Will the Green Deal work for flat owners, asks Bob Smytherman

The FPRA has long been concerned about the issue of energy efficiency for long- leaseholders living in blocks of flats, due to the complex nature of most leases.

For very good reasons most leases don’t allow for improvements to be carried out as part of the service charge. Consensus for works to be done must be sought from residents but this can stall improvements before they have started.

To be cost-effective, the improvements that need to be carried out to a block as a whole would involve very complex arrangements and negotiations, especially in mixed tenure developments and those where there are a number of parties to the lease. In my own block for instance, we have a tripartite lease where we have a Freeholder and RMC as well as leaseholders who vary from being reasonably well-off to those in dire fuel poverty struggling to pay their bills. Who should fund works in such a situation?

Flat owners need help in making their blocks more energy efficient. But the Government’s Green Deal – designed to do just that - isn’t likely to work for flat owners without providing incentives. On its own the Green Deal doesn’t do this.

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What is the Green Deal?

The Energy Act 2011, which came into force in October, sets the legislative framework for the Green Deal and new Energy Company Obligation (ECO). The Green Deal will enable private firms to offer consumers energy efficiency improvements to their homes and businesses at no upfront cost and allow repayments, in instalments, through the savings made on energy bills. It promotes the installation of the most cost effective energy efficiency measures through the ‘Golden Rule’ whereby the savings should be equal to or greater than the charge on the energy bill. In parallel, the ECO will provide additional support where Green Deal finance alone is not enough.

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It has been well researched and modelled that in medium to high rise buildings, the energy & carbon savings that could be seen in top floor flats are different to those on middle floors and are significantly different to those on the ground floor within the same building, even when the same measures are offered. Therefore it would seem wrong to install a measure for the whole building and then, based on carbon savings, divide the cost up equally among the number of dwellings in the block, even if this lease allows this. But this is precisely the basis on which the government is trying to promote the Green Deal to flat owners.

Most blocks of flats in the private sector are co-owned and a number of parties are involved with each building including freeholder-landlords, leaseholder-landlords, leaseholder-owner-occupiers and short hold tenants, not to mention residential management companies and letting and managing agents too. In some circumstances the freeholder can even be a social landlord and the tenants private. Leases vary from flat to flat and block to block and the whole sector struggles from a lack of national regulation. The responsibilities of the various parties can also vary significantly, which makes improvements to these buildings very difficult to implement.

For all these reasons, the FPRA has been lobbying Government to treat blocks of flats/apartments in the private sector, especially those where works would need to be done to common parts, as a separate entity under the Green Deal so that these issues are correctly and fairly addressed. Research by our legal advisor Dr Nick Roberts, published last year in the New Law Journal, proposed a few simple changes to existing leasehold regulations which would make the situation easier for flat owners.

Leaseholders of flats are used to sharing expenses equally through service charges and therefore any scheme that requires a detailed cost benefit analysis, distinguishing flats with one or two external walls or on the ground or top floor are, in our view, doomed to failure. My view is that the key barrier to delivery of the Green Deal to blocks of flats and other multi-occupancy properties will be consent to the Green Deal charge from multiple bill payers (both lessees and sub-tenants).

Before a Green Deal can be entered into, consent will be required for two things; these are consent to installation and consent to the Green Deal charge being attached to the meter. Therefore a Green Deal customer will need to ensure they have secured the consent of the bill payer and the owner of the property to attach the charge to the energy bill, and the consent of any relevant parties, such as the owner, freeholder, or local planning authority, to go ahead with the energy saving installation.

This issue may be particularly acute for measures such as cavity or solid wall insulation which may impact on multiple units within a building and may require a Green Deal charge to be attached to two or more individual meters. The most significant problems are likely to be those in multiple occupancy buildings were one or a minority of flat owners or tenants could prevent a Green Deal from going ahead on the block or row of properties, to the actual or perceived disadvantage of other occupants.

We suggest that in order to deliver energy improvements to the structure and common parts of blocks of leasehold flats, other funding programmes will be required such as the one inWest Sussexhighlighted in the last edition of Flat Living (see autumn issue, News page 11).

Bob Smytherman

Chairman

Federation of Private Residents Associations

Tel: 0871 200 3324

info@fpra.org.uk

www.fpra.org.uk

Bob Smytherman was the FPRA representative on the Green Deal Consent Barriers and Retaliatory Evictions Working Group which will be reporting back to both Energy Efficiency Minister Gregory Barker MP and Housing Minister Grant Shapps MP.