The Government's Green Deal offers homeowners the financing to reduce the environmental footprint of their home, but what happens when the property is sold? As with any charge, the buyer would expect the seller to settle the loan when the property is sold. The catch is that a Green Deal loan is not a charge, and is not registered at the Land Registry.
A seller is nevertheless obliged to inform a buyer of the existence of an outstanding Green Deal loan, but what happens if the seller does not, or simply forgets?
What is the Green Deal?
Many homeowners recognise the long-term benefits of improving the energy efficiency of their residence. Not only will improvements, such as better insulation, mean lower utility bills, the property should also be more attractive to future buyers.
£200 million is being made available to deliver over £1. 3 billion in energy savings to 14 million homes by 2020.
Green Deal Confusion
A Green Deal loan should be identified during appropriate searches during the conveyancing of a property, and the vendor is required to inform the seller regardless. The loan will be noted on the first page of the property's Energy Performance Certificate (EPC), which is made available to anyone who expresses a serious interest in purchasing the home.
Despite this, a number of industry professionals have voiced concerns that the status of the loan is ambiguous. Is it the seller's responsibility to pay off the loan when the property is sold, as though it were a charge? Or does the buyer "inherit" the obligation to repay the loan, given that it is the new owner who will be gaining the benefit of the energy efficiency?
It appears that the Government's position is that the bill payer at the property is responsible for repaying the loan. This can also potentially refer to tenants, and may create confusion if both parties in a sale, purchase or rental assume that the other will be taking responsibility for the debt. This confusion may only come to light weeks into the transaction.
Furthermore, an EPC is generally valid for 10 years. It is possible that an EPC created before a Green Deal loan is taken out (and therefore containing no mention of the loan) may be provided to a potential buyer. This denies the buyer an early opportunity to clarify the status of the loan, or a chance to decide against the purchase.
Even in cases where the loan is disclosed, some commenters have argued that buyers would be less interested in a property burdened with this debt. This is doubtless the opposite of the Government's intent when the Green Deal was announced.
Clarification as to how the solicitors acting for buyers and sellers should advise their clients is sorely needed.