This article is from the source 'guardian' and was first published or seen on . It last changed over 40 days ago and won't be checked again for changes.
You can find the current article at its original source at http://www.guardian.co.uk/money/blog/2013/jan/29/green-deal-consumers-beware-nasty-surprises
The article has changed 7 times. There is an RSS feed of changes available.
| Version 2 | Version 3 |
|---|---|
| The Green Deal: consumers beware nasty surprises | The Green Deal: consumers beware nasty surprises |
| (1 day later) | |
| Homeowners can now sign up to a "Green Deal" which enables them to get energy-efficient improvements to their home at, potentially, no up-front cost. | Homeowners can now sign up to a "Green Deal" which enables them to get energy-efficient improvements to their home at, potentially, no up-front cost. |
| Instead, Green Deal providers foot the bill with occupants repaying the debt over time via a charge on their energy bills. But just how consumer-focused is the scheme? | Instead, Green Deal providers foot the bill with occupants repaying the debt over time via a charge on their energy bills. But just how consumer-focused is the scheme? |
| First, the good news. Because the "buy now, pay later" concept means a Green Deal provider is essentially offering a line of credit, most participants will be covered by the Consumer Credit Act. This means the provider is obliged by law to provide certain information, such as the total charge for credit, any APR, how repayments are calculated, information about cancellation rights, and so on. Therefore, as long as consumers read the small print carefully before forging ahead, they should avoid any nasty surprises. | First, the good news. Because the "buy now, pay later" concept means a Green Deal provider is essentially offering a line of credit, most participants will be covered by the Consumer Credit Act. This means the provider is obliged by law to provide certain information, such as the total charge for credit, any APR, how repayments are calculated, information about cancellation rights, and so on. Therefore, as long as consumers read the small print carefully before forging ahead, they should avoid any nasty surprises. |
| The bad news is that, like anything bought on credit, improvement works will cost significantly more than they would if paid for up front. Alan Milstein, chairman of the Residential Property Surveyors Association, says homeowners would be well advised to look at alternative methods of funding before entering into a Green Deal. "For many consumers, taking on a Green Deal loan may not be the most cost-effective mechanism to fund any green improvements to their property," he says. | The bad news is that, like anything bought on credit, improvement works will cost significantly more than they would if paid for up front. Alan Milstein, chairman of the Residential Property Surveyors Association, says homeowners would be well advised to look at alternative methods of funding before entering into a Green Deal. "For many consumers, taking on a Green Deal loan may not be the most cost-effective mechanism to fund any green improvements to their property," he says. |
| The masterminds behind the scheme have sought to allay this concern by introducing a "Golden Rule" – that the cost of repaying the loan should not exceed the estimated energy savings each period. So, for example, if it is estimated you will save £50 a quarter on your energy bills, your Green Deal provider may not recover more than £50 a quarter from you to pay back your loan. | The masterminds behind the scheme have sought to allay this concern by introducing a "Golden Rule" – that the cost of repaying the loan should not exceed the estimated energy savings each period. So, for example, if it is estimated you will save £50 a quarter on your energy bills, your Green Deal provider may not recover more than £50 a quarter from you to pay back your loan. |
| What has been glossed over, however, is the fact the estimated savings are exactly that: an estimate. There is a risk consumers could end up paying more. | What has been glossed over, however, is the fact the estimated savings are exactly that: an estimate. There is a risk consumers could end up paying more. |
| The Green Deal code of practice is littered with requirements that providers remind consumers about this risk, seemingly with the view that if we know about the problem, that solves it. However, there does not seem to be any specific obligation on providers to reassess affordability if it becomes apparent that estimated savings have not been achieved. | The Green Deal code of practice is littered with requirements that providers remind consumers about this risk, seemingly with the view that if we know about the problem, that solves it. However, there does not seem to be any specific obligation on providers to reassess affordability if it becomes apparent that estimated savings have not been achieved. |
| Another significant concern is what happens when the occupant of a house changes. Any deal is attached to the house it is bought for, rather than the person buying the loan. This means subsequent occupiers could find themselves saddled with charges they do not want or cannot afford. | Another significant concern is what happens when the occupant of a house changes. Any deal is attached to the house it is bought for, rather than the person buying the loan. This means subsequent occupiers could find themselves saddled with charges they do not want or cannot afford. |
| The scheme seeks to deal with this problem in two ways. First, there are extensive rules about disclosure – anyone selling a property must tell a prospective buyer if there is a Green Deal attached to it; the buyer must be notified before the seller accepts an offer at the very latest. Second, the code of practice states that if the occupier of the house changes, the provider should reassess the affordability of the plan for the new occupant. | The scheme seeks to deal with this problem in two ways. First, there are extensive rules about disclosure – anyone selling a property must tell a prospective buyer if there is a Green Deal attached to it; the buyer must be notified before the seller accepts an offer at the very latest. Second, the code of practice states that if the occupier of the house changes, the provider should reassess the affordability of the plan for the new occupant. |
| Neither of these, however, is without its problems. The disclosure requirements are strict, and a buyer must consent to any Green Deal in writing; a seller who fails to obtain such consent will have to pay compensation. But if a buyer does not want to consent, there is little the seller can do beyond negotiating. They could, for example, offer to pay off the loan in full. In such cases, however, they should be prepared to pay an early settlement fee, and may well find themselves out of pocket if a buyer does not agree to any corresponding increase in the purchase price. | Neither of these, however, is without its problems. The disclosure requirements are strict, and a buyer must consent to any Green Deal in writing; a seller who fails to obtain such consent will have to pay compensation. But if a buyer does not want to consent, there is little the seller can do beyond negotiating. They could, for example, offer to pay off the loan in full. In such cases, however, they should be prepared to pay an early settlement fee, and may well find themselves out of pocket if a buyer does not agree to any corresponding increase in the purchase price. |
| Even if a buyer does consent to the Green Deal, the reassessment requirement means any savings the seller is making cannot be said to indicate the potential savings a buyer might make – the buyer's needs and energy usage will inevitably differ. | Even if a buyer does consent to the Green Deal, the reassessment requirement means any savings the seller is making cannot be said to indicate the potential savings a buyer might make – the buyer's needs and energy usage will inevitably differ. |
| A buyer may therefore want the reassessment done before deciding whether to make an offer on a property, all of which is likely to take time. At a time when sales are already proving difficult for homeowners, it seems probable that Green Deal housing stock will be on the market for longer while buyers wait for affordability assessments and weigh up the pros and cons. | A buyer may therefore want the reassessment done before deciding whether to make an offer on a property, all of which is likely to take time. At a time when sales are already proving difficult for homeowners, it seems probable that Green Deal housing stock will be on the market for longer while buyers wait for affordability assessments and weigh up the pros and cons. |
| It is of course possible that these issues will be ironed out quickly as the scheme finds its feet. For those who would not otherwise be able to afford the relevant home improvements, and for whom the estimated savings materialise, the Green Deal could well prove to be a great deal. But for many it could amount to nothing more than a great deal of trouble. | It is of course possible that these issues will be ironed out quickly as the scheme finds its feet. For those who would not otherwise be able to afford the relevant home improvements, and for whom the estimated savings materialise, the Green Deal could well prove to be a great deal. But for many it could amount to nothing more than a great deal of trouble. |
| • Rachel Tandy is a barrister who practises in consumer law | • Rachel Tandy is a barrister who practises in consumer law |
| Top mortgages | Top mortgages |
| Chelsea Building Society | Chelsea Building Society |
| HSBC | HSBC |
| Nationwide | Nationwide |
| Provided by London & Country for the Guardian |