Green Deal: Private Rented Sector
The Energy Act 2011 enables Government to regulate to help ensure the take up of cost effective energy efficiency improvements in the Private Rented Sector. Government’s intention is that:
· from April 2016, domestic landlords should not be able to unreasonably refuse requests from their tenants for consent to energy efficiency improvements, where financial support is available, such as the Green Deal and/or the Energy Company Obligation (ECO); and
· from April 2018, all private rented properties (domestic and non-domestic) should be brought up to a minimum energy efficiency standard rating, likely to be set at EPC rating “E”. This requirement would be subject to there being no upfront financial cost to landlords. Therefore, the intention is that landlords would have fulfilled this requirement if they had either reached “E” or carried out the maximum package of measures funded under the Green Deal and/or ECO (even if this does not take them above an “F” rating).
When a property with a Green Deal is sold or rented (or when a licence to occupy is issued) the person considering taking over the property should be informed about the Green Deal and what it means for them. This is done by disclosing the Green Deal to the potential buyer or seller and then getting an acknowledgement from them to confirm they will be liable for the Green Deal charges payable through the electricity bill. When Green Deal properties are transferred, as well as Green Deal Providers helping their customers, it is envisaged that a number of professions will assist those selling or renting to understand and properly meet their obligations, as well as informing potential new bill payers so they understand the Green Deal Plan they are taking on should they move into the property.
The Green Deal will be disclosed using the Energy Performance Certificate (EPC). This is already used as part of the transaction process for sale and rent and is an existing requirement of the Energy Performance of Buildings Regulations, which implements a European Directive.
We anticipate a number of property practitioners will assist their clients in working with the Green Deal in the following ways:
· Estate agents and letting agents will assist sellers and landlords to disclose the Green Deal by providing potential buyers and tenants with the Energy Performance Certificate. They are also likely to act as an intermediary between the two parties when buyers and tenants are looking for more information;
· Solicitors will engage with the Green Deal through their work representing clients in the transfer of property, through sale, rent or license. Primarily this will require sellers to include an acknowledgement in the contract for sale or the lease or licence agreement.. Solicitors could also assist buyers in understanding the terms of the Green Deal as part of their usual investigations; and
· Buyers may ask surveyors to check that Green Deal measures are present and as described on the EPC, as part of any survey of the property.
WHY IS IT IMPORTANT FOR THE GREEN DEAL TO BE DISCLOSED TO AND ACKNOWLEDGED BY FUTURE BILL PAYERS (BUYERS AND TENANTS)?
When a property is transacted, the new owner or tenant will become responsible for paying the Green Deal charge, as part of the electricity bill. It is important that buyers or tenants are aware of the Green Deal before they make their decision to take on the property and acknowledge the requirement to make payments, because it would be unfair to require people to pay for something they did not know about beforehand. This principle is reflected in existing consumer protection legislation. Complying with the disclosure and acknowledgment obligations will help to ensure that future bill payers are protected and the responsibility for making payments passes smoothly from bill payer to the next.
WHAT HAPPENS IF A PERSON TAKES ON A GREEN DEAL PROPERTY AND IS NOT TOLD ABOUT THE GREEN DEAL FIRST?
There are several opportunities for the buyer or tenant to become aware of the Green Deal when properties transfer so we expect this to be rare. Where a bill payer was not made aware of the Green Deal, they will be able to raise the issue with their Green Deal Provider and the relevant ombudsman, who will investigate the matter. If the case is proved, the Secretary of State can then order cancellation of the Plan and require the person who failed to disclose and secure an acknowledgment to pay compensation to the provider.
HOW DOES THE DISCLOSURE OBLIGATION FIT WITH THE ENERGY PERFORMANCE IN BUILDINGS REGULATIONS IN GIVING EP CERTIFICATES TO POTENTIAL BUYERS OR TENANTS?
The disclosure obligations dovetail with the requirements of the EPB Regulations, whilst keeping the burden on agents proportionate to the need to inform customers. A number of separate changes are being made to the EPB Regulations covering when an EPC needs to be commissioned, when the EPC must be made available and how compliance will be enforced. For Green Deal properties, the EPC should be provided when someone views the property or, if they do not, when they make an offer to buy or rent the property.
WILL ESTATE AGENTS OR LETTING AGENTS BE LIABLE FOR THE GREEN DEAL IF THEY DON’T PROVIDE THE EPC?
The responsibility to disclose the Green Deal and to obtain acknowledgement rests with the seller or landlord. Agents can fulfil this responsibility on behalf of their clients, but liability does not move to the agents. We anticipate that over time standard contracts between agents and their clients will formalise this arrangement.
WILL RELEVANT PROPERTY PROFESSIONALS HAVE FORMAL ROLES UNDER THE GREEN DEAL?
We do not intend to regulate the activities of property professionals involved in the Green Deal at the present time. We anticipate that Green Deal activities can be incorporated into standard practices over time and we will be working with the relevant professions to achieve this.
