Selling a Green Deal property? What you need to know before you do
Complications can arise when selling a home with a Green Deal. Here's what you need to know before putting your property on the market:
What is the Green Deal?
The Green Deal was a UK Government initiative designed to encourage homeowners to make their homes more energy-efficient. The scheme was essentially a long-term loan that could be used for home improvements like double glazing, heating, renewable energy generation and loft insulation.
The Green Deal scheme ran from 2012 to 2015 and has now been scrapped.
The Green Deal loan
The Green Deal loans were typically issued for a fixed term, typically 15 to 20 years and at a fixed rate of interest.
This means that a property with a green deal loan issued in 2015 could still be bound by the terms of the loan until 2035.
How is the Green Deal loan repaid?
Repayments are automatically made through the electricity bill, and the loan stays with the property when you move out. Therefore you must inform any buyer that the Green Deal is in place.
What is the problem?
A property being sold with an outstanding Green Deal loan should not jeopardise your sale.
However, the scheme was no a great success with only an estimated 10,000 properties having signed up. As a result, buyers, agents and even solicitors might not fully understand the implications and could be spooked by the prospect of inheriting liability for the loan.
Might having a Green Deal in place put off potential buyers?
To make the scheme affordable, repayment figures are not supposed to exceed the financial savings made by the improvements. The homeowner should not experience any increase in day-to-day costs after the work has been carried out.
However, buyers may assume that the improvements are reflected in the upfront asking price. Once the buyer discovers the liability for the outstanding loan, they are likely to want to renegotiate to reflect this lability.
As a seller, you will then have to explain how the loan repayments are offset by the future energy savings, or capitulate and accept a lower offer.
Selling a property with a Green Deal - FAQs:
How and when should I complete the Property Information Form (TA6)?
The Property Information Form (TA6) is a standard form completed by the seller of the property at the beginning of the conveyancing process.
Question 7.7 on the form asks :
Have any installations in the property been financed under the Green Deal scheme? If Yes, please give details of all installations and supply a copy of your last electricity bill.
- answer this question giving as much detail as possible. The form does not offer much room for detail - if necessary continue the explanation on a separate page or the back of the form
- ideally, instruct a solicitor before you find a buyer, so the information is immediately available to the buyer.
- have been issued a new Energy Performance Certificate (EPC) when the work was completed. The EPC should have details of the work carried out and the repayment terms. Find the EPC and include it with the form when you return it to your solicitor.
- find and include a copy of your electricity bill.
You can download a specimen copy of the Law Society TA6 form here:
Should I tell my estate agent?
Yes. If you explain the Green Deal circumstances to the agent, they will relay this information to any prospective buyer. Being open and transparent upfront will build trust and negate any potential issues in the conveyancing process.
Correctly explained, buyers should have no concerns and will understand that a Green Deal loan should not be a reason to make a lower offer.
Will the buyer have to stay with the same electricity supplier?
No. The new owner can switch electricity supplier, as long as the new supplier is a participant in the Green Deal scheme.
All major energy providers (British Gas, EDF, Eon, Npower, Scottish Power and SSE) are part of the scheme, although some of the smaller suppliers may not accept Green Deal customers.
If the new owner switches supplier, the loan will move to the new supplier.
Could I pay off the loan before selling my house?
You could. It may be worth considering paying off your Green Deal loan before you sell your property to simplify the negotiations. You could also agree to pay the loan off between exchange and completion using the deposit - but this could create delays and is therefore not usually advised.
Are there any early repayment fees?
If the loan was taken out before May 2014, there should be no early repayment fees. There should be no fees for early repayments for loans of less than £8,000 over a 15-year (or shorter) term.
Larger loans that were taken out before May 2014 typically attract fees of:
- loans for less than 15 years: repayment fees for up to a maximum of 1% of the amount you wish to repay early.
- loans for more than 15 years: a maximum charge of £6 for each year left on the loan for every £1,000 you want to repay early.
For example, an outstanding loan of £10,000 with 13 years still to run of a 15+ year term will attract an early repayment fee of £900, on top of the £10,000 still owing.
Handled correctly, the Green Deal should not affect the sale of your property. It can even be pitched as a marketing benefit as it means that energy-saving measures have already been carried out at the property.
With the costs of energy increasing, the benefits could actually be considerably higher than the cost of the loan repayments.
The key is that your conveyancing solicitor is fully conversant with Green Deal loans and can complete the conveyancing process without delay.
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