Here is a post from our May 2009 Real Estate Update.
A proposal by the Ontario government that would force homeowners to conduct an energy audit before they could sell their home has stirred up lots of controversy within the real estate industry.
The audits are a small part of Ontario's proposed new Green Energy Act, which the government says is "a bold series of co-ordinated actions to enhance economic activity and reduce our impact on the environment."
A proposal by the Ontario government that would force homeowners to conduct an energy audit before they could sell their home has stirred up lots of controversy within the real estate industry.
The audits are a small part of Ontario's proposed new Green Energy Act, which the government says is "a bold series of co-ordinated actions to enhance economic activity and reduce our impact on the environment."
Optional energy audits are currently available at a cost of about $300, along with government subsidies of up to $150 to help pay for them. Certified contractors inspect homes and provide a detailed report that includes an energy rating for the home (similar to the EnerGuide rating on home appliances) and suggestions about how energy efficiency could be improved.
The audits would be required prior to the sale, and in some cases leasing, of houses, condominiums and apartments.
"This mandatory government regulation will impose a significant cost on home sellers. As with most Canadians, we don't believe in green at any cost," says Gerry Weir, past-president of the Ontario Real Estate Association (OREA). "It's not the initial cost of these audits that concerns us. Rather, the results of these audits will be used by home buyers as bargaining chips to significantly reduce the final selling price.
"Today's economic downturn is a terrible time to introduce this measure," Weir says. "Home sellers are already worried about lost equity in their homes. A move like this, which will reduce their value even further, will not help them in any way."
Bob Aaron, a Toronto real estate lawyer and writer, says, "The introduction of mandatory energy audits marks a government intrusion into the free marketplace, which is unprecedented in Canadian history. No government in this country has ever required mandatory inspections of any home component at the time of sale."
But not everyone in the real estate industry is opposed to the concept. Elden Freeman, founder of the National Association of Green Agents and Brokers says, "The legislation itself is hardly unprecedented – other jurisdictions such as Germany and the United Kingdom have already implemented mandatory home energy audits, and reported quite a bit of success with their programs."
Freeman says that "considered over the long term of owning a house, the opportunities for improvements that audits can reveal ultimately pay for themselves several times over. Take into account that both the audits and the improvements are both government-subsidized and it becomes clear that home audits are an opportunity for savings and asset enhancement."
However, there are a number of issues that need to be ironed out before the mandatory audit program could be implemented. Critics say that, for example, there are fewer than 500 licensed auditors in the province, but more than 200,000 houses changed hands in 2007.
OREA says there is no one standard for energy audits, and different firms arrive at different assessments of the same house.
"EnerGuide ratings of an existing home can and do vary between energy auditors, depending on the assumptions they make and the extent of data they collect on the building's actual construction," Weir says.
The association also says that since there is no regulation of energy auditors, a conflict of interest can arise if a contractor conducts the audit. There is a natural inclination for that contractor to find problems that he can offer to repair for the homeowner, it says.
However, Freeman says that in the U.K., the program has been credited with improving the overall housing stock and reducing costs for first-time home buyers. He says that "sooner or later, other jurisdictions in Canada will likely follow" Ontario's lead.
It could even become part of the federal Liberal party's next election platform. MP David McGuinty, the Liberals' environment and energy critic and brother of Ontario Premier Dalton McGuinty, told Canwest News Service that mandatory energy audits are among "a slew of ideas" that the party is considering for its next platform.
The bill has passed second reading in the Ontario Legislature and now will be discussed in public consultations before it is put to a final vote.
Written by Jim Adair
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