On
Monday 28th January the government formally launched the Green Deal
scheme following its inception in October 2012. The intention behind the
legislation is to improve the energy efficiency of the property stock
in the UK. I have been asked by a number of conveyancing solicitors
about what additional responsibilities there are for conveyancers during
the process of selling or buying a property which has been subject to a
Green Deal.
By
way of background, the Green Deal enables homeowners and others to take
out long-term loans to fund energy-efficient home improvement projects
such as the installation of loft insulation, solar panels and new
boilers. The loan is paid back through the electricity bills for a
period of up to 25 years.
Under
the scheme approved Energy Assessors will attend the property to assess
its energy efficiency and make recommendations on potential
improvements, such recommendations taking into account not only the
design and age of the property but also the householders’ energy use
habits. The homeowner will then be in a position to provide the report
to an approved Green Deal Provider who will implement the
recommendations and install the appropriate energy-saving measures. The
'golden rule' is that the loan repayments should be lower than the
anticipated savings in energy costs. However, this may not always be the
case because different occupiers will use different amounts of fuel.
The
debt is effectively attached to the electricity supply of the property.
It is not a legal charge (it is an unsecured loan regulated under the
Consumer Credit Act) and it is not the personal obligation of the person
commissioning the works. If they move the 'benefits' and the debt stay
with the property.
The
main impact for conveyancing solicitors will arise on the transfer
and/or charge of a property when the property has installations that
have been financed under the scheme.
Terms and Conditions and Estimates
Consider
changing your Terms and Conditions to cater for the Green Deal. First,
make it clear that the obligation rests the seller to disclose whether a
Green Deal as applicable to the property. Set out the legal obligations
of disclose and the implications of failure. If you have an instruction
form add a question as to whether the property is subject to a Green
Deal. As the conveyancing will inevitably be more complex where there
is a Green Deal do consider whether you want to reserve the right to
charge additional fees. If you have an on-line fee calculator perhaps
you can ask the appropriate question and therefore disclose your
additional fee
Acting for Sellers
Sellers
of properties subject to the Green Deal will be under a duty to
disclose the scheme to prospective buyers at least seven days before
exchange of contracts and to secure the acknowledgement of the buyer or
tenant that they will be bound by the plan.The responsibility for
communicating that information rests with the seller or landlord. Agents
can fulfil that role; however they are not liable for the
responsibility. The buyer will then be required to formally acknowledge
that the Deal has been disclosed to them and that they will be bound by
the terms of the agreement made between the Buyer and the Green Deal
Provider.
If
the seller (being the original bill payer) fails to give necessary
disclosure they may have to repay the value of the loan (and interest).
The purchaser or tenant (if they have not received the necessary
disclosure) may challenge the obligation to repay the loan. They must
do so within 90 days of notification by the energy provider that the
Green Deal affects the property. This action by the purchaser would
leave the debt with the outgoing seller.
Acting for the Buyer
Precedent
documents will need to be amended to reflect the changes, in particular
the Contract for Sale, Reports on Title, Lease and License, and advice
will need to be provided to buyers in understanding the terms of the
Green Deal as part of the usual title investigations.
Whilst
it important to make sure that the investigative work about any Green
Deal is covered I would include a paragraph (as a fallback position)
within the ROT making sure that the buyer gets in touch with you if they
receive any bill one they move in which indicates a Green Deal being in
place - point to the fact that there is a 90 day limitation period to
push the debt back to the seller. I would not consider it overkill in
your letter confirming completion to reiterate the necessity to check
the utility bills and reinforcing the 90 day limitation period
(obviously such paragraphs should be deleted if the where the Green Deal
has been identified as part of the conveyancing process).
The ROT should also set out the disclosure obligations should the buyer decide to let out the property.
As
a buyer’s conveyancer you need to ensure that your client understands
the terms of the agreement, but you will also want confirmation that all
appropriate building regulations and, in certain circumstances,
planning obligations have been fulfilled by the scheme provider as
required under the Deal. For certain properties restrictive covenant
consent or the a license for alteration from a landlord or freeholder
may also have been needed. Please also note that if part of the work
involves a lease of the roof for solar panels there will be CML handbook
requirements to consider.
If
you would like to see precedent wording to go in your Terms and
Conditions, Reports, Sale Contract and other appropriate documents
please contact me.