Thu 26 Oct 2017 by Lorraine Imhoff
The benefits of the Green Deal for homeowners have been widely publicised. However buyers should be aware that they will have to continue making repayments when buying a home, if the seller has obtained finance under this scheme.
The Green Deal scheme is aimed at encouraging owners of older homes to install energy-saving measures such as loft insulation, double glazing or a more efficient boiler. It provides registered installers with the finance to pay for the works. Homeowners then repay this finance through their energy bills.
The idea is that the repayments will (in theory at least) be covered by the savings on energy bills made from having the energy-saving home improvements installed. This is known as the 'Golden Rule' – an owner should not pay back more in loan repayments than they are saving on their energy bills.
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But Green Deal finance is not like other loans or mortgages – it does not have to be repaid by the seller when a home is sold. Instead the buyer (or more accurately the new bill-payer) will have to continue to make repayments, through their energy bills. In a way, the loan attaches to the electricity meter rather than the property.
Home buyers will therefore want to know whether a seller has used Green Deal finance to pay for improvements, and how much they will continue to have to pay. Since this will not be mentioned on the property title, buyers will have to rely on information provided by sellers.
With this in mind, the latest version of the Property Information Form used by Conveyancing Solicitors requires sellers to say whether any installations at the property have been financed under the scheme, and if so to provide a copy of the last electricity bill.
If the property is being sold by a mortgage lender as a repossession case, or by a trustee or executor, they might not know whether the original owner had used Green Deal finance to pay for improvements.
Buyers should look carefully at the terms of any Green Deal package affecting a home. One of the problems facing buyers is that the repayment terms for the original finance will have been determined by the Green Deal provider when the works were installed. This will depend on the projected amount of energy savings, and repayments may have to be made for up to twenty-five years.
Buyers will not necessarily benefit from the same amount of savings as the seller. For instance a seller with a large family could use a lot more energy than a couple who are out at work most of the day. The couple buying the property could then find that with the repayments they will have to make the total amount they have to pay on their energy bills is higher than if there had been no Green Deal loan.
It seems to have been assumed that the prospect of having to make such repayments will not affect the price buyers are prepared to pay for a property. But buyers do not usually expect to have to pay for works which the seller has had carried out.
They may therefore not be prepared to pay more for a home which has the benefit of energy-saving works than for a similar property without such improvements.
Buyers may be prepared to take into account the fact that their energy bills should benefit, but most buyers are out to get the best possible deal for themselves. Consequently sellers may not be able to achieve a higher price just because they have had energy-saving improvements carried out.
Anyone buying a property with the intention of letting it should be aware that the bill-payer, which is usually the tenant, will become responsible for repayments of any Green Deal finance. If a property has prepayment meters, the tenant will have to pay enough to cover the repayments as well as paying for electricity actually used.
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