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Is the Green Deal a good deal?

August 8, 2013

The Green Deal is an ambitious new carbon saving measure introduced by the Government in January to provide funding to reduce domestic energy consumption with no upfront costs to the homeowner. The cost will instead be repaid, with interest, through electricity bills over a period of time.

The loan (max. £10,000 over a period of up to 25 years) can be used to pay for improvements including cavity wall insulation, loft insulation, double glazing, central heating and many other measures. The interest rates vary between the various Green Deal providers. In theory, the repayments should not outweigh the savings made as a result of the improvements.

A home assessment (app. £120) is required before any measures can be installed.

The Government hopes to kick start the scheme by offering cash back incentives to those signing up early. These incentives are also available to people who can afford to pay up front without taking a loan.

Having a Green Deal loan does not mean that you have to stay with the same electricity supplier. It is quite permissible to switch supplier provided the new company is also signed up to the scheme. All of the major energy suppliers are already signed up.

So what’s the problem? The loan is attached to the property’s electricity bill, so if the person who has set up the deal moves house, the outstanding debt falls to the new owner! Potential buyers may not value the improvements and may not want to pay for them. They might very well consider that the benefit of the improvements has already been factored into the sale price, and that the loan repayments on their electricity bill are therefore an extra cost that they don’t want to pay. It is expected that most prospective buyers will insist on the seller paying off the loan before buying the property.

It is therefore vital when buying a property that your solicitor checks if it is affected by a Green Deal loan.

For more information please contact Stuart Rowland, Partner at Walker Foster on 01535 656000 swr@walkerfoster.com

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