The Energy Act

No doubt you will have read or heard by now of the Energy Act 2011, which received Royal Assent on 18 October 2011, and the government's plan to prevent the sale or letting of all properties that fall within bands F or G of the energy performance certificate. I assume that estate agents will be the first point of contact to ensure that properties comply with this requirement, ensuring that an energy performance certificate is obtained and reviewed before a conveyancer is instructed. This will reduce the number of cases that are opened and then do not proceed, wasting our time and money.

The risk is that this will dramatically reduce the number of properties on the market for sale, and, in turn, the number of instructions available to conveyancers. I decided to look further into this.

As with most things, there is more to the government's actions then meets the eye. Most news reports I read stated that property owners would be forced to pay thousands of pounds to make their properties more energy efficient in order to sell or let. This is true but only half the story.

As part of the government's 'green deal' strategy it is proposed that from October 2012 any improvements that are necessary will be made available through energy companies; for example, British Gas. The energy company will finance the work to be done through approved contractors and the individual will then repay the energy company over a period of time via their utility bill. The idea is that, as a property's energy efficiency increases, the utility bills will drop, which means that an individual who has improved their home will never pay more than they were before having the work done.

So, how does this affect a conveyancer? Well, the cost of the works forms a loan from the energy company to the property which must be repaid. However, as far as I can tell, it will not be a secured loan, meaning that any existing charge holder will not be required to give consent. Instead, the existence of the loan will be noted on the energy performance certificate itself, and, further, the loan will remain with the property after the sale or lease has completed. This means that the buyer or tenant of the property will take on responsibility for payment through their utility bills.

For conveyancing practice, I will, if the proposals proceed, be making sure that all files have an energy performance certificate and even making it one of my pre-contract enquiries to find out if the deal has been taken. This stems from the requirement that a new energy performance certificate should be made available after the work is done '“ clearly any earlier certificate will be wrong.

Should this government proposal actually proceed then any loan will need to be reported to the client on every transaction as it may affect desirability or even value. It is also worth considering informing clients now of their potential future obligations for their property. If the deal has been taken and if there is an effect on property value then this will also have to be reported to the mortgage lender.

From a selling point of view, if the 'green deal' has been taken then this must be revealed to a potential buyer. It is possible that the property information forms will change regarding this, and, I think, should set out what work has been carried out.

Importantly, section 14 (2) of the Energy Act 2011 states: 'The seller or prospective landlord or licensor must secure that the contract for sale or tenancy or licence agreement includes an acknowledgment by the buyer, tenant or licensee that the bill payer at the property is liable to make payments under the green deal plan and that certain terms of that plan are binding on the bill payer.'

In turn, this places an onus on the conveyancer to ensure that the contract contains this acknowledgement by the buyer.

I think this is a clever idea but question whether it will actually work. Will people instead opt to purchase new-build properties, which are already energy efficient and do not have this loan attached to it, or will an effect on value make obtaining a mortgage difficult? That said, for people with a property to sell, they may find themselves with no other option but to take the green deal.