The Green Deal is a scheme implemented by the UK Government to promote energy efficiency for both home owners and businesses. Mackrell Turner Garrett Property Solicitor Meera Gabriel looks at the potential for the Green Deal to become compulsory for commercial landlords in the next few years and the effect this may have on businesses.
How does the Green Deal work?
Properties are made more energy efficient through the use of greener technology, such as installing insulation and double glazing, as well as through benefiting from renewable energy sources, for example by installing solar panels.
Businesses would pay the initial cost of an assessment, which would involve an approved assessor inspecting the premises, after which a report would be produced to highlight the possible improvements that could be made.
The business would then apply for funding to pay for the installation of this equipment. An upper limit has not been set for business with regards to the funding so this is therefore something which would be decided by the business and its provider.
The costs of these potential improvements are, in general, subject to what is known as the Golden Rule, which provides that the amount spent on the installation to make the property more energy efficient cannot exceed the potential savings.
Commercial property owners must, however, note that this rule does not always apply to them and this is something that must therefore be considered before entering into such a scheme.
The costs of making the premises more energy efficient are not paid up front but are paid back through the energy bill. It is for this reason that if the property is then sold on, the liability to pay for the improvements passes to the new homeowner rather than the bill payer, as they will then receive the benefits of the scheme.
How does this affect commercial properties?
It must be noted that in order for landlords to enter into the scheme, consent must first be obtained from their tenant(s) and vice versa should the tenant want to enter the scheme.
The scheme has a great potential to benefit commercial businesses as, although the costs are paid back through the energy bills, the savings made in the long run could far outweigh the costs spent on instalments.
However, as with most schemes there are some downsides too. It could turn out to be more of a burden and the costs of installing the energy saving equipment that is supposed to be saving the business money could still be greater than the savings.
There are potential proposals to render the Green Deal scheme compulsory for landlords of business premises in 2018.
Landlords may have to reach a certain minimum efficiency level and failure to reach this set limit will mean that the landlords will not be able to rent out the property. It is therefore very important for commercial landlords to keep an eye on the updates to the legislation as the Government could enforce this obligation sooner should it so wish.
Mackrell Turner Garrett