In essence it provides access to green finance allowing building owners to install energy efficiency improvement measures in their property. The repayments are made through the electricity bill with the unique aspect being that the loan sits with the property rather than person so any new occupier takes responsibility for the repayments. The ‘Golden Rule’ of The Green Deal is that the repayments should not be more than the estimated typical savings. So in summary outgoings should not go up, the property has been improved and when the loan is paid off the savings benefit the occupier. In concept a nice idea but in reality is it working work? Only time will tell but if it does take off there are both opportunities and threats to consider for Estate Agents, Letting Agents and Landlord.
The opportunities come from revenue generation, forming partnerships with Green Deal Assessors, Providers or perhaps even becoming one. The ideal market for Green Deal finance are new purchasers who are looking to finance improvements outside of the mortgage and landlords who can improve their properties at no cost to them with the tenant paying the bill. The motivation for landlords is increased further by new rules due to come into force by 2018 in which no property with an EPC rating lower than an E can be rented out. Estate and Lettings Agents on the other hand clearly have the contacts to introduce the idea of Green Deal finance to and those working within The Green Deal will be happy to pay to get to them.
The threat comes from the finance being attached to the property. This means any prospective tenant or buyer is going to take over the repayments. So the Agent/ Landlord has to consider how then will this be explained? Will it affect the property value and will it be a potential stumbling block in the transaction with purchasers expecting the balance to be paid before completion? The EPC will disclose whether Green Deal finance is secured on the property even if the vendor doesn’t and suspect, despite The Golden Rule, this will be seen as a straight loan by purchasers that they either want nothing to do with or compensating in terms of purchase price to take on. This is made more relevant in that The golden rule is based on estimated savings and if not matched in reality the running cost of the property may be higher. Also occupiers struggling with cash flow can switch off to save energy, so reducing bills, whereas The Green Deal loan repayments remain a fixed cost.
This holds true for rental properties as well, will tenants be willing to take on the payments with no reduction on the rent?
How it plays out in reality of course remains to be seen, but The Green Deal is very much something that all involved in property should be ready to deal with.
