Page 24. South Wales & Three Counties Herald. Issue 004
Issue 004. South Wales & Three Counties Herald. Page 25
The Green Deal: consumers beware nasty surprises
surprises.
The bad news is that, like anything bought on credit, improvement works
The Green Deal is littered with caveats and controls that might deter
will cost significantly more than they would if paid for up front. Alan
potential consumers – but with a bit of awareness they should be able to
Milstein, chairman of the Residential Property Surveyors Association,
avoid most pitfalls
says homeowners would be well advised to look at alternative methods of
Homeowners can now sign up to a “Green Deal” which enables them to
funding before entering into a Green Deal. “For many consumers, taking on
get energy-efficient improvements to their home at, potentially, no up-front a Green Deal loan may not be the most cost-effective mechanism to fund
cost.
any green improvements to their property,” he says.
Instead, Green Deal providers foot the bill with occupants repaying the debt The masterminds behind the scheme have sought to allay this concern by
over time via a charge on their energy bills. But just how consumer-focused introducing a “Golden Rule” – that the cost of repaying the loan should not
is the scheme?
exceed the estimated energy savings each period. So, for example, if it is
First, the good news. Because the “buy now, pay later” concept means a
estimated you will save £50 a quarter on your energy bills, your Green Deal
Green Deal provider is essentially offering a line of credit, most participants provider may not recover more than £50 a quarter from you to pay back
will be covered by the Consumer Credit Act. This means the provider is
your loan.
obliged by law to provide certain information, such as the total charge
What has been glossed over, however, is the fact the estimated savings are
for credit, any APR, how repayments are calculated, information about
exactly that: an estimate. There is a risk consumers could end up paying
cancellation rights, and so on. Therefore, as long as consumers read the
more.
small print carefully before forging ahead, they should avoid any nasty
The Green Deal code of practice is littered with requirements that providers
remind consumers about this risk, seemingly with the view that if we know
about the problem, that solves it. However, there does not seem to be any
specific obligation on providers to reassess affordability if it becomes
apparent that estimated savings have not been achieved.
Another significant concern is what happens when the occupant of a house
changes. Any deal is attached to the house it is bought for, rather than
the person buying the loan. This means subsequent occupiers could find
themselves saddled with charges they do not want or cannot afford.
The scheme seeks to deal with this problem in two ways. First, there are
extensive rules about disclosure – anyone selling a property must tell a
prospective buyer if there is a Green Deal attached to it; the buyer must be
notified before the seller accepts an offer at the very latest. Second, the code
of practice states that if the occupier of the house changes, the provider
should reassess the affordability of the plan for the new occupant.
Neither of these, however, is without its problems. The disclosure
requirements are strict, and a buyer must consent to any Green Deal
in writing; a seller who fails to obtain such consent will have to pay
compensation. But if a buyer does not want to consent, there is little the
seller can do beyond negotiating. They could, for example, off er to pay off
the loan in full. In such cases, however, they should be prepared to pay an
early settlement fee, and may well find themselves out of pocket if a buyer
does not agree to any corresponding increase in the purchase price.
Even if a buyer does consent to the Green Deal, the reassessment
requirement means any savings the seller is making cannot be said to
indicate the potential savings a buyer might make – the buyer’s needs and
energy usage will inevitably differ.
A buyer may therefore want the reassessment done before deciding whether
to make an offer on a property, all of which is likely to take time. At a time
when sales are already proving difficult for homeowners, it seems probable
that Green Deal housing stock will be on the market for longer while buyers
wait for affordability assessments and weigh up the pros and cons.
It is of course possible that these issues will be ironed out quickly as the
scheme finds its feet. For those who would not otherwise be able to afford
the relevant home improvements, and for whom the estimated savings
materialise, the Green Deal could well prove to be a great deal. But for many
it could amount to nothing more than a great deal of trouble.
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