not entirely clear at present whether, based on the Green Deal Framework Regulations 2012, Shared Ownership lessees will require the consent of their landlord for measures that may be wholly within the demise of the tenant. However, it is our view that it was the government's intention that shared ownership lessees should be treated like any other long lease holder for these purposes and that they would not require consent from their Landlord prior to entering into a Green Deal.
Yet, whilst we do not think that consent will be required pursuant to the Green Deal Regulations in relation to shared ownership properties per se, consent may be required under the terms of house/flat leases depending on what the proposed Green Deal measures are.
Like all leases, shared ownership leases seek to balance the needs of the Landlord as owner of the reversionary interest and the needs of the Leaseholder. And in the case of leasehold flats, normally a shared ownership flat lease will demise the interior of the flat only, and the structural walls, and in particular the cavities between the external structural walls, will be outside of the lessee's demise.
Therefore the type of Green Deal measures that a shared ownership lessee can enter into will be limited by:
- The extent of the demise. For instance, the measures cannot be ones which impact upon the structure or exterior of the premises unless an agreement was reached with the Landlord, so no solar panels on the roof, because the roof is outside of the lessee's demise.
- The extent to which the terms on a shared ownership flat or house lease itself may prohibit the proposed alterations. There are some Green Deal measures, such as installing a new energy efficient shower or boiler (notwithstanding that technically the Leaseholder may be removing Landlord's fixtures), that are unlikely to be works for which the Lessee would need to seek consent, due to the fact that the Leaseholder is under an obligation to keep the Premises, including the Landlord's fixtures, in good repair.
In most cases Leaseholders are likely to want to replace items that are worn out rather than seek energy-efficient improvements per se. However, other Green Deal Measures may need Landlord's consent even when they are within the Lessees demise. For example, the installation of double glazing may need Landlord's consent, because the Lessee is not permitted to make any alterations to the exterior of the Premises.
Obviously there are no hard and fast rules as to whether Leaseholders will need to seek consent of the Landlord and it will depend on the package of measures that the lessee is proposing and the terms of their Lease.
If landlords want to enter into a Green Deal Plan in relation to the common parts of a Shared Ownership or mixed tenure block of flats, they must consider the following points:
- Do you have sufficient rights? A Landlord under a shared ownership flat lease will normally have sufficient rights of entry to enter onto the Common Parts of a block of flats to carry out Green Deal Works.
- Can you make these improvements? It seems that improvements made to a building may, in principle, be charged back to Leaseholders through the service charge, enabling the Landlord to make improvements as well as to carry out repairs and renewals.
- Can the Green Deal charge be recovered through service charges? Although improvements are permitted, we do not think that a Green Deal Charge (which is capital costs + loan interest) can be charged back to lessees unless there is an express provision in the Lease which allows Landlord's to do this.
- Is consent required from tenants in a multi-let building? According to DECC consent will not be required from Leaseholders (or Tenants) in a multi-let building where Green Deal measures are intended to benefit its Common Parts. For instance, cavity wall insulation or loft insulation will see the Green Deal Charge attached to the Landlord's energy bill because the tenants are not the "bill payer".
- Will you have to vary your Shared Ownership leases in order to implement the Green Deal in respect of the common parts? Yes. Most Shared Ownership Leases will require variation to enable the Green Deal Finance to be recovered through service charges.
- Do You Have To Consult? Yes. Consultation on (Qualifying) major works must be undertaken. The landlord cannot carry out major works to the building where it costs any one leaseholder more than £250 without first consulting all of the leaseholders; if the Landlord fails to do this, they may not be able to recover all its costs.
- You must consult on (Qualifying) long-term agreements. Landlord's must consult where the amount payable by any one contributing tenant, under the agreement in any accounting period, exceeds £100. The landlord must also consult all tenants if any one tenant would have to pay more than £100 in any one year. Furthermore, long term agreements would include, for example, an agreement entered into with a contractor to install Green Deal Measures on a rolling programme and an agreement to enter into a Green Deal finance plan as well as the allied utility contract.
- Service Charges Must Be Reasonable. If they are not deemed reasonable they can be challenged at the Leasehold Valuation Tribunal.