Buying a House with a Green Deal
03 January 2020
If you buy a house with a Green Deal you become liable for paying off the outstanding balance of the loan, which is added on to your electricity bill. This is because the loan is attached to the property not you personally. In this article, we explain what a Green Deal is, how it works and what to think about before buying a house with a Green Deal.
The Green Deal Explained
The Green Deal is a government scheme which provides homeowners with a loan to improve the energy efficiency of their home. This loan can help to cover the cost of home improvements such as loft insulation, double glazing or a new boiler, and these costs are then paid back over time through the homeowner's electricity bill.
One of the key attributes of the Green Deal is that the cost of the loan repayments shouldn't outweigh the energy savings. This means energy costs won't increase, which makes the Green Deal attractive to homeowners.
The only issue with this comes if the homeowner wishes to sell the property before the outstanding loan has been settled. Any outstanding payments on the Green Deal will become the responsibility of the new homeowner. Whoever pays the utility bills will be paying back the costs, as these payments will be added to their energy bills (so either the homeowner or the tenant if the property is rented). They will also benefit from the lower energy costs.
Tips for Buying a House with a Green Deal
You can see whether or not a house has a Green Deal on the Energy Performance Certificate (EPC). Anyone selling a property is obliged to provide a copy of this certificate, and if you haven't already received a copy of this, you can request one from the estate agent or view the EPC register. In addition, the Property Information Form that is provided by the seller to the prospective buyer must also state whether any work at the property has been financed by the Green Deal.
If a home does have a Green Deal, then the good news is that it will have recently had work carried out to improve its energy efficiency. The bad news, however, is that you could find yourself footing the bill for those improvements even though you weren't the one who undertook them. This is because the loan is attached to the property's energy bill, so it stays with the property rather than moving on with the person who initially signed up to the deal.
Any other finance arrangement or loan would always stay with the individual who signed up to it in the first place, but this isn't how it works with the Green Deal. And while a property's asking price would commonly reflect improvements that have been carried out, the buyer wouldn't usually be required to pay any costs in addition to the purchase price to cover these improvements. This is what makes the Green Deal so unique, and this is why it's important to fully understand the implications of a Green Deal before committing to purchasing a property that has one.
If you are considering buying a house with a Green Deal then the first thing you need to do is find out how much is outstanding on the deal. Unless the seller settles the outstanding amount prior to selling, you'll become liable for this outstanding bill when the purchase completes.
You should also consider how your energy consumption is likely to compare with that of the current property owners. For example, if the current owners are at home during the day or if they have a large family, then they may have taken out the deal because it effectively reduced their energy consumption as a household. A professional couple without children, who are out of the house a lot of the time may not see the same benefits.
One important point to note is that you are still able to switch energy suppliers if you are on a Green Deal, so it won't impact on your ability to shop around to find the best tariff.
In some cases, you may be able to negotiate money off the purchase price to reflect the outstanding bill that you'll be taking on. Or you could request that the seller settles the outstanding amount before you exchange contracts. As with any negotiation, the seller is under no obligation to agree to this request. Ultimately, if you're not happy to take on the Green Deal and become liable for the outstanding amount, and the seller refuses to settle this themselves, then your best option might be to walk away.
If you are interested in learning more about the Green Deal or taking one out on your own home, you can find more information on gov.uk. The Green Deal is no longer funded by the government, but private companies continue to operate the scheme.