GREEN DEAL – Warm Tenants and Happy Landlords

Saturday November 10, 2012

With another grim north east winter looming there is good news for landlords and their tenants in the region with the launch of the Green Deal set for this month. The Green Deal is a Government initiative aimed at improving energy efficiency in the UK housing stock. This will allow landlords to carry out energy efficiency improvements without any capital expenditure. Finance of up to £10,000 per property is expected to be in place by January 2013.

The improvements are paid for by a loan attached to the utility meter and repaid by whoever pays the bill and thus benefits from the savings demonstrated, in most cases this will be the tenant. In order to facilitate the Green Deal landlords must first gain permission from the tenant. With the prospect of a cozy home coupled with savings on utility bills this should not be a hard sell. The next step is to contact an authorised Green Deal Assessor who will visit the property and recommend energy efficiency improvements. These can include wall, floor, cavity or loft insulation, pipe lagging, draft proofing, double glazing or a new boiler. Solar panels may be included in the Green Deal although this is not yet clear.

Finance for the Green Deal is not provided by Government. It is a commercial loan repaid with interest but the Department of Energy and Climate Change (DECC) has provided a ‘Golden Rule’ which must be adhered to before finance is authorised. In essence the Golden Rule states that savings must exceed repayments so that if a £20 per month saving is demonstrated, the monthly repayment figure must be below £20. If the cost of repayment exceeds the savings demonstrated, say in the case of an older property, help is at hand in the form of the Energy Company Obligation (ECO). If the Golden Rule is broken the Green Deal Assessor will advise the landlord if grants are available to implement the necessary improvements. Like the Green Deal the ECO launches this month.

A further incentive if one were needed, is the fact that from April 2018, landlords will be unable to let properties with an Energy Performance Certificate (EPC) banding of ‘F’ or ‘G’ unless they can demonstrate they have done everything they can through Green Deal and ECO to bring the property up to band ‘E’. There is speculation in the letting sector that Councils may grade Council Tax by EPC rating, penalising properties in the lower bands. It is hard to find a flaw in the Green Deal. The landlord adds value to the property with no capital expenditure, the tenant gets an energy efficient home with a guarantee of lower utility bills and everyone improves their carbon footprint. Combined with the fact that our northern winters do not seem likely to get milder any time soon and the economic outlook for our region remains uncertain, cost savings combined with warm-as-toast properties would seem to be a no-brainer of a deal for all concerned.