What s the deal with Green Deal?

What s the deal with Green Deal? The RLA s guide to Green Deal legislation and what it means for landlords July 2012

What is Green Deal? The Energy Act 2011 includes provisions for the new Green Deal, which is intended to reduce carbon emissions and improve the energy efficiency of British properties, thus making homes warmer. In essence, Green Deal finance will provide energy efficiency improvements with no upfront costs involved. Instead the costs will be repaid linked to the property s energy bill repayments usually paid for by the tenant. Green Deal finance will provide energy efficiency improvements with no upfront costs involved... Who will provide Green Deal? What energy efficiency improvements will be covered? The Green Deal involves a wide range of energy efficiency measures such as loft insulation cavity, wall insulation, energy efficient boilers, double glazing and solid wall insulation. The golden rule... The golden rule is key. The rule states that, based on the first year, the Green Deal charges repaid alongside the electricity bill must be no more than the annual savings achievable as a result of the work. Thus, at least in theory, having the work done should mean that no more is payable than current electricity and gas charges combined for the property. However, this is assessed according to average usage and standard criteria, so in reality it may depend on the usage and lifestyle of the occupiers. This is why the energy assessor is also required to do an individual occupancy assessment, alongside any golden rule calculations of what has to be paid, to show what the actual savings may be. The Green Deal will be provided via accredited energy assessors, Green Deal providers (who will organise the package and provide the finance) and Green Deal installers (who will carry out the work). These will be provided separately or by the same organisations.

Green Deal assessments Getting the work done The Green Deal assessment is key. It will be carried out by accredited assessors who will be prepare a report with recommendations. This will include calculations using the golden rule, as well as occupancy assessment to gauge the likely savings based on the individuals living at the property. Some or all of the work can be done (but there may be a minimum amount of work that has to be done once the private rented sector compulsion provisions come into force). It is the assessor s responsibility to identify if grants under the Energy Company Obligation (ECO) may be available to help fund the works instead of repaying the cost of the work. There may be part packages under which some of the work is financed under Green Deal and the remainder under ECO. The work can be organised either by the landlord or (usually with the landlord s agreement) the tenant. If the landlord is initiating the work and there is a tenant in occupation, or under contract to move in, at the time the tenant will have to give written consent to the Green Deal charge being attached to the electricity account for the property. Whoever organises the work will have to sign up with the Green Deal provider. Green Deal charges will be included in the electricity account... Paying Green Deal charges Interest will be added. Indicative rates are around seven per cent. Green Deal charges will be included in the electricity account. They will be repayable in effect over the anticipated lifetime of the energy improvement measures installed at the property. The role of Energy Performance Certificates (EPC) The EPC is crucial in the scheme of things. Works recommended will depend on an up-to-date EPC assessment. Once the works have been carried out a new EPC will be issued giving details of the Green Deal charges. This will help alert both existing and new tenants as well as any new owner that the Green Deal is attached to the property. Under EPCs, properties are graded from G (the lowest) up to A (the highest). Compulsion in the PRS will affect properties which are rated F or G on current plans.

What a landlord needs to do when letting a property As at present, the landlord must make an EPC available to prospective tenants. Where the Green Deal applies any tenancy agreement must notify the tenant of this so that the tenant is aware of the responsibility to pay Green Deal charges. The tenant will have to sign a written acknowledgement. Non-compliance means that the Green Deal may have to be repaid. Energy Company Obligation (ECO) Alongside Green Deal energy companies will be obliged to finance solid wall insulation in hard to treat properties (usually properties without cavities built before the First World War) and a wide range of measures for those in fuel poverty who are in certain priority categories. Localities will also be chosen for treatment with the benefit of ECO. Who pays the Green Deal charges? Compulsion for the private rented sector The person responsible for paying the electricity bill will be the one who has to pay the Green Deal charges. Payment will be made to the electricity supplier in the usual way. Non-payment could lead to disconnection. Under legislation, it is the occupier of the property (i.e. the tenant normally) who is liable to pay electricity charges and the same will apply to Green Deal charges. Early repayment will be possible. Rented properties will have to be brought up to at least Category E on an Energy Performance Certificate, otherwise they cannot be let. This will include properties which are already subject to sitting tenancies. This is likely to start in 2018. This will only apply to works which are covered by either Green Deal or ECO if there is no such funding available to cover the works then it is likely that exemption from compulsion will apply even though the properties may still be Category F or G. Rented properties will have to be brought up to at least Category E... otherwise they cannot be let...

As a landlord why should I care? Green Deal will particularly affect every property in the private rented sector. The scheme will be rolled out on a voluntary basis in October 2012. Tenants will be legally allowed to demand Green Deal improvements from 2016, and compliance with Green Deal minimum requirements for privately rented properties will be compulsory from 2018. The RLA has a number of concerns about how Green Deal will operate in practice... Consumer protection The Government intention is that there should be extensive consumer protection under Green Deal. Primarily this will be provided by accrediting all Green Deal assessors, installers and providers with guarantees (underwritten by insurance) being in place in case of defective work etc. RLA position on Green Deal The RLA has a number of concerns about how Green Deal will operate in practice. To find out more visit www.rla.org.uk/greendeal. For more information about our work please also visit: www.prsgreendeal.co.uk Alternatively: Telephone: 0845 666 5000 Email: campaigns@rla.org.uk Disclaimer This leaflet is based on the RLA s current understanding of legislation and proposed regulation. This may change. All information correct at the time of publication. 2012, Residential Landlords Association. All rights reserved.