Concern over green deal for businesses ahead of budget

Hodgson Elkington LLP, the Lincoln based chartered surveyors, remain sceptical about coalition government plans to help businesses in the ‘Green Deal’ proposals within the chancellor’s forthcoming Budget.

“It will be very interesting to see how the coalition Government is going to help businesses be included in the Green Deal within the forthcoming Budget”, said Sam Elkington, senior partner at Hodgson Elkington LLP.

The Government has launched its Green Deal to largely muted response. The scheme was launched at the end of January 2013 for homeowners and the intention is that it will be passed through to the business community.

Put simply, property owners can now be offered loans by their utility company providers that will cut bills while making their homes more energy efficient. These loans are paid back through the savings made on energy bills over a maximum of 25 years. Energy improvement works to the property will be funded through a loan which will not exceed the saving made on energy bills by installing the same improvements.

“In principle, I think it is a credit to any government of whatever political persuasion that is trying to tackle the green issues in both existing buildings and new buildings. However, asking energy suppliers to fund these improvements and recover the cost through energy bills relating to that property over a period of 25 years does seem to be very cumbersome. Whilst the scheme may well be appropriate for businesses looking to remain in business premises for a 25-year period, if occupiers look to sell the premises before that period has lapsed then there would be an on-going liability for the next occupier in that building until the loan is repaid. This could potentially deter purchasers and/or tenants from moving in to one particular building as they will see the loan attached to the property as being potentially detrimental”.

“It is encouraging that all the major energy providers are buying into the scheme, but one does wonder just how the public and business community will respond to the scheme.

“It is important to get good professional advice when looking at constructing new premises or adapting or extending existing premises. It is one thing to sign up to such an initiative, it is another to potentially blight the future value of any assets and the ability to sell the same if there are unwieldy loans attached to specific utility providers,” said Sam Elkington.

Improvements in properties could include new efficient boilers; insulation etc., and property owners would be protected by the golden rule for the Green Deal which states that ‘The energy savings a property makes in a 25-year period must be equal to or more than the cost of implementing the changes in the first place. This ensures that the property owner is not paying back more to partake in the Green Deal than they are saving in energy bills’.

Businesses will have the same measures available to them as domestic customers, but some will not comply with to the golden rule of the Green Deal due to the size of some business premises, believes Sam Elkington.

For example, if a business is a large warehouse it might not be cost effective to fit solar panels to the building due to the high initial costs. It might, however, be cost effective to fit lighting controls and low energy lights which will give a much faster return on investment and fit into the Green Deal golden rule of a 25-year life payback.

“It is interesting times for building designers and building occupiers but probably something with more clarify and simplicity is needed from the Government,” said Sam Elkington.