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Green Deal

Last updated 21/05/2013: any recent updates in this colour.

About the Green Deal

The Green Deal is a flagship government scheme led by the Department for Energy and Climate Change (DECC) which is intended to deliver energy efficiency measures to homes in all tenures without any up front costs.  It was fully launched on 28 January 2013.  Since then, customers have been able to take out Green Deal finance plans to pay for energy efficiency improvement works to their homes. 

DECC Green Deal guidance for the UK property industry

On 26 March 2013, DECC published their Guidance for the property industry on the Green Deal, which includes process maps and various scenarios illustrating how the Green Deal interacts with property transactions.  The CML provided substantial input into the development of this Guidance, so that it sufficiently reflects issues of interest to lenders in relation to the Green Deal.  The Guidance provides extensive information on a range of issues arising as the property industry interacts with the Green Deal and properties which have been improved by it.  The CML is committed to continue to work with DECC and property professionals to ensure this guidance remains relevant as the Green Deal marketplace develops over time.

Property industry guidance FAQs for lenders

As of May 2013, in conjunction with DECC, we have developed a useful set of FAQs to supplement the property industry guidance.  The FAQs can be downloaded from the “related documents” section at the end of this page.  The FAQs are intended to be a living document, and we will keep these under review and expand them over time as the Green Deal develops.  The following topics are covered:

  • The value of Green Deal improved properties
  • Mortgage Affordability
  • Green Deal charge payments
  • Disclosure
  • Energy Performance Certificates
  • Quality of assessments and installation
  • Mortgage provider interest in properties improved by the Green Deal
  • Void periods
  • Consents
  • Other issues

On residential lending, the CML’s position on the Green Deal is:

  • The market will determine any impact the Green Deal may have on property values.
  • In principle, lenders welcome measures that may reduce energy costs on mortgaged properties, but they will wish to know when Green Deal finance and improvements exist so that they can assess any potential positive or negative impacts on their exposure to risk, or on property valuation aspects.
  • The CML and DECC will continue to work together to review practical aspects of the implementation of the Green Deal, to ensure concerns around practical aspects (such as liability and costs if repossession occurs) are properly addressed through guidance as necessary.
  • Lenders will adopt their own individual policies towards the Green Deal, dependent on how the market develops as the Green Deal is taken-up by customers and as Green Deal improved properties turn over in the property market.
  • Lenders will make their own individual commercial decisions in response to the Green Deal, and these may vary.

On commercial lending to housing associations (registered providers), the CML’s position on the Green Deal is:

  • Firm commitment to Green Deal activity in the social and affordable housing sector, as in other sectors, is currently limited.  The market will shape how this develops over time.
  • It is currently too early to confirm any impact that Green Deal measures, including the Green Deal charge, may have on property values in the sector – again the market will determine this.
  • Lenders will expect borrowers to engage with them, in discussing their proposed approach to the Green Deal, in all cases.
  • In principle, lenders welcome measures which aim to reduce energy costs in social and affordable housing properties. They will, however, expect to be kept informed, when the provision or acceptance of Green Deal finance and other services are proposed, so that they can properly consider any potential impact on risk and on property values.
  • Regardless of whether borrowers are proposing to become Green Deal providers themselves (in relation to their own and/or other stock) or to commission third party Green Deal providers, lenders will expect borrowers and their boards to approach strategic decisions to be made about Green Deal activity with diligence, care and with full awareness as to risk.
  • Lenders will make their own individual commercial decisions in response to the approaches that their borrowers propose to take in response to the Green Deal; lenders’ commercial decisions may vary.
  • The CML will endeavour to work with DECC to review practical aspects of the implementation of the Green Deal in the social and affordable housing sector and to ensure that any concerns are appropriately addressed.

 

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