Croftons Solicitors LLP

At the end of this year the Green Deal is intended to go live and the first Green Deal Plans could be signed in January 2013.

 Last month saw the HCA roll out its guidance for registered providers “Dealing Green: Options for Registered Providers”

The Green Deal is a vehicle for funding improvements to the energy efficiency of buildings.

Energy assessors will advise on the kind of improvements that can be carried out.  The improvements are then carried out by accredited installers and paid for by a Green Deal Provider which recovers the costs plus financing charges through the property’s electricity bills.

“The Golden Rule” dictates that payments by the bill payer must not exceed the savings that an average energy user would expect the improvements to make.

The payments attach to the property rather than the individual owner or tenant and could last for up to twenty five years.

The measures are also intended to apply to commercial properties and not just residential properties.

The HCA’s guidance sets out some of the pros and cons for RPs in deciding whether to become Green Deal Providers or not.  DECC has also published a Green Deal Provider Guide.

Even if you are not planning on becoming a Green Deal Provider, the end of the year could see approaches by other providers direct to your tenants.  We would urge registered providers to start thinking about the implications now, if you have not do so already, and start to put policies in place.  Some of the issues to highlight this are:

• Policy - Will you agree to the installation of measures?  If your tenant is approached by another provider wanting to install measures at one of your tenanted properties, what is your policy?  It is likely that a lot of your tenants will not be aware of the Green Deal and may not realise that under their tenancy agreement they would need your consent before agreeing to the installation of any measures.  We would urge you to put policies in place and communicate them to your tenants sooner rather than later.   As part of this, you would need to decide on your overall policy and whether you will agree to a third party provider installing measures on your properties. You may want to register as a Green Deal Provider yourselves and provide services to your stock and to the wider market.  You may also want to consider communicating to your tenants that the measures that are installed on the property belong to the property (ie. you, as landlord) rather than them.  If solar panels are installed, the tenant cannot take them with them when their tenancy comes to an end.

•  Your tenancy agreements – there is an obligation on property owners when renting, licensing or selling a property with Green Deal measures installed to positively tell the new buyer, tenant or licensee of the existence of those measures as the new owner or tenant, as the electricity bill payer, will be responsible for the Green Deal Plan payments.  Under the Energy Act 2010, new tenants taking on a property which has Green Deal measures installed will have to acknowledge the presence of the Green Deal installations and that, as payer of the electricity bill, they are to make the payments under the Green Deal plan.  Therefore, your tenancy agreements will need updating to include this provision.

•  25 years – The repayment plans could last for up to 25 years and it is not clear if the Green Deal Plans will allow for a full voluntary early repayment.

• Other consents? When agreeing to allow the installation of measures, what other consents do you need?  Is there a freeholder who needs to consent?  A more likely issue is your institutional lenders – you will have to consider whether their consent is required under the terms of your lending arrangements.  They may want to revalue.

• Voids - The Green Deal Plan repayments could attach to the property for twenty five years.  You will need to be aware that during any void periods for that particular property, you will still have to make the payments even if the property is empty.

• Guarantees and warranties – You will need to ensure that all guarantees and warranties in respect of the installations are passed to you and that you have the benefit of them as property owner.

•  Other more attractive funding methods? If you want to install similar measures across your stock, other funding mechanisms might be more attractive than the Green Deal.

If you would like more information about the Green Deal or to discuss any issues that you may have, please contact:
Lucy Worrall, Partner

Twitter @lucyVworrall

Email lworrall@croftons.co.uk

Posted on 14.08.12