The UK government's ‘Green Deal', which came into force in October, 2012, tries to persuade homeowners to cut the carbon footprint of their home in return for cash incentives.
This had led to one obvious query: What happens if the property is sold? Normally, the buyer would be expected to settle any loans pertaining to the property before it changes hands. The catch here is that such Green Deal loans do not count as charges, and are therefore not registered at the Land Registry.
It is the obligation of the seller to inform a potential buyer of any outstanding Green Deal loans, but what happens if the purchase goes through without the buyer being informed?
About the Green Deal
In 2011 the government announced it was allotting £200million to its Green Deal scheme. Its aim is to deliver over £1.3billion in energy savings by 2020.
Many homeowners are savvy enough to understand that improving the energy-efficiency of their homes by, say, insulating their loft or installing solar panels, creates long-term benefits and makes their home more attractive to potential purchasers.
However confusion often arises when the property is sold and the title is transferred to a new owner.
Commenting on the solicitor's approach to Green Deal loans, Fridaysmove Panel Director Tony Lilleystone said “It is the task of a conveyancing solicitor to identify Green Deal loans during preparations for a potential house purchase, but the seller is required to inform the buyer anyway.”
“The property's EPC (Energy Performance Certificate), which is made available to anyone expressing an interest in buying the property, will contain a reference to the Green Deal loan on its first page.”
In spite of this, professionals within the property-purchasing industry have expressed concerns over the ambiguous nature of a Green Deal loan. If the loan qualifies as a charge, then the seller is obliged to settle the loan before the property is sold.
If it is not, then does the buyer inherit the need to repay the loan? The buyer will, after all, be benefiting from the home improvements made by the previous owner.
Whose Loan is it Anyway?
The Government's position seems to be that responsibility for paying the loan lies with whoever is paying the bills at the property in question.
This has led to further confusion – just because you own a property does not means you live in it. If you rent it out, does payment of the Green Deal loan now fall to your tenants? This confusion about the ownership of the loan – seller, buyer or occupants – may add weeks onto the time it takes for a sale to be completed.
The fact that an EPC is generally valid for ten years means there is no guarantee an EPC has been updated to reflect that the property has a Green Deal loan attached to it.
If the information about a Green Deal loan only comes to light several weeks down the line, and the seller is not happy about having to take over the loan, then both parties will have wasted a great deal of time and money for nothing.
In summary, it seems that advice on how conveyancing solicitors advise their clients about a property where a Green Deal loan remains outstanding is sorely required.
Tony Lilleystone is Panel Director at Fridaysmove, 1-6 Speedy Place, London, WC1H 8BU, and has over 30 years experience in the Property Sector.