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The Green Deal – landlords be prepared!

17 July 2012Seddons

Later this year, the government-backed “Green Deal” scheme will be rolled out across the country, lauded as a way for landlords to improve their properties by making them more energy efficient.

However, the scheme will add to the regulatory burden on the private rented sector – for example, from 2016, a landlord will not be able to refuse a tenant’s reasonable request for energy efficiency improvements where support is available through the scheme.

Under the Green Deal, energy companies and approved retailers will fund energy efficiency improvement measures which are paid back over time through a charge levied on electricity or gas bills, the cost of which is supposed to be offset by savings made on energy use. The  so-called ‘golden rule’ of the scheme is that its costs should not be greater than the expected financial savings.

Implementing the scheme does not rely upon conventional loans as it considered a benefit to the occupier, so the charges are paid for by the current bill-payer who ceases to be responsible for the cost of the measures after they move out. Whilst it is usually the tenants responsibility to pay for energy use, landlords should note that the charge will have to be covered by them in void periods even if there is little or no energy usage during that time.

A landlord will therefore want to make sure (where possible) that a tenant does not go off to try and get the Green Deal implemented without their knowledge given the possible liability during such void periods. It is also likely to want to make sure precisely what work is being done and that it does not ruin décor and the like, thereby adding to the landlords possible costs at the end of a tenancy, which may not be fully recoverable from the tenant’s deposit.

A landlord should also check whether the property is subject to any obligations, known as “covenants”, particularly if he owns leasehold property. Common covenants include restrictions on alterations without the freeholder’s consent. Should the “Green Deal” improvements constitute a breach of covenant, landlords could find themselves exposed to a possible claim by their freeholder, which may ultimately lead to forfeiture of their lease. It would be a good investment in terms of time and money to check the lease before signing up to the Green Deal.

The above is only a summary and no substitute for taking legal advice on the specifics of your case.

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Seddons is a Central London law firm with specialist teams dealing with property, landlord and tenants, disputes, enfranchisement, lending, family, probate, employment and corporate affairs. For further advice please contact John Midgley at Seddons Solicitors on 020 7725 8000 or via john.midgley[at]seddons.co.uk. Visit their website here.