Green Building Law Update

What do Hurricanes, Earthquakes and LEED Bonds Have in Common?

Three weeks ago, Washington DC was hit by both an earthquake and a hurricane. But this was not the most shocking development during the week -- at least for me.  

Here's what shocked me the most: I learned there is a chance that LEED bonds could be available in our nation's capital.

On Wednesday, August 24, I attended a meeting of the DC Green Building Codes working group. The topic to be discussed was the DC Green Building Act's LEED bond requirement. For the uninitiated, the DC Green Building Act requires that all new construction in D.C. greater than 50,000 square feet be LEED certified starting January 1, 2012. Project developers have to post a bond guaranteeing the certification. The bonds range from 1 to 3 percent of a project's total cost, and can be as much as $3 million. 

I have been writing about the LEED bond requirement since the first week of this blog. I once compared LEED bonds to unicorns because they only existed in a fantasy world. 

LEED bonds do now exist and have been underwritten to support projects applying for the Arlington County, Virginia bonus density program. But it is unlikely that LEED bonds were going to be underwritten in Washington DC due to problems with the Green Building Act.  At the working group meeting, the SFAA and NASBP issued a white paper (PDF) summarizing the Act's many problem, including:

  • "The regulations should state the developer must furnish the bond"
  • "The regulations should provide for claims less than the full bond amount." 
  • "Consider the relationship between the bond amount and the financial thresholds required by the surety. . . . We suggest that the regulation should set the maximum amount at a lower level that is sufficient to provide the necessary financial protection to the District." 
  • "The regulations should set forth the appeals process by which a developer can appeal a USGBC determination.  Notice of appeal should be provided to surety." 

The last issue is of most interest to me.  The D.C. Department of the Environment (DDOE) has indicated that a party other than the US Green Building Council could determine compliance with LEED certification.  Whether these third-parties would be in the form of a government agency or a for-profit company remains to be seen.  But it would certainly be interesting to have another entity looking over the shoulder of the US Green Building Council. 

The DC government has less than four months to revise the Green Building Act to reflect the suggested changes in the SFAA and NASBP white paper.

Will DC make the necessary changes to the Green Building Act by January 1, 2012?

Photo credit: Cape Town Craig

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Comments (3) Read through and enter the discussion with the form at the end
Tiombe Parrish - September 16, 2011 6:30 AM

Not so much about bonds but....The last issue is similar to the gray area in the Montgomery County Maryland green building requirement. They also included the possibility of alternate 3rd party review in their regulation suggesting that it could happen in house but had not prepared for it with staff or training. We ended up being held to the final GBCI Certification with temporary Certificates of Occupancy until it was done.

Cade Laverty - September 16, 2011 6:35 AM

Are LEED bonds really necessary? From the first time I heard about this, I’ve wondered why regulatory bodies would resort to this. There are many other ways for a jurisdiction to deal with not achieving LEED certification (if it is mandated by their own regulations), than requiring bonding. Simply not granting an occupancy certificate would suffice, wouldn’t it? The DC Green Building Act also brings up other issues like whether or not LEED certification should be mandatory at all. Is it wise to give a private organization like USGBC quasi-governmental power? I really think not. Although you mention in your article that there might be assurances that a third party would look over USGBC’s shoulder when determining compliance with LEED certification, why is this necessary? I think the best course is to take we have learned so far in green building and gradually update local building codes to reflect the sustainable building movement.

mispronunced joe - December 27, 2011 6:03 AM

this is way overrated issue i think... sorry for that but this is what i really think.

Stuart Kaplow
Sustainability & Green Real Estate Attorneys
15 East Chesapeake Avenue
Baltimore, Maryland 21286-5306 USA
Tel 410-339-3910
Fax 410-339-3912