Although I live in Northern Ireland and we have a different “Green Deal” to the rest of the UK, I was able to secure a grant for the replacement of my Mother’s 22-year-old boiler for a new condenser type. As a result, there has been an immediate reduction in oil consumption which has meant that my Mother has reduced her heating bill by almost 50%!
The original Green Deal was launched in mainland Britain in 2013 with the sole purpose of improving the Energy Efficiency rating of old properties. It was claimed by the various Government Ministers, to be a revolution in the improvement of property Energy Efficiency. Unfortunately, the terms were not very attractive. The idea was that householders could take out a loan in order to replace old central heating boilers or install better insulation and that the loans would be paid back via the property’s energy bill over a period of between 10 to 25 years. The enticement was that the savings in energy costs would more than offset the cost of the loan.
However after seven months of the plan’s existence, only some 4000 households had actually signed up for the deal. There were a number of reasons as to why there was such a low take-up. Firstly, despite the low Bank of England base interest rate, these loans were being charged at a rate of 7% interest, which was considered to be extremely excessive. The other issue was the fact that the loan itself was attached to the property and an uncertainty arose as to how this would be dealt with when the time came to sell the house.
In December that year, the Government tried to encourage a larger take-up of the scheme by adding a further amount of £125 million with an increase in the level of pay-out.
However in June 2014, a further element was added to the scheme which proved to be a great success and thus was born the Green Deal Home Improvement Fund.
The unfortunate result was that because this addition to the original scheme was so successful, the Government was forced to close it to any new applicants at the end of July 2014 – one month after it was initially opened.
Before any work could be undertaken, the property owner had to instruct an authorised company to carry out an Energy Efficiency Survey. This survey would outline what energy-saving improvements would be necessary to make the property more efficient. Only when the survey had been completed and the appropriate Green Deal Advice Report obtained, would the property owner be able to submit a claim to the fund itself.
There were a number of items that could be claimed such as, up to £1000 for the installation of two energy-saving improvements, which could be increased by a further £500 for those who had only bought their property within the previous 12 months. There was also a further amount available of £6000 for any property owner that installed solid wall insulation. It is also interesting to note that the cost of the original survey, up to a value of £100 could be included in the claim but only when the claim had been accepted by the fund.
The main point is that the Green Deal Home Improvement Fund was applicable to both private landlords who owned property for rent and individual property owners. The same amounts were available to both parties as they related to improving the Energy Efficiency of the property. However there was a small stumbling block!
Obviously, in a rented property, the tenant is responsible for the payment of the electricity bill. However, any improvements to the property with regards to an increase in Energy Efficiency, apply to the property but since any loans must be paid back via the electricity bill, these repayment costs are added to the consumption charges of an electricity bill, whether it be monthly or on a pay-as-you-go system. The argument for this was that the tenant would save in heating bills as a result of the increased Energy Efficiency and this would more than offset the additional cost of the loan repayments.
This all might seem somewhat complicated, so let me look at it in greater detail.
You, the landlord, are the person who has carried out any Energy Efficiency improvements to the rented property. Since the finance for these improvements is attached to the property itself and not to you as a landlord and payment for these improvements is financed through the electricity bill, then the responsibility for the repayments attach and rest purely with the tenant i.e. the person who is ultimately responsible for payment of the electricity bill.
It is pretty obvious that initially, a tenant’s first concern will not be the fact that you have carried out such improvements. Their main concern will be the rising cost of the electricity bill itself. However as you are unable to receive a grant to assist with such improvements unless there will be an obvious increase in the Energy Efficiency of the property, there will inevitably be a saving in the overall heating costs of the house, no matter whether the bulk of the heating is supplied by gas, oil or electricity. The ultimate saving should more than offset the additional payments in the electricity bill.
I stress this point for a second time because insofar as existing tenants are concerned, it is essential that you obtain the tenants express and written permission to undertake the improvements before you are able to even apply for a grant within the terms and conditions of the Green Deal Loan. Should that tenant refuse to agree with the installation of the improvements then at this time, there is no real way you can enforce their installation. In any event, you will further have to reach agreement with the tenant with regards to the installation should the tenant accept the proposed improvements. It is for this specific reason that I have heavily emphasised throughout this article the ultimate savings that will be made through the improvement of Energy Efficiency which, in the long run, can only but reduce the power overheads for a tenant.
This right of refusal would not apply to a new tenant, even though the costs of any finance will actually be paid for by that new tenant. For this reason, you will need to incorporate within the Tenancy Agreement an acknowledgement that the Green Deal Home Improvement repayments will form part of the electricity bill for that property. A tenant is not in a position to refuse to pay these amounts as they will, by default, form part of any electricity bill. Therefore by accepting your duly altered Tenancy Agreement, they will have accepted repayment of the additional amounts.
It is worth pointing out that should a landlord wish to finance any energy-saving improvements themselves instead of applying for a loan, then this is completely acceptable and I have no doubt that the future rent for any new tenant could incorporate an additional element to cover these costs. The only real condition and stipulation would be for any improvements to be installed by a registered Green Deal provider.
At this stage, particularly since the current Green Deal Home Improvement Fund is closed for further applicants, there is no legal requirement on any landlord to undertake any of these improvements. However it is quite possible that as from 2016 the situation may change due to the following Government proposals.
It is anticipated that as from 2016, all tenants will have the automatic right to effectively demand that energy efficiency improvements be carried out to the property they rent, should its Efficiency Rating be below Grade E.
Furthermore, from 2018, it is anticipated that it will be illegal for landlords to rent out a property within the UK, excluding Northern Ireland, that only has an efficiency rating of F or G displayed on their Energy Performance Certificate. Landlords will only be able to let properties that either meet this standard or where they can prove that they have installed improvements to the maximum amount fundable under the terms and conditions of the Green Deal. Similarly, if a landlord is still unable to increase the efficiency rating of the property to the minimum accepted level of an E rating, despite taking advantage of all funding available, then they will be excused compliance with this legal obligation.
Earlier on in this article, I mentioned that before an application may have been submitted, it was essential that an Energy Efficiency Survey be undertaken by an accredited surveyor. Many landlords did have a survey conducted but since the fund was all used up within one month of it being launched, a large proportion failed to submit their application within sufficient time. This meant that they had incurred a cost, sometimes up to £120, in relation to the survey, the cost of which could have been included in the grant from the fund. As a result, a large number of landlords are currently out of pocket and at this time, it is not possible to say whether such Certificates would be admissible in any future fund relating to the Green Deal.
As I’m sure you are very well aware, Governments keep changing their mind all the time. A general election is in the offing in about six months and so all parties are looking for something new with which to persuade the voters that they are the best party for the job! So it is no surprise that at the recent Liberal Democrat conference in Glasgow, they announced that homeowners were to get a second bite of the cherry, namely the Green Deal Home Improvement Scheme Phase 2.
It is anticipated that the Government will offer an extra £100 million in subsidies to make energy efficiency improvements although at the time of writing this article, there has been no indication as to when this will actually be put into effect. It has also not been intimated as to the level of benefits that will apply with this new proposal, particularly as to whether they will be in line with the previous version. As a further incentive, it has been proposed that the government fund a £100 per year local Council tax discount over the next 10 years for any property owners, including landlords, who take steps in order to improve the energy efficiency of their properties.
So led us summarise the points that have been discussed.
The purpose of the Green Deal Home Improvement Fund, which was available both to private property owners and private landlords, was to provide an element of funding to enable those property owners to increase the Energy Efficiency of the property by installing acceptable energy-saving improvements, such as condensation boilers and wall insulation.
In the first instance and prior to submitting a claim, the applicant had to obtain an Energy Efficiency Survey carried out by an accredited surveyor, so that a Green Deal Advice Report would be issued indicating the efficiency grading of the particular building.
The applicant could apply for funding up to a maximum amount of £7000 to carry out these improvements, the funding for which would be supplied by the electricity companies. Although the improvements would effectively be attached to the property, the responsibility for repayment of the loan rested solely with the payer of the electricity bill, namely the tenant.
Although it was not mandatory to apply for funding, most landlords would do so since repayment of the funds plus interest would rest with the tenant rather than the landlord.
Agreement between the existing tenant and the landlord for the installation of the improvements must be in writing between both parties. Where a new tenant is involved, the responsibility for repayment of the funding via the tenant’s electricity bill must be incorporated within any future Tenancy Agreement.
It is proposed that certain mandatory obligations will be placed on the landlord with regards Energy Efficiency with effect from the year 2016 and will be further enhanced in 2018.
In view of the phenomenal take-up of the Green Deal Home Improvement Fund when it was launched in June 2014, it was subsequently closed one month later and is not currently open to any future applications.
Landlords can but hope that, as indicated, the Government will reopen the fund in the near future in order that they may comply with new pending legislation regarding Energy Efficiency anticipated in the year 2016. It will be interesting to see if a non-Conservative government is elected, whether it will indeed reopen the fund and honour the commitments of the current government.