The Green Deal: Should you take advantage?

The Green Deal: Should you take advantage?


Author: Sophie Wilkinson and Nathan Rees

Funding under the Green Deal will be available for domestic and non-domestic properties from 28 January 2013.

What is the Green Deal?

The Green Deal is a government-backed funding mechanism for making energy efficiency improvements to property, which removes the need for up-front payment.

It is based around the principle of 'pay as you save'. For finance to be available, the energy efficiency improvements need to pay for themselves through resulting savings on gas and electricity bills. This is known as the 'golden rule'.

The Green Deal charge attaches to the property's energy bill rather than to the party taking out the Green Deal plan, meaning that (in effect) it binds the property and the successors in title to the party which accepts the funding, which is likely to cause concern to owners of investment property in terms of attractiveness to potential purchasers. There is a requirement to disclose the existence of the plan to purchasers and incoming tenants.

The Green Deal provider will set the repayment period, the amount of each instalment and the interest rate (expected to be in the region of 6-8%). The Green Deal Finance Company (a not-for-profit organisation set up to provide finance to GD providers) has announced that it will charge 6.96% on loans that it makes to GD providers. There is a feeling that the interest rate is too high, although GD providers can obtain finance from other sources.

Who can apply for Green Deal finance?

Both landlords and tenants can take out Green Deal finance. Landlords may benefit from improved value and marketability (from the perception that the property is more energy efficient), whilst tenants should benefit from lower bills. However, there are a number of issues which landlords/investors, in particular, will need to consider, as referred to below.

Regulations are expected by 1 April 2018, requiring landlords to carry out certain energy efficiency improvements to properties with low energy efficiency before they are let (see "Will an EPC rating of F or G prevent a letting?"). This provides a further incentive for landlords to make energy efficiency improvements and consider funding them via the Green Deal.

How do I obtain Green Deal finance?

  • check that your proposed improvements are on the list of eligible measures 
  • a Green Deal assessor then needs to visit your property to establish suitable measures for the property and whether the "golden rule" is met (a charge may be made for this assessment)
  • a Green Deal provider can then offer finance for the measures via a Green Deal plan
  • a Green Deal installer can then be instructed to carry out the works

Issues to consider

Landlords may be able (depending on the terms of the lease) to refuse to consent to alterations proposed by a tenant under the Green Deal.

However, from 1 April 2016 at the latest, landlords of private rented property will not be able to unreasonably refuse consent (whatever the terms of the lease).

There is no similar proposal in relation to commercial property, meaning that the terms of the lease (and existing statutory provisions regarding alterations and improvements generally) will prevail.

Written consent to the Green Deal plan is needed from the bill payer, which may be the landlord in multi-let properties.

Landlords need to be aware that if they consent to Green Deal improvements by a tenant, the landlord will be liable to pay the Green Deal charge during any period where there is no tenant to pay the utility bill. The Green Deal charge will continue to be payable even if no gas or electricity is being consumed at the premises.

Further issues that should be considered are set out in the table below.

If the Green Deal takes off, a market position between landlords and tenants will no doubt develop as to how Green Deal charges are dealt with in leases. It will also be interesting to see how the attitude of investors and funders develops to such finance attaching to properties, if and when Green Deal finance becomes more commonly used.

Landlords  Tenants  Investors/Lenders 

Limit the tenant's ability to take out a Green Deal plan or limit the term of the Green Deal plan to the length of the tenant's lease (to prevent any impact on marketability and risk of having to pay the charge in any void period)?

Check the energy efficiency of the property and whether a Green Deal plan is in place before making a decision to rent.

Potential for impact on affordability and saleability. 

Require tenants to pay off the Green Deal charges if the lease ends early and/or to provide security for the debt via a rent deposit?  

Ensure that Green Deal improvements do not need to be removed at the end of the term.  

How landlords will pay for any Green Deal charge during void periods.

Reserve a specific right to carry out Green Deal improvements.

Ensure any Green Deal improvements carried out are set out in a licence for alterations. 

Whether to require borrowers to carry out energy efficiency measures.

Require tenants to meet Green Deal payments relating to common parts via the service charge.


Impose an obligation on tenants to ensure the energy efficiency of the property does not fall below a certain standard (see