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Been offered a free biomass boiler? Proceed with caution, advises Ofgem

Posted by Tasha Kosviner on 9 April 2015 at 2:35 pm

Have you been approached by someone offering to install a free biomass boiler in your house?

Is this an offer that seems too good to be true? 

As the Department of Energy and Climate Change continues to work out how to regulate so called third party ownership under the Renewable Heat Incentive (RHI) scheme, there are some businesses who are jumping ahead.

Under the RHI, owners of eligible renewable heating systems are given regular payments to help offset the cost of the installation. Third party ownership describes a situation where a business offers a free installation in exchange for the homeowner signing the RHI payments over to them. 

Ahead of DECC’s anticipated regulations, Ofgem has issued guidance to households considering accepting such an offer. Like us here at YouGen, Ofgem advises extreme caution. Their advice includes:

  • Be sure to take legal advice. You may be entering into a financial agreement and you need to be sure you fully understand the small print. In particular you need to know if this is a loan or a hire purchase deal; what the repayment terms and interest rates are; that the organisation is regulated by the Financial Conduct Authority; and whether you’ll have the statutory 14 day cancellation period. 
  • Make sure you’ve informed the relevant authorities – your mortgage lender, your local planning authority, your buildings insurer may all need to be informed of the arrangement. 

Before you sign any agreement Ofgem advises asking the following questions:

  • Is your contract with the installer or another organisation? The more organisations involved, the harder it is to figure out who is responsible if something goes wrong.
  • Who is liable if there is damage during installation – you, or the other party? Who is responsible for insuring and maintaining the system once it’s installed?
  • Does your agreement cover the system and all the associated costs of installation?
  • Who owns the system? Does that ownership apply just to the renewable heating equipment or to the whole heating system?
  • How can you be reassured that the system they are proposing is appropriate for your home? (An inappropriate system could leave you with huge fuel bills or an insufficiently heated home.)
  • Who will the RHI payments go to? They must be paid into a bank account in your name, so how will the transfer of payments be made? 
  • If payments are delayed or stopped (for example if you can’t meet your ongoing obligations to qualify for payments), how will this affect your contract?
  • If Ofgem needs to reclaim the payments, you are responsible. How will your contract cover this?
  • Will you be tied to a particular fuel supplier? (It’s always better to be free to shop around.)
  • What happens if you move house and the new owner doesn’t want the deal?
  • Are you allowed to pay your loan off early? How will this affect the RHI arrangement?
  • What happens to the system once you’re at the end of the seven-year RHI scheme? Who owns it, who’s responsible for its upkeep, will your services and maintenance contract still apply?

As you can see, there is a lot to consider and many ways in which this kind of arrangement is open to abuse. There is a very real risk that you could be left out of pocket or with a system which is inappropriate for your home. If you’re in doubt, be sure to take advice.

Our advice would be either to try and find another way to finance your scheme – re-mortgaging perhaps, or a maybe a personal loan? – or at the very least, wait until DECC has finalised their guidance.


Photo Credit: cnattrass via Compfight cc

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