Now that the worst of the economy’s problems appear to be behind us, the government can once more begin to address issues which were temporarily pushed to the bottom of the pile whist battling an altogether more immediate threat. One of the most prominent of these issues is the need to reduce the UK’s carbon footprint by utilising new technologies – something commercial property landlords can now consider without worrying about on-the-spot high costs.
Prop-Search director Richard Baker
The Green Deal is a funding mechanism to assist businesses and landlords with the cost of making energy efficient improvements to their property which was launched at the beginning of this year. Under the scheme property occupiers can have all necessary works carried out by a Green Deal Provider and make small repayments for the measures as part of their monthly energy bill rather than having to find hundreds or even thousands of pounds for a one-off payment.
However, before any work can be done a financial assessment must be carried out to determine whether the financial savings from the changes will make the alterations worthwhile. Known as the “Golden Rule”, Green Deal Assessors are required to ensure that the savings will be equal to or greater than the cost of the occupier’s repayments during the specified repayment period before the Green Deal Plan can be confirmed.
According to Prop-Search Director Richard Baker, this assessment is key to the success of the Green Deal and as such the assessor is instrumental in the process. However, forecasting the long-term use of the property is also hugely important.
He says; “It is hoped that the Green Deal will not have a negative effect on the value of a property, but this will largely depend upon the Green Deal Assessor – whose assessment report forms the basis of the Green Deal Plan – undertaking its role effectively and the use of the property remaining similar.
“For example, a reduction in the number of people occupying a property is likely to cut the amount of energy used and this may push the cost above what might be paid without a Green Deal in place.”
While landlords have voiced concerns about allowing tenants to enter into a Green Deal Plan – their financial obligations should a tenant’s lease not be renewed during the repayment period is a major sticking point – thanks to the passing of the Energy Act 2011 they could be forced to undertake any improvements in the coming years regardless. The legislation states that the Government must impose regulations no later than the 1st of April 2018 which prevent properties with an Energy Performance Certificate rating below an as-yet unspecified level from being let.
Mr Baker concludes; “It is possible that the Green Deal will have little effect on commercial property until the April 2018 deadline.
“In addition, as many commercial leases are now of five years or less, the Golden Rule is likely to apply only if the payback period is longer than the lease and landlords may not be willing to take on the higher electricity charge after the lease has ended.”
Do you think the Green Deal is the most effective way for the government to meet its carbon reduction targets?
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