Green Building Law Update : Green Building & Construction LEED AP, Lawyer & Attorney Chris Cheatham : Washington DC, Virginia, New York City

When you think of green energy projects, what sort of results do you anticipate?  New energy sources?  Reduced energy costs?  Green jobs? 

What about earthquakes?

Geothermal energy, a widely-touted green energy source, involves drilling miles-deep wells into underground reservoirs in order to tap steam and hot water that can be used for energy applications.  I have previously referenced a geothermal energy project that was shut down by the Swiss government for allegedly causing earthquakes in 2006 and 2007. 

Apparently, the potential for earthquakes triggered by geothermal energy projects is also a concern for the U.S. Department of Energy, as detailed in a December 30 DOE letter: 

"The United States Energy Department, concerned about earthquake risk, will impose new safeguards on geothermal energy projects that drill deep into the Earth’s crust.  The new policy is being instituted after a project in California that used the new technology was shut down by technical problems and encountered community opposition, federal documents indicate.

The project, by Seattle-based AltaRock Energy, would have fractured bedrock and extracted heat by digging more than two miles beneath the surface at a spot called the Geysers, about 100 miles north of San Francisco. The company ran into serious problems with its drilling and faced accusations from scientists and local residents that it had not been forthcoming enough about the earthquake risk. AltaRock denied those accusations."

"In a second document dated Sept. 11, 2009, but not previously disclosed, the department concluded that earthquakes that would have been set off by the AltaRock project would 'not have a significant impact on the human environment.'”

Just another example of how new, green technologies will result in unintended consequences.  How can you extrapolate this example to the green building industry?

Photo Credit:  peripathetic

Related Links:

Green Energy Project Causes Earthquakes? (GBLU)

Geothermal Basics (DOE)

Geothermal Drilling Safeguards Imposed (NYT)

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If you participate on building projects that are seeking LEED certification, this news may come as a relief to you.  According to Marian Keeler of Simon & Associates, the United States Green Building Council (USGBC) is reconsidering its decision to stop making Credit Interpretation Requests (CIRs) public.  

I have previously described a CIR as follows:  
 

In June 2009, I reported that the USGBC had announced that, effective June 26, 2009, a CIR would only be applicable to the project that submitted it.  At the time, I suggested that "[w]ithout public CIRs, architects, engineers and contractors are going to have more trouble interpreting credits and determining strategies that will successfully achieve a LEED credit."

It appears that the USGBC is now reconsidering its decision and plans to implement a new CIR system:

I will reach out to the USGBC for further information.  Why do you think the USGBC is reconsidering?

Related Links:

Why Do Non-Public CIRs Mean LEEDigation? (GBLU)

CIRs and Precedence Policy (LEEDuser)

Photo credit: eddiewls

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Did you know your company may have a duty to disclose how climate change may impact your business?

A group of Crowell & Moring attorneys - James Chen, Bryan Brewer and Jessica Hall - recently released a Climate Change Client Alert regarding the issuance of climate disclosure guidance by the Securities and Exchange Commission (SEC).  This alert has important implications for those companies required to make disclosures and may impact the green building industry as well.

"On January 27, 2010, the Securities and Exchange Commission ("SEC") approved, by a slight majority, the issuance of guidance on how existing public company-disclosure requirements may apply to climate change. A pre-publication copy of the guidance was made available on February 2, 2010 (see below). Unlike a law or rule promulgated pursuant to legal authority, the interpretive guidance is not legally binding. It is, nonetheless, significant as the SEC's first express statement regarding how climate change issues may implicate companies' disclosure requirements.

Existing disclosure rules cover a company's risk factors, business description, legal proceedings, and management discussion and analysis. Companies must disclose to investors material information that may impact their business. Materiality is generally determined by reference to the "reasonable investor." The SEC has long acknowledged that environmental factors may trigger disclosure duties under certain circumstances. The issue of climate change was not specifically considered until 2007.

The SEC's interpretive guidance indicates that climate change may trigger existing disclosure requirements for some companies. In assessing whether disclosure is required, companies should consider the following:

• existing domestic laws and regulations relating to climate change, including the potential impact of pending laws and rules;

• opportunities and risks arising from legal or technological aspects of climate change, including indirect impacts of regulation like decreased demand for carbon-intensive products;

• potential positive and negative effects of international legal instruments governing climate change; and

• actual and potential physical impacts of climate change on business operations.

Thus, under the SEC's guidance, a company may have to consider the materiality and possible disclosure of impacts related to the Environmental Protection Agency's mandatory greenhouse gas reporting rule, promulgated in 2009, as well as other pending Clean Air Act rule-makings on greenhouse gases. Companies may also have to consider the likelihood of enactment and impacts of comprehensive climate change legislation. In addition, companies may have to disclose risks related to the rise in private tort litigation involving greenhouse gas emitters. Finally, if international negotiations lead to a post-Kyoto Protocol climate treaty, companies may have to consider how the treaty would impact their businesses."

I am particularly interested in how "existing domestic laws and regulations relating to climate change" may trigger disclosure rules. For example, in cities like Washington, D.C., Austin, Texas and New York City, municipal governments are attempting to create a market for energy efficient buildings by requiring disclosure of building stock energy usage. If a major, publicly-traded real estate development company owns property with poor energy efficiency in one of these cities, could the developer be required to disclose this information?

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In Ohio, there is LEEDigation brewing.  But it's not the LEEDigaiton that I anticipated.  

The Ohio School Facilities Commission (OSFC) requires that new OSFC-funded schools achieve LEED Silver certification.  The Washington-Nile school district is balking at the additional costs incurred as a result of the LEED certification requirement.  

When a school project is pursuing LEED certification, OSFC provides three percent more funding than the estimated project costs in order to pay for the incremental costs of certification.  According to Washington-Nile Superintedent Patricia Ciraso, 3 percent is insufficient to cover the costs of LEED certification in her school district (red dot in the picture on the left):  

"'It might cover it in Columbus, or Cleveland, where you have people that deal with LEED constantly. These contractors down here, this is new to them and they’re going to have to deal with it. They’re probably going to have to bring in some people, or at least have some people trained,' she said.

To help prove the need for greater LEED funding at smaller, isolated districts, the school has retained an attorney in Columbus, with experience in school projects, to research the equity of LEED funding for schools in Ohio. Ciraso said the outcome of this battle could have local impact on LEED funding for school projects at New Boston and Clay also.

'If you are co-funding these projects and you have said silver is the appropriate LEED certification, why would you not want to fund to that level?' she asked."

I had always assumed LEEDigation would involve post-construction disputes when a project failed to achieve its green building certification.  A pre-construction dispute involving public funding for certification is a new issue, and one that could impact other state green building programs.  

Did you see this coming? 

Related Links: 

LEED Funding for Green School Causes Construction Delay (GBLU)

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Last Thursday, during a webinar on green building legal issues, I stated the following:

"I really believe schools will be a hotbed for green defect claims, in terms of energy efficiency, and other green building components.  Schools rely on tight budgets. . . .  Be careful what you are promising on these green school projects."

On Friday, I read an article titled "Construction Delayed at West School," which led with the following paragraph:

"Construction is at a stand-still at Washington-Nile School, where issues surrounding state-mandated LEED (Leadership in Energy and Environment Design) elements have placed the new middle school building project over-budget. Now attorneys working for the school are researching the equity of LEED funding for schools in Ohio; the outcome of which could also affect building projects at New Boston and Clay."

I was close.  

In Ohio, the Ohio School Facilities Commission (OSFC), administers the state’s Kindergarten through 12th Grade public school construction program and helps school districts fund, plan, design, and build or renovate schools.  In a previous post, we highlighted the OSFC's green buiding requirement for Ohio schools:

"OSFC Resolution 07-124 . . . mandates that all newly constructed or substantially renovated school buildings that are state funded achieve a minimum of Silver certification in the US Green Building Council's LEED-Schools (Leadership in Energy and Environmental Design) rating system with emphasis in energy conservation."

As highlighted in the article, the OSFC accepted the Washington-Nile School (tiny red dot in the photo to the left) as a special-needs project.  Because of the district’s low wealth base, the OSFC agreed to provide 98 percent of the funding for a new $16 million middle school. The remaining 2 percent (about $320,000) was paid from the school’s General Fund.

By accepting the OSFC funds, the school district is required to build the new Washington-Nile School to LEED Silver certification.  But the bids for the school were over-budget despite numerous changes made to the design:  

"'We knew a little about LEED. We didn’t know much, so they (the OSFC) educated us and they did a very good job. We bought into that and we designed accordingly. We made sure we had some educational LEED credits,' Washington-Nile Superintendent Patricia Ciraso said. She explained that while striving to meet these LEED requirements, the school had to give up other features they had hoped to add. By choosing to cut-back on windows, the school had change its lighting system, which means redesigning the entire electrical system — and what they ended up with still was estimated at least $1.2 million over-budget."

On Friday, we will look at allegations by the Washington-Nile school district that the OSFC is not properly funding the necessary LEED-certification costs.  You will want to check back, as these allegations include a creative legal challenge to the state's funding of green schools, which could have broad implications for other state green building programs. 

Related Links: 

Sensible Interview:  OSFC (GBLU)

Live Webinar (GBLU)

Construction Delayed at West School (Portsmouth Daily Times)

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In December 2009, an Amendment to the D.C. Green Building Act of 2006 was introduced by the D.C. Council.  Labeled the "Green Building Technical Corrections, Clarification, and Revision Amendment Act of 2009," this Amendment includes many revisions to the original Green Building Act.  One of those revisions involves the "performance bond" requirement:

"'Sec. 6. Bond requirements.'.

(2) Section 6 is amended by striking the phrase 'performance bond' wherever it appears and inserting the word "bond" in its place."

That's it.  This feels anti-climatic.  We have been discussing this same issue since the dawn of Green Building Law Update.  Back on August 15, 2008, one of my very first posts pointed out the performance bond issue.  So what does this fix? 

1.  Replacing "performance bond" with "bond" will eliminate the confusion that was certain to ensue in the construction and surety industry.  Performance bonds guarantee a contractor will building according to the plans and specifications.  Here, a developer has to guarantee that a project will achieve green building certification. 

2.  I still have concerns about the bigger issue of whether these "bonds" will be available.  Bond instruments guaranteeing green building certification simply do not exist in the market.  Maybe a surety will develop these bonds, maybe they will not. 

In the end, I applaud the D.C. City Council for addressing the "performance bond" issue. 

What do you think about this revision?  Disaster averted? 

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Back in April 2009, I took a vow of silence.  I promised to stop writing about the "performance bond" requirement in the D.C. Green Building Act.  I had faith the D.C. Council would address the issue.  Thankfully, it appears our long nightmare may be coming to an end.

Today, I am going to reset the "performance bond" issue (I have not written about it since April 2009!).  On Monday, I will discuss the "Green Building Technical Corrections, Clarification, and Revision Amendment Act of 2009" (pdf) and the proposed revision to the "performance bond" requirement. 

As background, for every green building mandate, you need an enforcement mechanism. The D.C. Green Building Act of 2006 requires that "after January 1, 2012, all new construction of projects 50,000 square feet or greater must comply to the LEED certification level."  Here is how I described the enforcement mechanism in a previous white paper:

"One of the most controversial provisions in the Green Building Act is the performance bond requirement.  After January 1, 2012, an applicant for construction of a privately-owned building must provide a performance bond which is due and payable prior to receipt of a certificate of occupancy.  Thus, after January 1, 2012, if a construction project must meet green requirements in the Green Buildings Act, the 'applicant for construction' must also provide a performance bond guaranteeing satisfaction of the green requirements." 

There are two primary problems with the D.C. Green Building Act "performance bond" requirement. 

1.  "The Act incorrectly uses the term 'performance bond' as the bond described in the Act 'seems to function more in the manner of a license or compliance bond, which typically guarantees compliance with a law or code.' A performance bond typically assures one party that another party will perform the contract in accordance with its terms and conditions."

2.  "Let me make this clear: no bond or insurance instrument has been created that guarantees green certification.  This type of security instrument does not exist.  I have discussed the issue with sureties, surety industry groups, insurance companies and insurance brokers.  None of them know of a security instrument that guarantees green building certification."

So what did the D.C. City Council correct either of these problems?  Check back on Monday as I continue this discussion. 

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You can view my webinar "Green Building Legal Issues on the Horizon" live at 1 pm EST or archived on demand.  If you are having trouble, you can also try the BrightTALK website. 

PLEASE NOTE:  We experienced some technical difficulties at the beginning.  Please fast forward to the 2:10 mark for the beginning of the presentation.  Thanks!

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This week, I am going to be trying something new and exciting here at Green Building Law Update.  On January 28 at 1 pm (eastern), I will be participating in a live webinar hosted by BrightTALK titled "Green Building Legal Issues on the Horizon." 

What makes this webinar truly unique is that you can listen to it (for free) right here at Green Building Law Update.  On Thursday morning, I will put up an additional blog post that will include a live webinar viewer.  Simply log on to www.greenbuildinglawupdate.com on Thursday morning and you should be good to go.  As a backup plan, you can also view the webinar by going to the BrightTALK page.

I am excited about this opportunity because while I have spoken to many audiences on green building legal topics, I have not been able to speak to you you, my faithful blog readers.  My hope is that you will learn four things from the webinar:

• You should think twice before making green building guarantees
• Guarantees of green building certification are risky
• Insurance for green building projects is difficult to obtain; and
• Energy efficiency is hard to control

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A coalition of forest product companies ("the Coalition") has filed a complaint with the Federal Trade Commission (FTC) regarding, in part, the United States Green Building Council’s preference for Federal Stewardship Council-certified (FSC) wood products. The Coalition has asked the FTC Bureau of Competition to provide guidance to the USGBC and other rating systems regarding the endorsement of product certifications.

If the FTC decides to provide such guidance, the USGBC’s LEED rating system will obviously be affected.  I am particularly interested in the implications of FTC action for green building regulations that have incorporated the LEED rating system.

In its complaint, the Coalition takes a shot across the bow aimed at federal agencies that have adopted the LEED rating system:

“The favoritism shown FSC-certified products by USGBC is inconsistent with the American National Standards Institutes's (“ANSI”) due process requirements and OMB Circular No. A-119, which establishes the principles that voluntary, private sector standards must meet if federal agencies wish to use them, including openness, balance, due process, an appeals process, and consensus.”

In short, the Coalition is arguing that federal agencies are improperly requiring LEED certification for the design and construction of federal buildings. This allegation is not a new one.  Most green building regulations that require LEED certification also permit “an equivalent” certification in order to avoid antitrust issues like the ones raised by the Coalition’s complaint.

But many federal agencies exclusively require LEED certification for federal projects. The most obvious example is the General Services Administration, which builds and maintains a large percentage of federal buildings.  The GSA's website describes its LEED mandate:

“As a means of evaluating and measuring our green building achievements, all GSA new construction projects and substantial renovations must achieve Silver certification through the Leadership in Energy and Environmental Design (LEED®) Green Building Rating System of the U.S. Green Building Council.”

If the FTC were to find that the USGBC’s preference for FSC-certified wood products constitutes anti-competitive behavior, hundreds of green building regulations across the country and in Washington D.C. will have to be re-written.

The implications of the FTC action on the complaint are staggering.

What other implications do you see?

Related Links:

• USGBC Accused of Anti-competitive Practices (GBLU)
• FSC, USGBC Accused of Deception, Anti-Competitive Practices (Green Source)
• Letter:  Forest Certification and Law and Standards (Complaint)(pdf)
• GSA - Sustainable Design Program (GSA)

Photo:  Eighty734

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The green building industry is entering an interesting period. In 2009, the green building movement was embraced as a solution to economic and environmental problems. "Green jobs" were touted as a way to improve the economy while reducing unemployment. Investment in renewable energy and energy efficiency measures was championed as a way to reduce greenhouse gas emissions and increase energy security.

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Geothermal heat pumps continue to gain popularity as an alternative energy source.  This energy technology doesn't come without uncertainties though.  In fact, as ENR recently described it, there are significant problems with the geothermal industry:  "[M]any of these systems are not performing as touted, especially cleverly hyped geothermal heating systems that are plagued with inflated savings claims and deficient designs."

The article goes on to describe three primary problems with the geothermal industry:

• "Their performance often is only superficially studied by equipment insiders whose main interest is selling more systems. As a result, the construction industry lacks a trusted set of independently audited best practices for design, installation and maintenance. This issue is becoming increasingly important as engineers scale up geothermal systems for larger buildings."

• "In particular, the coefficient of performance (COP) rating for a heat pump usually does not take into account the efficiency of the entire system. During design and installation, many variables can creep into that equation, such as the amount of electricity needed to pump water through piping loops, heat escaped through poorly built ductwork and seasonal imbalances in how much heat is dumped or pumped out of the ground. These all can compromise the COP and extend the payback time for systems."
   
• "Industry promoters working for owners, architects, engineers and contractors have done a poor job of educating consumers on the benefits and drawbacks of geothermal HVAC. There are large variations in average ground temperatures by region, but geothermal advocates would have potential customers believe ground temperature is a constant 55°F."

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It's always amazing to me the unexpected consequences that result from apparently benign activities.  As new green building and energy innovations and materials are incorporated into projects, there is always the possibility of an unexpected consequence.  

Take for instance a geothermal energy project in California.  

Geothermal projects involve mile-or-more-deep wells drilled into underground reservoirs to tap steam and very hot water that can be brought to the surface for use in a variety of applications.  The Department of Energy is investing millions in geothermal projects.  But one of the DOE projects was recently halted:  

The project by the company, AltaRock Energy, was the Obama administration’s first major test of geothermal energy as a significant alternative to fossil fuels and the project was being financed with federal Department of Energy money at a site about 100 miles north of San Francisco called the Geysers.

But on Friday, the Energy Department said that AltaRock had given notice this week that “it will not be continuing work at the Geysers” as part of the agency’s geothermal development program.

The timing of the announcement coincides with another project recently shutdown due to earthquake concerns:  

"The project’s apparent collapse comes a day after Swiss government officials permanently shut down a similar project in Basel, because of the damaging earthquakes it produced in 2006 and 2007. . . .  [T]he type of geothermal energy explored in Basel and at the Geysers requires fracturing the bedrock then circulating water through the cracks to produce steam. By its nature, fracturing creates earthquakes, though most of them are small."

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We previously reviewed a green building contract that can be used to manage the architect-owner relationship. But what about contractors?

As a member of the AGC ConsensusDOCS committee, I had the pleasure of collaborating on the ConsensusDOCS 310 Green Building Addendum, which was recently released:

On Nov. 10, ConsensusDOCS released the construction industry's first and only comprehensive standard contract document addressing the unique risks and responsibilities associated with building green projects -- the ConsensusDOCS 310 Green Building Addendum. The Addendum incorporates contractual best practices to identify the project participants' roles and responsibilities, as well as the implementation and coordination efforts critical to achieving a successful project using green building elements, particularly those seeking third-party green building rating certification. It was drafted to work well not only with the other ConsensusDOCS contract documents, but also with other form contracts.

If you have an opportunity to review or work with ConsensusDOCS 310, I would like to hear your thoughts. Based on conversations with owners, contractors and architects, there seems to be a real need for standardized green building contracts. Simple modifications to your existing contracts are not enough.

What other relationships exist on a green building project that require a contract?

Related Links:

ConsensusDOCS 310 Green Building Addendum (AGC)

What Does A Green Building Contract Look Like (GBLU)

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In order to manage risk associated with a design and construction project, it is important to draft an appropriate contract. There are a number of standard contracts available for the construction industry. The American Institute of Architects (AIA) publishes the AIA construction contracts to manage the architect-owner relationship. The Association of General Contractors (AGC) has also created ConsensusDOCS contracts that are used between contractors and owners.

With the emergence of green buildings, new risks must be accounted for in contracts. The AIA has released AIA B214 to manage green building risks between an architect and owner:

B214–2007 establishes duties and responsibilities when the owner seeks certification from the U.S. Green Building Council’s Leadership in Energy and Environmental Design (LEED®).

Among other things, the architect’s services include conducting a pre-design workshop where the LEED rating system will be reviewed and LEED points will be targeted, preparing a LEED Certification Plan, monitoring the LEED Certification process, providing LEED specifications for inclusion in the Contract Documents and preparing a LEED Certification Report detailing the LEED rating the project achieved.

Next time, I will look at a new green building contract that can be used between contractors and owners.

What are your experiences with green building contracts?

Related Links:

AIA - B214 (2007) Standard Form of Architect’s Services: LEED® Certification (AIA)

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On Friday, we discussed Navy contracting requirements for tracking "energy efficiency" and "energy footprints."  When I first learned of these requirements, I was reminded of Executive Order 13514.  We have already discussed Executive Order 13514 in terms of the green building industry, but the Order also contains provisions relating to greenhouse gas emissions. I don't usually include extended regulatory text, but in this case, the regulation emphasizes the Obama Administration's focus on greenhouse gas emissions: 

Sec. 13. Recommendations for Vendor and Contractor

 

Emissions. Within 180 days of the date of this order, the General Services Administration, in coordination with the Department of Defense, the Environmental Protection Agency, and other agencies as appropriate, shall review and provide recommendations to the CEQ Chair and the Administrator of OMB's Office of Federal Procurement Policy regarding the feasibility of working with the Federal vendor and contractor community to provide information that will assist Federal agencies in tracking and reducing scope 3 greenhouse gas emissions related to the supply of products and services to the Government. These recommendations should consider the potential impacts on the procurement process, and the Federal vendor and contractor community including small businesses and other socioeconomic procurement programs. Recommendations should also explore the feasibility of:

 

(a) requiring vendors and contractors to register with a voluntary registry or organization for reporting greenhouse gas

emissions;

 

(b) requiring contractors, as part of a new or revised registration under the Central Contractor Registration or other tracking system, to develop and make available its greenhouse gas inventory and description of efforts to mitigate greenhouse gas emissions;

 

(c) using Federal Government purchasing preferences or other incentives for products manufactured using processes that minimize greenhouse gas emissions; and

 

(d) other options for encouraging sustainable practices and reducing greenhouse gas emissions.

Related Links: 

President Obama signs an Executive Order (White House)

Energy Reductions in the Navy (GBLU)

Does Executive Order Signal Shift in Green Building Regulations (GBLU)

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The primary theme of Green Building Law Update is green building litigation will develop.  To date, one of the rare examples of green building litigation is Shaw Development v. Southern Builders, a case that involved a project's failure to achieve LEED certification in a timely matter.  Other examples of green building disputes are sparse.

But I am confident the litigation will develop.  A recent article, "'Green' projects create new exposures", suggests others agree:

“There is certainly going to be litigation coming out soon around (green buildings) and insurance companies are waiting to see” the loss results before developing coverage products, (David) Cohen, [senior product director for commercial insurance at Fireman's Fund Insurance Co. in Novato, Calif.], said.

Fireman's Fund Insurance Co. (FFIC) was the first company in the United States to offer green building commercial insurance in 2006.  The availability of this type of policy further suggests the inevitability of green building litigation.

What factors do you think will eventually result in more green building litigation?

Related Links: 

Shaw Development v. Southern Builders (GBLU)

"Green" Projects Create New Exposures (Business Insurance)

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[Ed. Note: Steve McBrady is your Editor this week]

One of the primary focuses here at Green Building Law Update has been the emergence of Green building and sustainable development as an “unstoppable force” in the world of real estate development and construction – as well as the emerging federal, state, and local regulations that accompany this Greenward* move.

Lately, with the federal government’s heavy investment in Green building through the American Recovery and Reinvestment Act of 2009 (ARRA), much of our focus has been on how this money is being spent, its potential impact on the economy, and (of great significance to our readers), what exactly various new government regulations mean.  But Green building existed before the ARRA, and it will be a driving force in the American economy long after the stimulus dollars run out.

So, allow myself to introduce … myself.  (Credit to Mike Myers for that one).  On November 16-18, Chris and I, along with our colleague Randy Erickson, will be traveling to Orlando, Florida for the Construction Users Roundtable’s Annual Conference, where we will address key Green building issues in both the Public and Private sectors:

The American Recovery and Reinvestment Act of 2009 (ARRA) is aggressively expanding federal and state investment in Green construction and renovation projects.  Moreover, an increasing number of state and local laws require private Owners to meet stringent Green building requirements.  In this presentation, Crowell & Moring attorneys will cover the "nuts and bolts" of Green construction in the 21st century, including:

·         Green building certification

·         Green building under the American Recovery and Reinvestment Act

·         Key state and local Green building laws

·         Green building risk management

CURT Annual Conference Agenda

The theme for this year’s conference is “Surviving and Thriving in Today’s Construction Industry.”  Our goal is to discuss critical Green building issues facing Owners and Contractors as they navigate Green building opportunities, risks and regulations on Public and Private construction projects. 

What questions would you like to see addressed?

*[Ed. Note: to our knowledge, Greenward is not actually a word] 

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[Ed. Note: Chris could not help sending along one last post before he enjoys some well-deserved R&R on his honeymoon.  Congratulations to Chris and Melissa!  Stay tuned for my guest posts the remainder of the week.  - Steve]

There is a wave of funding for green building and energy efficiency projects on the way. 

The American Recovery and Reinvestment Act has set aside nearly $25 billion for projects that will impact the green building industry.  The General Services Administration received $5.5 billion to create high-performing, sustainable federal buildings.  The Department of Energy received $3 billion to distribute to states under the Energy Efficiency And Conservation Block Grants Program.

But where is this money?  In California, which has been allocated a large amount of green building stimulus money, it has yet to hit the streets:  
 

A preliminary report by the California Recovery Task Force early this month shows that the federal stimulus program has allocated $185.8 million to help the state's low-income households weatherize their homes and $314.5 million for energy-efficiency and conservation programs.
 

But as of Sept. 30, the report said, less than $10 million has been spent, leading to the creation or retention of only 120 or so jobs. The bulk of the funding is expected to start flowing within the next three or four months.

The article also questions whether green building will remain a sustainable industry once the federal projects are completed:
 

"But at a forum on federal stimulus programs last week at the University of California San Diego, builders, union organizers and academics said the real task ahead is to keep the work flowing after the federal funds dry up in a couple years. The government, after all, has been far more willing to engage in energy saving measures than most consumers or businesses have been."   
 

“What it's going to take is a lot of education,” said Devon Hartman, a principal in the HartmanBaldwin construction and design firm in Claremont.
 

There is reason to question this argument.  Prior to the economic turmoil that began in late 2008, there was an obvious shift in market demand for green building, both in residential and commercial.  Investment of federal dollars in the green building industry will only contribute further to this market shift.  As the building industry is better able to demonstrate reduced energy bills from green buildings, market demand will increase further. 
 

Do you think private dollars will invest in green building? 
 

Sustaining Green Tide in Building A Concern (Union-Tribune)

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[Ed. Note:  I am getting married tomorrow!  As a result, guest editor Steve McBrady will be taking over Green Building Law Update.  I will be back November 2.]

The green building professionals in Nashville, Tennessee are a no-nonsense, dedicated group.  

That's my conclusion after I recently gave a green building legal presentation to the USGBC Middle Tennessee Chapter.  After my presentation was over, I was questioned for 15 minutes on the nuances of the law and green building.  I met some dedicated professionals involved in some incredible green building projects.  For example, did you know there is someone in Nashville who has been involved with LEED certified projects since 2000?  Brian Phelps has been contributing to LEED projects in the Nashville area for years and was able to point out a number of his projects on the Nashville skyline.  

As promised, below is the slideshow I used during the Nashville presentation.  Feel free to ask questions about any of the slides. 

Thanks Nashville!

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Photo:  serdir

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Down in Los Altos, California, a green building controversy is brewing. Linda Kincaid, industrial hygienist, has made some serious accusations about high levels of formaldehyde in certified green homes. On September 15, Kincaid, along with Richard Calhoun, held a press conference to discuss her findings. I am particularly interested in Calhoun's reference to "sick buildings" during the press conference:

Calhoun pointed out that commercial buildings were sealed too tightly after the energy crisis of the 1970s. Sick buildings were the result.

Calhoun stated that recent building practices reduce ventilation in homes to the point that people become ill. There is not adequate fresh air to dilute formaldehyde emitted from building materials and furniture. “History is repeating itself,” said Calhoun.

Calhoun himself is a realtor in California. If he has been a realtor for a number of years, he would likely have experienced the previous sick building crisis that he references. So what is this sick building syndrome that occurred in the 1970s?

Much of the history of sick building syndrome can be traced to the energy crisis of the 1970s. Before the mid-1970s, most commercial buildings had only one way of regulating the volume of air transmitted to the occupants, namely the windows which were opened or shut as the occupant desired, while homes had fairly significant airflow even with all doors and windows shut. Energy conservation efforts undertaken following the 1973 OPEC embargo changed all this. Voluntary and involuntary energy consumption reduction efforts required the reduction of heat loss or gain through the exterior of buildings and a reduction in the supply of outside air quantities into buildings. Buildings were made "tight" and commercial buildings became solely dependent upon mechanical ventilation to supply heating, cooling, and humidity. Windows were sealed shut. While many homes did not receive the benefit of such elaborate mechanical ventilation systems, they were nevertheless sealed and insulated.

This is where I am hoping I can tap the immense knowledge of all the readers of this blog. Tell me about sick building syndrome. Do you see the potential for another round of sick building syndrome from the new wave of green buildings? What do you think of Kincaid and Calhoun's findings?

You can email me at ccheatham@crowell.com or post a comment below. If I get some great responses, I will feature them in a follow up post.

Related Links

More on formaldehyde allegations (Examiner)

Sick Building Syndrome: A potpourri analysis (bnet)

Photo:  timlovesbrian

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When I have previously speculated as to green building lawsuits, I never imagined that an industrial hygienist would play a significant role.

Industrial hygienists are scientists and engineers who study health and safety of people in the workplace and the community. Linda Kincaid is an industrial hygienist in California. She is also a citizen-reporter for the San Jose Environmental Health Examiner. Turns out, Kincaid has recently been testing Los Altos homes for formaldehyde. Kincaid alleges that Los Altos homes are emitting more formaldehyde and that a green building rating requirement may be the culprit:

[According to Kincaid], of homes with more than 100 ppb formaldehyde, nine out of eleven were in Los Altos. Of homes with more than 120 ppb formaldehyde, three out of four were in Los Altos. Over half of the homes tested in Los Altos had more formaldehyde than the 77 ppb average in the Katrina FEMA trailers.

Initially, we could not understand why homes in Los Altos were different from homes in nearby communities. Construction practices and construction materials should be similar throughout the county. The difference, [according to Kincaid,] was a green building ordinance passed by the City of Los Altos in late 2007. Beginning in January 2008, all new homes in Los Altos were required meet the criteria for GreenPoint Rated.

Kincaid's accusation is a big one. She is alleging that homes that are certified under the GreenPoint Rated system, which is mandated by the City of Los Altos, have higher levels of formaldehyde.

Kincaid's first article of September 8 drew a swift response. The Formaldehyde Council, Inc. published a scathing critique of Kincaid's analysis, as did Build it Green, publishers of the GreenPoint Rated certification system. From the Build it Green website:

Build It Green found the information in the articles quite inflammatory and simplistic, with an elementary perspective on the realities of any green building rating system and the US construction marketplace. Ms. Kincaid also severely misrepresents the standards and intent of California’s regulatory safeguards in place to help protect homeowners from actual risks of formaldehyde offgassing. Ms. Kincaid’s testing methodology is highly questionable, her conclusions overly simplistic and spurious. Her articles do the opposite of supporting the need for good comprehensive information regarding the realistic dynamics occurring in today’s homes.

There is, of course, more to the story, which we will discuss on Friday. If residents were hypothetically getting sick from formaldehyde in green certified homes, could a green building rating system be responsible? Could a city or county, which mandated the green building certification, be responsible? Architects and contractors who built the homes also have to be concerned about liability implications.

What is your take?

Related Links: 

What is an Industrial Hygienist?  (AIHA)

Elevated formaldehyde in new Los Altos Homes (Examiner)

FCI Reponds to Linda Kincaid Articles (FCI Blog)

Build It Green Responds to Recent Articles by Linda Kincaid (Build It Green)

Photo:  timlovesbrian

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Tomorrow I will be in Nashville, Tennessee to talk to the Middle Tennessee Chapter of the United States Green Building Council (USGBC) about green building law.  It is great news that the green building industry and the people who are involved in green building projects on a daily basis are so interested in green building law. 

As most lawyers who have written or discussed green building law probably understand, I am going to be walking a fine line.  On the one hand, the industry is growing and people are incredibly protective of the certification systems, like LEED.  On the other hand, the industry and its rating systems are not perfect and are likely to contribute to problems and disputes. 

Thankfully, I don't have to discuss the merits of the green building rating systems.  Instead, I will be discussing some of the legal implications, risks and liabilities that may arise from green building certification.  Here are some highlights:

• Green building certification guarantees are risky.  I will discuss Shaw Development v. Southern Builders and then highlight the LEED guarantee being provided by ACE. 

• Owners, architects and contractors should confirm that compliance with green building regulations is possible.  I will use the Washington D.C. Green Building Act and the Vancouver green roof ordinance as examples.

• Green building risks are the real hidden risks.  I am particularly excited to discuss this topic because there is some breaking news on this front.  Check back on Wednesday for more on that story.

Notice I never once blame the green building rating systems.  The parties, projects and contracts that rely on the green building rating systems create the risk.  Sometime next week I will put up my presentation and you can see what I mean. 

Until then, what do you think?  What future green building risks are you focused on? 

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The American Recovery and Reinvestment Act (ARRA) projects have resulted in extremely low bids.  These low bids could be the result of improved efficiency in the construction industry; or the low bids could be the result of cut throat competition.  

“These days, there are more companies competing for comparatively fewer contracts, and that means contractors are facing downward pressure on their bids,” McBrady said. “The key for contractors is that it is OK to be competitive, but that bids should accurately reflect the cost to execute the work. Government officials are going to be on the lookout for contractors who make false claims, such as inflating costs for work conducted under change orders.”

• GAO
• Agency IGs
• RAT Board
• National Procurement Fraud Task Force
• Congress
• DOJ Antitrust Division 
• State and local auditors
• Whistleblowers
• The Public 

Photo:  zenosparadox

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Related Links: 

LiveRoof:  Green Roof Fire Test (YouTube)

Green Roof posts (GBLU)

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You may have recently read the New York Times article about the gap between LEED building designs and actual energy performance.  If not, I would recommend reading the article.  You may have also noticed a reference to "construction lawyers": 

"Already, some construction lawyers have said that owners might face additional risk of lawsuits if buildings are found to under-perform."

In May 2009, I spoke with Ms. Navarro about legal issues that could arise from under-performing green buildings.  I told her that under-performing green buildings might result in unhappy owners when energy performance promises were not met.  Even worse, owners might interpret a green building energy performance design as a promise and be disappointed when actual performance does not match.  Finally, I pointed Ms. Navarro to Malcolm Lewis of CTG Energetics, who actually corrects energy performance gaps that occur in new buildings. 

A lot has happened since my conversation with Ms. Navarro.  The USGBC has taken big steps to address the energy performance gap, which the article covers.  Remember when we discussed the USGBC's new requirement for reporting of energy data from LEED buildings?  Remember how the USGBC threatened to de-certify buildings that do not report energy savings?  These actions mean the USGBC is addressing the energy performance gap head on. 

Want more proof of how seriously the USGBC is taking this issue?  This is from a June 2009 press release from the USGBC:

The U.S. Green Building Council announced this week that Christopher Pyke, Ph. D. has been appointed Research Director. Dr. Pyke joins USGBC from CTG Energetics in Irvine, Calif., where he was National Director of Climate Change Services.   He brings a strong background of leadership in green building research to USGBC, underscoring its commitment to raising the bar on research related to green building science and technology, including the performance of LEED-certified buildings. This research will be vital to the ongoing development of the LEED green building certification program.

CTG Energetics is one of the leading building energy performance companies.  In hiring Dr. Pyke, the USGBC is investing significant resources into researching energy performance. 

Of course, this is all old news.  Friday we will discuss new information revealed by the USGBC's Scot Horst that has enormous ramifications for LEED.

Photo:  Geoff Livingston

Links: 

Some Buildings Not Living Up to Green Label (NYT)

Malcolm Lewis (CTG)

How I Learned to Stop Worrying and Love LEED De-Certificaiton (GBLU)

This Post is Really Important and Is Not For the Faint of Heart (GBLU)

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Today, I am starting work at a new law firm: Crowell & Moring.  I am excited and I think you will see why with a single story. 

My last day at my previous law firm was August 19.  What did I do on my first day off?  Sadly, I wrote blog posts.  I have to keep all of you happy!  As I was reviewing clipped articles for story ideas, I came across the following: 

Green Building Construction: Rewards, Rules and Risks

Increasing public awareness and government attention has jumpstarted market demand for environmentally-friendly or “green” building designs, construction practices and final products.  Green building construction is the wave of the future and is inevitable for any company constructing in America.  However, the possibility for liability is huge, which makes it vitally important to think-out projects from contracting, through construction, until the desired certification level has been achieved.  This session will inform contractors and owners of the best way to situate themselves now to mitigate the inevitable litigation fall-out.

Moderator:
Randy Erickson, Administrative Partner and Construction Practice Group Co-Chair, Crowell & Moring LLP

Panelists:
Deborah Arbabi, Counsel,  Crowell & Moring LLP 
Rosemary Carson, Associate, Crowell & Moring  LLP 
Bernadette Stafford, Associate, Crowell & Moring LLP

Sponsor: Crowell & Moring LLP

Incredible!  My first day off, and I am already reading about my new firm's involvement with green building law.  Fantastic. 

If you are going to be at the Construction Superconference in December, I would highly recommend dropping in on this session.  Say hello to my firm's attorneys.  We would love to hear from you.  I would love to hear from you.  In fact, here is my new contact information:

Chris Cheatham
Crowell & Moring
1001 Pennsylvania Avenue
Washington, D.C.  20004
P - 202.624.2717
ccheatham@crowell.com

Photo: Merrick Brown

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[I am on vacation this week in Phoenix and then Kansas City so I bring you guest posts and interviews!  I met each of the guest authors or interviewees somewhere along the way and asked them to contribute. 

When I was in New Orleans for the ABA Forum on Construction event, I met up with former collegue Asha Echeverria, a fellow construction attorney.  Asha told me all about green building events in Maine and I asked her to write a guest post.  I hope you enjoy!]

By Asha Echeverria

Greetings from the Vacationland State of Maine!  With the recent certification of the “first Platinum-certified LEED supermarket in the world” built in Augusta, Maine by Hannaford Supermarkets and the first LEED accredited newly constructed ice arena constructed at Bowdoin College in Brunswick, Maine, I have begun to wonder what would have happened if these celebrated and long awaited projects had failed to achieve LEED certification.  These ambitious projects were billed as “seeking LEED certification” long before they achieved LEED certification and though as a lawyer I know the word “seeking” makes all the difference in that claim, such advertisement raises some interesting issues, both legal and otherwise.

First, what, if any, are the legal consequences to an owner if a building fails to receive the desired level of certification from the USGBC?  For many owners, there may be little, if any, legal repercussions, but the failure to “live up to the hype” could result in financial losses, loss of good will, and other intangible losses.  Failure to achieve certification may result in lost advertising costs, a damaged public image, and a lost opportunity to capitalize on public interest in all things Green.  Though Hannaford seems to have accepted that the individual store in Augusta will not be profitable due to high investment costs, the supermarket chain does expect some return through increased good will at that store and at other Hannafords around the Northeast.   

Second, what are the consequences to the construction-design team?  The answer to this question, as to many questions in the construction industry, is “What do the contracts say?”  Unfortunately, we usually never know what construction contracts say unless litigation ensues, but we can discuss some of the issues surrounding the theoretical negotiation, content, and ultimate effects of these contracts.  First, do the contracts allocate the risk of achieving certification to the construction-design team or do the contracts simply indicate that the building was “designed” to achieve LEED status?  The former protects the owner’s interests discussed above but places the construction-design team in a difficult position to price or insure against a risk that requires the coordinated effort of the entire construction-design team and, even scarier, is predominantly controlled by a third-party, the USGBC.  The latter option, just indicating the project is “designed” for certification, places the project on the wrong side of the lessons learned from the Captain’s Galley litigation (See Jan. 14, 2009 Post Shaw Development v. Southern Builders case).

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[I am on vacation this week in Phoenix and then Kansas City so I bring you guest posts and interviews!  I met each of the guest authors or interviewees somewhere along the way and asked them to contribute. 

Ben Shultz works at Shultz Brothers Electric Company, an electrical contractor in Kansas City.  I also went to high school with Ben and I beat him every year in fantasy football.  So when he expressed interest in taking the LEED AP exam, I was intrigued.  The following is an interview I did in June with Ben regarding green building.  Hope you enjoy.]

1.  Your company is an electrical subcontractor and you just became a LEED AP.  How do you see green building and LEED certification impacting your business?

There are significant benefits in having a LEED AP electrical contractor involved in all phases of a construction project, but the greatest contributions would be on a design/build project and in the design and budgeting phases of a plan/spec project.  In those specific situations our expertise, understanding and application of the LEED rating system into a construction project would be of significant value to all parties involved in a green building project.  A few of our customers have already noticed this and have been reaching out to us for thoughts and ideas on upcoming green projects.  We anticipate this trend to grow as we are confident that owners and general contractors will see the value in having a LEED AP electrical contractor on their project. 

2.  What's the Kansas City construction market like these days?  Are you seeing more green building projects?

Right now it’s a tough market; bid lists are long and projects are going for less than we’ve seen in the past.  There is still plenty of good work, and we’re encouraged about what we see ahead, but there’s no question it has tightened up.
We have been seeing more green projects, which is encouraging to us because of the long term benefits of having a LEED AP as a resource.  Since there is a small premium to pay for a green building, as the economy turns around we expect to see more in the future.
 
3.  As a subcontractor, how would you manage guarantees of LEED certification made to the owner?

That would most likely be determined on a project by project basis.  It would depend on our level of involvement and at what stages of the project, what is being asked and expected of us, and what we have committed.  Since each trade contributes to certain LEED points, you could only be held accountable for those that you have an influence over and are identified as anticipated points.  As there are multiple players involved at multiple stages of a project, this is a gray area that could be a potential issue if not identified and addressed early on.

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When I first read about Energy Ace's LEED certification guarantee, I thought it was nuts.

Then I read a Co-Star article and realized Energy Ace's guarantee was brilliant.   

When I read a green building regulation, I always look at the enforcement mechanism.  And when I look at a green building contract, I always focus on the potential damages.  Energy Ace's LEED certification guarantee is brilliant because it limits potential damages if certification is not achieved:

"If a project misses its LEED target level (like Silver or Gold) or fails to earn certification altogether, Energy Ace would refund its LEED administration fee, which is between 30 percent and 45 percent of its total fees, Robertson said.

Simply brilliant.  Energy Ace provides a LEED certification guarantee that reassures owners while simultaneously limiting Energy Ace's potential damages. 

The potential damages stemming from a project's LEED certification failure are much greater than the limit described by Energy Ace.  For example, in Shaw Development v. Southern Builders, the owner sued for $635,000 when the project failed to achieve certification by a certain time.  I have never heard of a triple digit LEED administration fee. 

Brilliant, right? 

By the way, I can help you write a similar contract...

Guaranteeing LEED Certification (CoStar)
Southern Builders v. Shaw Development: Green Building Damages (GBLU)

Photo: ejpphoto

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Reminder:  Don't forget to register for Green Building Law Update's Birthday Happy Hour this Thursday! 

Energy Ace Inc., an Atlanta-based sustainability consulting firm, has publicly announced it will guarantee LEED certification for its projects.  Of course, there are limitations to the guarantee:  

"Energy Ace is guaranteeing LEED™ certification on projects where the firm is able to oversee LEED™ administration, Fundamental Commissioning and Energy Modeling, and where the project team is committed to LEED success."

Let's go through those conditions one at a time:  

1.  "The firm is able to ovesee LEED administration"

Since Energy Ace is a LEED consulting firm, I assume "LEED administration" means overseeing LEED certification paperwork.  Energy Ace doesn't appear to serve any design or construction role.  Remember, important decisions are made at both the design and construction stages that impact achieving LEED certification.  How can Energy Ace be comfortable that LEED administration is enough? 

2.  "The firm is able to ... oversee Fundamental Commissioning and Energy Modeling."  

This one makes sense.  Commissioning and modeling are key components of buildings that eventually achieve LEED certification.  

3.  "The project team is committed to LEED success."  
As a construction attorney, this sentence makes my stomach roll.  Please, seriously, someone explain this to me.  How do you define "committed to LEED success"?

Despite all of this, Energy Ace knows what they are doing.  Check back on Friday and I will explain why.     

Links: 

Energy Ace Inc. to Offer the Industry’s First Guarantee for LEED

Photo:  misterbisson

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Reminder:  Don't forget to register for Green Building Law Update's Birthday Happy Hour this Thursday!  

This week, we are going to be looking at an issue near and dear to me: guarantees of LEED certification.  Two publications from last week made clear to me the wide variety of views on the issue:

(1) Washington Business Journal's On Site, "Hot Potato" by Vandana Sinha (print only):

For the most part, these players have come together time and again to score a LEED designation and plaque.  But what happens when one of the parties comes up short, and the project misses its LEED goal?  Who's at fault?
...

Green building mandates make the question even more important. . . . "As more LEED mandates come out that require certification, this becomes a bigger deal," says Cheatham, a LEED-accredited D.C. construction attorney with Watt, Tieder, Hoffar & Fitzgerald LLP, where his primary job is to worry about risks associated with green building and things like the D.C. performance bond.  "That's actual cost.  That's money.  The owner will recognize that risk and more likely want to hold somebody accountable at the end."

(2)  CoStar, "Guaranteeing LEED Certification" by Andrew C. Burr:  

Energy Ace Inc., an Atlanta-based energy services and LEED consulting firm headed by Wayne Robertson, is offering what it calls the industry's first LEED certification guarantee.

At a time when many cities and states have begun mandating LEED-certified buildings, “We can offer clients a certainty that their project is going to be certified and remove that anxiety,” Robertson said.

...

“One of the senior architects was saying that these mandates are putting us in a position to offer a guarantee, and we can’t do that,” Robertson said. “And I’m thinking, yes we can.”

Who is right?  Is my concern about LEED guarantees warranted?  Or are companies like Energy Ace Inc. able to avoid issues surrounding LEED guarantees?  Are we both right?  

Photo: Wade Roush

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Over the past week, we have been discussing AIG's AIGRMGreen Reputation Coverage.  I had speculated that this insurance might cover bad press resulting from allegations of greenwashing. 

Turns out, AIG's insurance product covers more than just bad press. 

Mark Rabkin, my green building insurance guru, located a copy (PDF) of the AIGRMGreen Reputation Coverage.  From my reading of the policy, it would actually cover a green building project that failed to achieve LEED certification.  Come along with me as we read an insurance policy.  Don't worry, I have only picked out a couple of sections:



So what is considered an "adverse green claim"? 



I have been clamoring for this type of insurance policy for awhile.  I thought it would take much longer to create.  This is an important first step to properly insuring owners, contractors and architects involved with projects seeking LEED certification. 

We will definitely be discussing this policy in more detail.  Take a look at the policy (PDF) if you get a moment.  What do you think? 

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When I read about the AIGRMGreen Reputation Coverage, which covers bad press for green building projects, I immediately thought of allegations of greenwashing. From wikipedia:

Greenwash (a portmanteau of green and whitewash) is a term used to describe the practice of companies disingenuously spinning their products and policies as environmentally friendly, such as by presenting cost cuts as reductions in use of resources. It is a deceptive use of green PR or green marketing.

One particular type of greenwashing involves projects seeking or building to LEED standards. A recent Grist article detailed one instance of alleged greenwashing through the use of LEED:

Take, for instance, the highly controversial parking garage plopped in the middle of Atlanta’s Piedmont Park. Conceived and championed by the Piedmont Park Conservancy and the Atlanta Botanical Garden as a way to raise funds and provide parking space for folks attending the park’s special events (like the upcoming “Green Concert” starring Sir Paul McCartney), this “built to LEED standards” structure has been largely derided by neighborhood groups, including Friends of Piedmont Park (FOPP), as being a decidedly improper use of park space.

“We’re upset about the conversion of more public green space to cement and concrete,” says Jack White, a FOPP board member.

Grist is a very popular environmental website. After this story ran, other websites then picked up the story, resulting in substantial negative publicity for this construction project.

Is this the type of scenario that would be covered by the AIGRM Reputation Coverage? If the Piedmont Park had this coverage, would the Grist article represent a reasonable claim under the policy? And again, how would you measure the associated damages?

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How did we all miss this?  While AIG may have had its problems recently, it certainly has created an innovative green building insurance product: 

Did you know you can get insurance to cover you if your green building project goes awry?  Obviously, I would have to read the exclusions (I haven't), but theoretically I could envision that the AIGRMGreen Reputation Coverage would cover your project if it failed to achieve LEED certification. 

In order to offer particular coverage, an insurance company has to be able to measure the risks and potential damages.  How do you measure the damages from bad publicity resulting from a green building project?

Any AIG readers out there?  I would love to talk to you about this coverage! 

Photo:  happymichaelchung

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I have previously speculated that stimulus green building projects will be at risk of underbidding.  Now we have real evidence.  Remember the $5.5 billion that the General Services Administration received from the stimulus to fund green building construction and retrofits?

"Bids came in far lower than we expected, but the upside is that because of that, we have been able to fund more projects," said Paul Prouty, acting administrator for the General Services Administration.

You may recall that the GSA requires that all new construction projects achieve LEED certification and prefers that its projects achieve LEED Silver certification.  With the fierce competition for GSA projects, you can bet that the winning bids will include LEED Silver certification promises. 

Underbidding these GSA projects with promises of LEED certification is bound to lead to problems.  Underbidding makes it more difficult to deal with changes to the design and construction.  Underbidding makes it more difficult for contractors to deal with changes in design and construction plans:

[Paul Shaughnessy, president of BSI Constructors in St. Louis] warned that some contractors are bidding so low they could find themselves unable to cover even the slightest unexpected construction costs.

"The risky side is you're seeing some very thinly capitalized companies making low bids out of desperation," he said. "Their bids are so thin that should something go wrong, they would have very little capital to fix things."

Simply put, the stage is set for LEEDigation.   

Photo:  Our Hero

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You may be relieved to learn that I am temporarily done discussing LEED de-certification.  The USGBC will be releasing an addenda to the Minimum Project Requirements, at which time we will discuss this issue anew.  Until then, lets move on...to another LEED legal discussion. 

One green building legal development that I, and others, have been concerned about is the inclusion of LEED into government regulations, particularly when applied to private projects.  Is it constitutional to require private parties to comply with a third party rating system, namely the USGBC's LEED rating system?  What other legal issues arise from LEED mandates? 

Brad N. Mondschein's green energy blog raised an interesting case study regarding Connecticut's recently passed LEED mandate.  Under the regulation, the State Building Inspector is required to revise the State Building Code to incorporate LEED standards. 

Turns out, the State Building Inspector is very concerned about revising the State Building Code to incorporate LEED:

The state Department of Public Safety is still trying to write building-code language that reflects the new requirements for commercial projects.

“We don’t have the framework in place to implement it properly,” said Lisa R. Humble, the state building inspector.

After the law was passed, the State Building Inspector asked for an opinion from the Attorney General regarding the legality of the mandate.   

Andrew Falk did a great job finding a copy of the Attorney General's informal opinion letter (PDF) to the State Building Inspector.  From Janet Ainsworth from the Connecticut Department of Public Safety: 

The attached is the informal advice (PDF) received from the Office of the Attorney General. The AG opinion does not address the constitutionality of the legislation.  Rather, it discusses whether the statutory provisions may be enforced in the absence of applicable language in the State Building Code.  The Department of Public Safety is engaged in the development of the applicable language to be added to the State Building Code.  At this time, I am unable to estimate when the amendment to the State Building Code to address the green building requirements of the Connecticut General Statutes will be enacted.

Check out the letter (PDF) as we will be discussing it in future posts.  What's your take on the letter?

*Turns out, the Attorney General letter does not address constitutionality of LEED mandates, as originally thought.  We will save this issue for another day. 

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[Today, I am bringing you a guest post from Mark Rabkin.  I have been on Mark for awhile to write a guest post.  He is doing a tremendous job looking at the insurance and surety concerns related to green building.  Back when I was looking at alternatives for the D.C. Green Building Act bond requirement, I leaned on Rabkin's knowledge of the surety industry.  You may recognize Rabkin's post, which highlights surtey and insurance implications from LEED de-certification, because it was originally a comment last Friday.  Check out other posts from Rabkin over at Konstructr.com.]

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Love might be too strong of a word but you get the point.  The idea of LEED de-certification has touched off a firestorm of comments, some in support and others in objection.  I think a follow up post is warranted. 

First, I want to clarify one important piece of information as I noticed some were heading down the wrong path.  The LEED 2009 Minimum Project Requirements (MPR) require, among other things, that projects report energy performance data.  If projects do not report energy data, then LEED certification may be revoked (i.e. de-certification).  The USGBC has not stated that LEED certification will be revoked for poor energy performance itself.  Go take a look at the USGBC's MPR webpage if you get a moment.

Furthermore, the USGBC's decision to require energy reporting and threaten LEED de-certification makes sense.  Why?

The number of people complaining about LEED certified projects that were not reporting energy performance reductions was growing everyday.  Ever heard of Henry Gifford?  He actually engaged in an open debate with the USGBC in March 2009 about the merits of LEED certification.  This was not good press.  This was  not a good development for the USGBC.  

In response, the USGBC took a dramatic step to fix the problem.  The USGBC has taken what I think is only the first step to ensure improved energy performance.  Additionally, the USGBC used the only "stick" (i.e. enforcement mechanism) it had available:  LEED de-certification. 

On Wednesday, there was a great piece in ENR regarding the LEED energy reporting and de-certification.  Both an American Institute of Architects representative and a Building Owners and Managers Association representative came out in favor of the reporting requirements.  Of course, there was some criticism in the ENR article regarding LEED de-certification: 

The “bottom line” is, these conditions “may end up doing more harm than good for the future vitality” of LEED, says attorney Edward B. Gentilcore, a partner of Duane Morris LLP, Pittsburgh. “This would be a significant loss in light of the accomplishments to date,” he adds.

Mr. Gentilcore is a fellow construction attorney.  Us attorneys are going to be worried about any new requirement that creates additional risk and liability.  That is why we are here.  We are here to worry about your risks and liability.

The moral of the story?  As LEED 2009 changes are implemented, your contracts need to change as well.  Let us do the worrying for you.

Photo:  JonBen

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Disclaimer:  If you are sensitive to or frightened by new risks and liabilities in the green building industry, please skip this post.

On Monday, I highlighted the USGBC's decision to create requirements to ensure a building's performance matches modeled energy savings.  I finished the post by asking, what happens to projects that do not comply? 

Okay, brace yourself: 

NOTE: CERTIFICATION MAY BE REVOKED FROM ANY LEED PROJECT UPON GAINING KNOWLEDGE OF NON-COMPLIANCE WITH ANY APPLICABLE MPR.  IF SUCH A CIRCUMSTANCE OCCURS, REGISTRATION AND/OR CERTIFICATION FEES WILL NOT BE REFUNDED. 

It is time to introduce a new word into your green building vocabulary:  de-certification. 

Everytime I start thinking about the implications from de-certification, my head starts spinning and I have to sit down. 

It just happened again. 

I have definitely not uncovered all of the potential issues, but here are three that immediately jump to mind:

1.  De-certification makes regulations tied to LEED certification very difficult to enforce.  What does a jurisdiction do if a project is de-certified?

2.  Insurers and sureties are going to be extremely concerned about coverage issues after design and construction work is complete.  Could an architect or contractor remain on the hook for potential de-certification long after a project has been completed? 

3.  For you owners out there, the commitment to provide energy data must carry forward if a building or space changes ownership or lessee.  How in the world do you write this into a contract? 

The room is starting to spin again.  Please elaborate on any additional risks and liabilities implicated by de-certification in the comments.

Photo:  Kevin (iapetus)

Update:  Also check out Stephen Del Percio's detailed analysis of the Minimum Project Requirements. 

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I'm impressed.  In one fell swoop, the USGBC has stepped up to the plate to address the primary criticisms of the LEED rating system.   

Kudos to Scot Horst and the USGBC for acknowledging an issue that has bothered many users of the LEED rating system: 

“Today there is all too often a disconnect, or performance gap, between the energy modeling done during the design phase and what actually happens during daily operation after the building is constructed,” said Scot Horst, Senior Vice President of LEED, U.S. Green Building Council.  “We’re convinced that ongoing monitoring and reporting of data is the single best way to drive higher building performance because it will bring to light external issues such as occupant behavior or unanticipated building usage patterns, all key factors that influence performance.”

In order to address the performance gap, projects seeking LEED certification must agree to comply with one of the following ongoing requirements:

1. The building is recertified on a two-year cycle using LEED for Existing Buildings: Operations & Maintenance.

2. The building provides energy and water usage data on an ongoing basis annually.

3. The building owner signs a release that authorizes USGBC to access the building’s energy and water usage data directly from the building’s utility provider.

There are serious liability and risk issues implicated by this decision, but I am going to ignore those for now.

Instead, I would like to recognize the USGBC for transparently addressing the primary critique of the LEED rating system.  

What will happen to projects that don't comply with an ongoing requirement?

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I wanted to take a moment and thank all of the Green Building Law Update readers.  You all have been blowing my minds the last few weeks.  There has been a surge in comments and discussions that take place after my original post.  Many times, these comments and discussions are much more important than the post itself. 

Don't believe me?  Go back and look at the comments after last weeks post on the USGBC's decision to no longer make CIRs public. 
 

• Eli S. made a great point that without public CIRs, the USGBC and GBCI may be limiting their liability. 
• Rich C. followed up on Eli's comment with the point that the USGBC may face less liability, but internal disputes among project teams may actually increase. 
• Christopher Hill argued that one possible solution is to build more CIRs into any contract.  I agree.
• Tim Hughes made a fantastic point - someone is likely to set up a third party website or clearinghouse where projects still share CIRs.  Who is going to start this? 
• Finally, Robert Newcomer pointed out that my case law analogy may have been flawed because facts are never identical from case to case or CIR to CIR. 

Why am I highlighting these comments?  Two reasons.

First, if you aren't reading the comments and, more importantly, taking part in the discussions after the blog posts, you are missing out.

Second, the comments above are proof that attorneys can, in fact, contribute to the green building industry.  Each of the commenters is a construction attorney.

Of course, we always value non-legal contributors too.

Have a great Fourth of July. 

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As I mentioned in my June 24 post, starting June 26, the USGBC eliminated public CIRs in order to improve the functionality of the LEED rating system.  The USGBC's Peter Templeton provided the following explanation for eliminating the public CIRs:

Under the new LEED certification model, standards development and project certification responsibilities are divided between USGBC and GBCI respectively to improve capacity and timeliness. CIRs will be issued by certification bodies under the guidance of GBCI and will continue to fulfill their primary purpose of providing project-specific clarifications regarding the LEED requirements. An unavoidable consequence is that rulings will no longer be made by the LEED Technical Advisory Groups and, therefore, cannot be applied universally.

In short, LEED certification became so popular that the USGBC had to begin allowing certification through independent certification bodies.  Vandana Sinha, over at the Washington Business Journal, recently highlighted the LEED backlog that had resulted in 5 month waits for certification determinations.  

The USGBC responded to the backlog by delegating certification to the Green Building Certification Institute (GBCI), which will then be responsible for ten additional "certification bodies."

With that change, the council employees who touched every LEED design and construction application will turn the job over to 150 trained reviewers who will manage the process from first draft to final award for an expected 3,000 certifications this year. The affiliates foresee ramping up by an additional 50 to 75 people next year, when projections call for up to 3,600 new certification requests.

The USGBC no longer controls certification responsibilities.  Instead, ten independent companies will interpret LEED credits and apply them to projects seeking certification.  Since the USGBC will not  directly oversee the ten companies, the USGBC could not review the CIRs.  As a result, the USGBC was no longer comfortable with universal application of CIRs.

The Washington Business Journal also reported that the GBCI calculated that the LEED backlog will be wiped out by June 26. 

That was last Friday!  Did this happen? 

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If there was a LEEDigation doomsday clock, I would move it up about 5 minutes towards midnight based on the following decision by the USGBC.* 

Real Life LEED recently reported that the USGBC has decreed that, starting June 26, 2009, Credit Interpretation Requests (CIRs) will no longer be applicable to all projects: 

"Effective June 26, 2009, credit interpretation requests (CIRs) submitted by any registered project will no longer be vetted by USGBC or its LEED Technical Advisory Groups. As a result, CIR rulings will now be applicable only to the project that submitted them. For LEED version 2 projects, rulings on CIRs submitted prior to June 26, 2009, will be honored until they are retired by USGBC or incorporated into general USGBC-issued project guidance, such as through errata or addenda."

All you non-practitioners out there may be wondering what the heck a CIR is and why this matters.  The best way for me to explain a CIR is to compare it to case law. 

When you are talking to a client that is thinking about a lawsuit, one step you may undertake is reading up on case law.  You read case law to find a factually analogous situation to determine if your client has a good chance of winning. 

CIRs function the same way as case law.  To achieve LEED certification, a project must achieve a certain number of credits.  But the requirements for each credit are often open to interpretation.  To resolve this uncertainty, a technical advisory board evaluates each CIR to determine whether or not a credit should be granted.  Historically, USGBC has published these credit  interpretations to inform other builders and designers in future projects.  The first comment after the Real Life LEED post really hits at the importance of CIRs:

Wonder why they decided to do this, public CIRs help project teams immensely. They give good information on how the USGBC look at and interpret credits so that we could submit proper documentation or know what is and isn't acceptable strategies to meet the credits. I don't think LEED is in the stage where it is clear enough to not be interpreted several different ways.

You probably already see why LEEDigation is more likely without public CIRs.  Without public CIRs, architects, engineers and contractors are going to have more trouble interpreting credits and determining strategies that will successfully achieve a LEED credit.  As a result, the likelihood that projects will fail to achieve LEED certification increases dramatically.  As we've discussed, failure to achieve promised LEED certification leads toLEEDigation.

On Monday, we will look at why the USGBC had to do away with public CIRs.

But what do you think about this change? 

*To be clear, the USGBC had to make this business decision.  My post on Monday will go into more detail as to why this decision was necessary.

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Here's an update on "green job" requirements created by the American Recovery and Reinvestment Act. Previously, I wrote

To my knowledge, there is no requirement or guarantee in the American Recovery and Reinvestment Act to create a certain number of "green jobs."

While this is still the case, there are job creation reporting requirements that will likely be used to categorize the number of green jobs created by the ARRA.

Federal agencies must report more than 40 separate pieces of data regarding their stimulus spending to a central repository — and contractors are required to submit similarly detailed reports for all work funded in whole or in part by the stimulus legislation.

The deadlines are clear. What’s less clear is how to submit reports and arrive at certain calculations, such as the number of jobs created or saved by the stimulus-funded work.

The Office of Management and Budget should be coming out with reporting requirement guidelines for contractors soon.

If you are a contractor lucky enough to have successfully bid a stimulus project, pay close attention to future guidelines released by OMB. As we draw closer to the 2010 election cycle, you can bet that politicians who supported the ARRA will be looking to tout green jobs that were created.

Of course, the big question remains, will the ARRA result in a surge in green jobs? I'm not an economist but I can report I have noticed a surge in green startups the last two months. As we slowly emerge from the recession, and as green stimulus funds finally start to flow, look for huge opportunities and resulting success stories from startup green companies.

My money is on a lot of new green jobs being created.

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One of my blogging buddies, Shari Shapiro, wrote a piece last week about the lack of green building lawsuits.  Her post reminded me of a conversation I had with an attorney when I was in New Orleans for the ABA Forum on Construction event. 

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Green building liability issues are starting to hit the mainstream, as reflected in the New York Times' Green Inc. blog last week. 

Other interesting examples include a “green cement” controversy in Dallas and (though this is not a legal case) a delay in opening a Maryland elementary school that was partly due to changes in state environmental requirements.

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I took away a very important, very big thought from my conversation with Rob Watson.  This big, important thought was based first on a comment from Watson himself:

"We are in a 'you bet your species' proposition with unmanageable climate change, so more rapid penetration of LEED is not a problem, rather a prerequisite with regards to solving this global problem."

"Initiating is really and truly difficult, and that's what leaders do.  They see something others are ignoring and they jump on it." 

As an attorney and an independent analyst,  I see it as my role to make that standard work better, with less risk to all parties.  We can't wait for the USGBC to undertake that task - that is OUR task.

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I have had another green building epiphany.  Actually, a series of epiphanies. 

But before we get to the epiphany, we have to review a simple premise.  I have to thank Will Clark over at Multi-Family Guide for pointing out this premise to me.  So here it is: 

The LEED rating system was created to only apply to the top 25 percent of the market. 

It's true.  After doing a little digging, I found an interview from February 2008 with Rob Watson, the "Father of LEED," where he states the premise.   

VL: Here in the US, LEED is becoming mainstream and expanding to cover homes, schools, banks, businesses, neighborhood development, etc. Ultimately, how far do you think LEED can go?

RW: LEED is designed to fully reach the top 25 percent of the market in terms of the number of square feet—so a quarter of new buildings will be built to LEED specifications. The rest of the market will catch up eventually as green practices become more mainstream. So as we reach our target 25 percent (currently about 10 percent of new building square footage is LEED certified), LEED will get more stringent so it will be a moving bar. Unless the engine is moving, the train following it won’t move, either. So we want to keep raising the bar as the knowledge gets greater and the technology availability gets greater. We want to bring in ever greener and greener buildings.

I would venture to guess that most people don't realize LEED is only supposed to apply to "the top 25 percent of the market."  There are all sorts of ramifications, or epiphanies, we will get to in later posts that are the result of this premise. 

But for now, does anyone know the percentage of square footage that is LEED certified currently? 

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According to a recent Washington Post article, “Construction firms are so eager for work in the sagging economy that project bids are coming in much lower than expected.”

Great news, right?  Not necessarily.  Lower bids can be a good thing if they are the result of increased efficiency in the construction process.  But lower bids can also be the result of increased competition.  These lower bids can be just that - too low - and result in delays and litigation. 

What factors are causing the lower bids on stimulus projects?  According to Kenneth Simonson, chief economist for the Associated General Contractors of America: 

"Wherever I go, I hear of projects that used to attract two to three bids just a couple of years ago, now it's 20 or 30," Simonson said. "Many [contractors] are coming down on the minimum size of projects they will bid on, and ones who didn't do schools now are bidding on schools. Others are coming from out of state to a new region just to keep busy. And they are essentially giving away their services just to keep their key employees busy."

Why should this be a concern to the green building industry?  As I have detailed, the stimulus is providing nearly $25 billion for green building projects.  The green building industry is newer, the parties more inexperienced, and the technology relatively untested.  The opportunity for underbidding these green building projects is tremendous.  Projects that can't be completed at the promised cost could lead to LEEDigation. 

Be careful with your bids. 

Photo:  Jim Frazier

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Over the weekend, while writing a response to a Summary Judgment Motion, I was reminded of the most important legal principle in construction law.  Under the Spearin Doctrine:

"If [a] contractor is bound to build according to plans and specifications prepared by the owner, the contractor will not be responsible for the consequences of defects in the plans and specifications."

United States v. Spearin, 248 U.S. 132, 39 S.Ct. (1918).*

What does this have to do with green building? 

Generally speaking, if a contractor agrees to build a green building project according to the plans and specifications and it does so, the contractor will not be responsible for any subsequent problems. 

Of course, this won't always be the case.  Some contractors will also guarantee LEED certification.  If a contractor were to guarantee LEED certification, that contractor might be required to achieve LEED certification regardless of the project design.  The contractor could build according to the plans and specifications, not achieve LEED certification due to some design error or omission, and the contractor might still be on the hook for the failed certification. 

Do you see the problem there? 

*Today marks what I believe is the first case law ever cited on Green Building Law Update.  We are 150 entries in and I managed to never cite to case law.  That is either extremely impressive or embarrassing. 

Photo:  SnoShuu

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Last week, I gave a presentation on green building law to legal counsel for D.C metropolitan jurisdictions.  One of the things that I said, and have repeated to other groups, is that green schools will be a hotbed for initial LEEDigation (see slide 25).  

Want to see an example of what I am talking about? 

The one-year delay in the opening of a new elementary school in Upper Marlboro was largely caused by school system planners' struggles to meet state-imposed environmental standards that were established last year, a school development officer said.

 

The Prince George's County Public Schools' Capital Improvement Program office submitted a final building permit for approval later than expected because designers had to incorporate changes in Leadership in Energy and Environmental Design standards, said CIP officer Rupert McCave.

 

"It changes over the year because everyone is still growing and learning the new requirements," McCave said. "You can talk to any school district in Maryland and they'll tell you it's a learning curve."

"Economically, [the delay] concerns me," said Board of Education member Donna Hathaway Beck (At-large), who said she asked the school system's chief operating officer, Lawrence Fryer, about the delay at a CIP meeting early in April. "We're paying money now, but we're not going to be using the building until next year."

"It's just disappointing, and you remind them that this doesn't happen again," she added.

Disappointed owners of green buildings result in LEEDigation.  How are you managing green building expectations? 

Photo:  Dean Terry

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This week, I want to tell you about new green building developments in the D.C. metropolitan area. 

I like incentive programs related to green building.  D.C. recently came out with a solar rebate program that will most definitely increase the installation of renewable energy systems:

Beginning February 23, 2009, the program will provide rebates to eligible applicants to assist in the installation of a solar photovoltaic or wind turbine renewable energy system. Additional technology rebates are forthcoming in the second quarter of 2009 as regulations are adopted. Projects may include but are not limited to the installation of systems on single- and multi-family dwellings, as well as commercial and institutional buildings. 

Of course, I have to discuss some legal implications from this program.  D.C. is relying on a tried and true enforcement mechanism, the lien:  

Rebates will remain active for a period of six months (6 months) from the date of the award. The incentive contract requires installations to be completed in 6 months. If the system is not completed within 6 months, the system owner may request in writing a six-month extension. If an extension is not requested and/or the project timeline exceeds 12 months from the award date, the applicant is to return the rebate to DDOE. Failure to return the rebate will constitute a lien on the owner's real and personal property to secure repayment.

Filing liens on property in Washington, D.C. is not easy.  Releasing liens is even more difficult.  Are property owners and the District prepared for lien battles if problems do arise? 

Photo:  Jared Zimmerman

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On Wednesday, we looked at the best case scenario that can result from the D.C. Green Building Act "performance bond" requirement.  We assumed that the green building "performance bond" was created.  The scenario was not pretty and involved extensive LEEDigation™ . 

Green roofs not covered by B.C. insurers

 

No coverage means no new residential developments.  This has left developers caught between the possibility of being mandated by city governments on one hand and shut out by insurers on the other. 

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Today I am speaking once again on the D.C. Green Building Act "performance bond" issues (see slides in this post).  I have a new message for this presentation because, frankly, I am not certain we are getting anywhere.  If you need some background, here are all of the Green Building Law Update posts regarding this hot topic. 

What will this LEEDigation look like?  The Surety will file a lawsuit against the Architect or Contractor, blaming them for the project's failure to achieve LEED certification.  The Architect will file an additional lawsuit blaming the Contractor, or vice versa.  Oh, and the Architect will also file lawsuits against all of the Engineers.  The Contractor will go a similar route and sue all the Subcontractors. 

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Last week, I attended the ABA Forum on Construction “Talking Green Blues” conference in New Orleans.  The one presentation I was looking forward to the most was “When ‘Green’ Turns to ‘Red’ and ‘LEEDs’ to a Summons and Complaint,” which was moderated by Frank Musica.  Musica is one of the foremost experts on green building claims.  I wrote about Musica's presentation "Don't Let Green Design Cause Red Ink" in September, 2008 and refer to it often when discussing potential problems with green building. 

One of Musica's opening remarks really caught my attention:

"We are about to see a second and much larger wave of green building claims." 

Go back and read that quote again.  This is serious.  This is a big deal for the green building industry. 

Why do Musica and I expect a surge in green building claims in the coming months and years?  I highlighted many of the reasons in my "Green in the Stimulus" slideshow.  The presentation highlights the opportunities, but also the risks, inherhent in green building stimulus projects: inexperienced government entities will have unrealistic expectations of green building projects.  These same entities will also require guarantees of LEED certification or energy performance, or both.  The contracts for these projects will be extremely important. 

The wave of LEEDigation is coming.  Can you swim?  Can your attorney? 

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Recently, I was asked about my involvement with green building.  Why do I keep pointing out potential legal issues that the green building industry may have to confront?  Am I just an impediment to the green building industry? 

Here is my answer.  I am going to use this in the About section up above. 

I am a construction litigator.  I am also a LEED Accredited Professional (AP).  If you want a standard biography describing the articles I have written, the organizations I am a part of, or the schools I went to, go ahead and view my law firm profile, or better yet, my LinkedIn profile.  This section is going to be about why I started Green Building Law Update.

When I studied for the LEED AP exam, I got hooked on green building and became convinced this was the future for the construction industry.  Just after I passed the exam, I began reviewing the D.C. Green Building Act of 2006.  As I stated in one of my first Green Building Law Update posts, when I read the “Performance Bond” section of the Act, I gasped.  In that moment, I realized lawyers have an important role to play in the green building industry.

With any new industry, there will be issues and conflicts that must be resolved.  The green building industry is no different.  Through Green Building Law Update, I aim to point out the problematic regulations and industry trends that are ripe for litigation (i.e. LEEDigation) in order to hopefully prevent some of these issues and conflicts from arising.  If the issues and conflicts do arise, hopefully Green Building Law Update will lead you to contact me.  

These are my goals.  How am I doing? 

What do you think?  Are you convinced? 

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This post is simple.  I have a new term for the green building and legal industries:

LEEDigation. 

What is LEEDigation?  LEEDigation is green building litigation.  LEEDigation could involve disputes arising from green building certification.  LEEDigation could arise if a project fails to obtain government incentives or satisfy mandates for green building construction.  LEEDigation could simply result from improperly designed or constructed green building strategies. 

There you have it:  LEEDigation.  Feel free to start using it.  But don't forget about its origin!

Photo:  Outstanding Photos

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RSVP for the DCENVIRO Happy Hour on Earth Day, April 22.  Hope to see you there.

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A while back, I read a blog post describing how to prepare for a conference.  I am going to the ABA Construction Forum's Talking Green Blues event in New Orleans this week and decided to apply one idea to my conference preparation.

There are two questions in the forefront of my mind and I am not leaving New Orleans without the answers:

1.  What are people doing with contracts involving green building?
2.  How should I start studying up in order to become a renewable energy expert?

If you have answers to any of these questions, email me.  If you are going to be at the event and would like to meet up for a chat, a drink or some gumbo, email me.  If you have an answer to any of these questions and you will be in New Orleans this week, you have to email me.

Seriously. 

Photo:  Phillipe Leroyer

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If you have been paying attention to Green Building Law Update, you know D.C. has a bit of an issue regarding a green building "performance bond" currently required by law.  In short, green building "performance bonds" do not exist.  A few weeks ago, George Hawkins, Director of the District Department of the Environment, testified in support of the use of “performance bonds” as a method of enforcing the District’s Green Building Act (PDF link).  Among the comments that caught my attention, Mr. Hawkins stated that green building performance bonds will be created just as car insurance was created: 

"For example, before there were automobiles, there was no such thing as car insurance.  When the law recognized a growing need to insure against harms that may be perpetrated by automobile drivers to others, the market rose to the demand." 

Automobiles were invented in the mid-1890s. Although various vehicle insurance schemes existed in the late 1890s through the first decades of the 1900s, Massachusetts was the first state to make vehicle insurance compulsory in 1927. New York was the second state to make vehicle insurance mandatory, in 1956. The 'invention' of automobile insurance clearly preceded the state's mandating of such coverage. The DC GBA reverses this precedent by mandating something for which no appropriate instrument exists.

More directly, auto insurance is an extension of tort law, and vehicle insurance exists to compensate a party for its loss, whether personal or property. These loses are either known (cost of repair or treatment) or negotiated. In the case of the DC GBA, the compensated party (District's Green Building Fund) is not the party of loss.  Regarding forfeiture, the legislation states "All or part of the performance bond shall be forfeited to the District and deposited in the Green Building Fund if the building fails to meet the verification requirements." There is no method in the legislation to negotiate (or dispute) the severity of loss or even identify the loss. Certification of LEED projects is made by the US Green Building Council (USGBC), a non-governmental entity, and includes a mix of objective and subjective requirements. Because a failure to achieve the desired certification could be the result of subjective failures, a surety bond is an inappropriate method to ensure compliance.

Photo:  Larry Miller

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Today, we run Part II of the Eric Corey Freed interview.  I divided up the interview into two posts because the interview was long and Eric does a great job illuminating green building legal issues in Part II:   "Architects would not be able to guarantee LEED certification because the architect is not the one providing the LEED certification. . . .  I also don't think given the science of building technology that we can guarantee anything about energy usage."    

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My friends over at Sensible City recently offered me the opportunity to interview Eric Corey Freed.  It's not everyday I get to interview someone who was just interviewed by the New York Times so I jumped at the chance.  Even better, Eric is an "organic architect" and studied under a former student of Frank Lloyd Wright.  I am getting married in October at Wright's Arizona home, Taliesin West, so I couldn't pass up this opportunity. 

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It may surprise you to learn that I have a real job.  Seriously, I do and I love it!  I am a construction litigator and I am currently involved in a major construction delay claim.  I have been preparing a motion the last few days, hence the late filing of today’s post. 

There is a lot going on in the green building world.  The Stimulus.  D.C.’s unique green building bond (i.e. the green building unicorn).  LEED AP exam deadlines.  And also a little basketball.  I often don’t have time to touch on all the issues I would like, so today, I provide you my thoughts on these many issues. 

The stimulus.  In my “Green in the Stimulus” slideshow, I indicated that the General Services Administration has until April 3, 2009 to prepare a list of federal projects to receive stimulus-funding.  While that is true, apparently the GSA does not intend to release this list on April 3:  “Morris said a list of stimulus-funded projects is being vetted by the administration, but he could not give a date for the list’s release.”  Stay tuned for further details.

The D.C. Bond.  You may have noticed that I have been writing a lot about the D.C. Green Building Act's performance bond requirement.  It seems the issue takes a new turn everyday.  The most recent rumor is that the D.C. may incorporate the green building bond into zoning requirements.  How are we going the wrong way on this?  Look for a guest post next week on the issue. 

The LEED AP Exam.  I get a lot of google hits from people trying to decide if they should take the LEED AP exam.  My general thought is that if you are interested in a career in green building and you have some free time and money, you should take the exam.  You do know the deadline to sign up for the LEED AP exam is March 31, right?  Also, the Green Building Certification Institute recently announced that you actually have to take the LEED AP exam by June 30, 2009.   

The Defending Champions.  Finally, it is my favorite time of year.  It is the time of year when the University of Kansas Jayhawks take flight.  In addition to my job and this blog, I also am just a little bit COMPLETELY AND UTTERLY (ed: my fiancee made this change) obsessed with Kansas Jayhawks basketball.  Always have been, always will be.  I hope Sherron Collins, Cole Aldrich, Bill Self and company continue rolling and dispatch of the Spartans in quick fashion tonight.  Rock Chalk Jayhawk! 

Photo:  ruralocity

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Last week, I had the pleasure of testifying before the D.C. Council regarding green building policies in the district.  As mentioned in my post last week, the focus of my testimony was the Green Building Act's "performance bond" requirement.  Before my testimony, I had the opportunity to hear George Hawkins, Director of the District Department of the Environment.  During his speech, Mr. Hawkins directly addressed the "performance bond" issue and many of the points I raised in my White Paper last Wednesday.  After you review Mr. Hawkins testimony, I would be very interested in hearing your thoughts. 

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“Performance Bond” Requirement for Private Projects

I would now like to turn to the issue of performance bonds and criticism of this enforcement tool. Pursuant to the Act, commercial applicants will be required to submit a “performance bond.” If the building fails to meet the LEED certification requirements, “all or part of the performance bond shall be forfeited to the District.” Experts in the area of environmental finance analysis and DDOE’s research on the subject support this approach as an appropriate and sufficient enforcement mechanism to ensure compliance with the Act.

One of the concerns that has been raised is that “performance bonds” do not currently exist in the financial assurance world. There are, however, a number of laws and regulations that have required forms of financial assurance that at the time of the inception did not exist in the market. In each regulatory context, private financial markets have developed to provide the insurance, bonds, and other financial instruments necessary to demonstrate assurance. For example, before there were automobiles, there was no such thing as car insurance. When the law recognized a growing need to insure against harms that may be perpetrated by automobile drivers to others, the market rose to the demand.

The breadth of operations and environmental risks covered by current rules is an additional testament to the market’s ability to conform to and rise to the demand of a new form of financial assurance. For example, the Resource Conservation and Recovery Act (RCRA) requires that financial assurance be provided by the responsible party as proof that adequate funds will be available when needed to undertake the necessary corrective action at a RCRA treatment, storage, and disposal facility. Many states have their own laws requiring financial assurance, including our own DDOE requirement that developers post a bond equal to the cost of stormwater management infrastructure until DDOE verifies proper installation.

A second concern that has been raised is that it may prove difficult and financially burdensome for developers to provide letters of credit, collateral to obtain a bond, or escrow in amounts up to $3,000,000 (the maximum requirement under the Green Building Act). While opposition to new financial assurance rules is common regardless of industry, DDOE believes fears of business disruption from this new assurance requirement are unwarranted. When the District began to require condominium developers to place 10 percent of the cost of construction in an escrow account or provide a letter of credit under the Condominium Act, the same concerns were cited, and yet, this is now common practice.

An additional criticism of the current “performance bond” requirement is that the enforcement mechanism creates an inherent conflict of interest because those that would require forfeiture of the bonds would also directly benefit from the forfeiture. If forfeited, performance bond funds are to be “deposited in the Green Building Fund.” Under the Act, the Green Building Fund is to be used, in part, for “staffing and operating costs to provide technical assistance, plan review, and inspections and monitoring of green buildings.” On the contrary, it is important to note that many legally-required fees, fines, and penalties are used by governments to fund the operation of the program under which they are collected. For example, D.C. Official Code § 7-632 authorizes the establishment of a Regulatory Enforcement Fund to be used by DDOE to finance its regulatory practice. The Council has routinely authorized use of enforcement proceeds to finance future enforcement actions.

In summary, we believe the bond requirement under the Green Building Act is viable and can be implemented. We have already, and will continue to, participate in discussions with our sister agencies and stakeholders as to how this enforcement mechanism should best be implemented.

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Do you think Mr. Hawkins is right?  Will the financial sector come up with a green building performance bond?

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I am very excited for an event taking place today:  the Public Oversight Roundtable on Green Building Practices hosted by the Council of D.C. Committee on Government Operations and the Environment. 

As you may recall, Green Building Law Update has repeatedly discussed the "performance bond" requirement of the D.C. Green Building Act .  As currently written, the D.C. Green Building Act, starting in 2012, will require a performance bond as a guarantee the private development projects will achieve LEED certification. 

Last week, I wrote that no bond, security or insurance instruments exist to guarantee LEED certification.  I have never liked pointing out problems without also providing a solution.  Today, at the Roundtable, I will be speaking about problems with the performance bond and highlighting two potential solutions:

(1) "Financial security" in the form of a fee if a project fails to achieve LEED certification; or
(2) a "D.C. Feebate" similar to Portland's feebate system . 

In order to crystallize these solutions, I wrote a white paper discussing this complex issue and potential solutions.  You can download "White Paper:  Revisions to Performance Bond Requirement of the D.C. Green Building Act" or read the white paper in its entirety after the jump. 

If you have any critiques or suggestions, please do not hesitate to share. 

Photo:  Echo9er

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I have been working with the D.C. City Council recently on revisions to the D.C. Green Building Act of 2007.  In particular, I have been looking for an enforcement mechanism that can be used to ensure compliance with LEED certification requirements for commercial buildings.  The problem is that the current Green Building Act requires a "performance bond" to guarantee certification.  Green Building Law Update has covered the issued extensively and you can read more about it here. 

Photo:  Martyn and Debz

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Update:  For a rundown of green building provisions in the stimulus pacakge, see this post.

Thank you to everyone who attended Rutherfoord's "Trends in Green Building" seminar yesterday and listened to my "Green in the Stimulus" presentation.  It was great to recognize so many faces in the crowd.  If you came up and spoke to me about speaking engagements or green building legal programs offered by my law firm, please follow up with me so we can make it happen.  For those of you who missed the event, I will post the powerpoint I presented to Green Building Law Update (hopefully with a voiceover) on Monday. 

Now for the bad part. 

The stimulus package is going to result in increased levels of green building litigation. I hope I am wrong, but I think it is inevitable. 

In my "Green in the Stimulus" presentation, I highlighted three factors that will contribute to an increase in green building litigation.  The first factor is an influx of inexperienced parties attempting to build green.  There are many state and local governments that, to date, have not been substantially involved in the green building industry.  These entities, with the help of the stimulus funding, are now going to require green building projects through regulation.  Here is an example.  These state and local governments will be required by the timelines of the law to fast track these green building developments.  Do you see the problems that can arise from this scenario?

The second factor will be the requirement that projects attain LEED certification.  The website of the General Services Administration states:

As of 2003, all new GSA building projects must be certified through the Leadership in Energy and Environmental Design (LEED) Green Building Rating System of the U.S. Green Building Council, and Silver LEED rating is encouraged. 

The GSA will not be the only entity requiring LEED certification for projects.  Who will be responsible for achieving the LEED certification?  What happens if the project fails to achieve the LEED certification?

Finally, the third factor that will result in more green building litigaiton is the emphasis on energy efficiency.  The drive to build green primarily centers around the desire to reduce building energy use.  However, it is very difficult to anticipate how a building will actually perform.  Under the LEED rating system, energy efficiency is modeled through ASHRAE.  Buried deep in a ASHRAE appendix (ASHRAE 90.1, Appendix G, Section G1.2, Note 2) is the following disclaimer:

"Neither the proposed building performance, nor the baseline building performance are predictions of actual energy consumption or costs for the proposed design after construction. Actual experience will differ from these calculations due to variations such as occupancy, weather, energy use not covered by this procedure, changes in energy rates between design of the building and occupancy, and the precision of the calculation tool."

Not every government or municipality will see or understand this caveat.  Heck, many of the entities requiring certification don't even understand the acronym for the LEED rating system.  What happens when the new green buildings don't actually reduce energy usage? 

I am not the only one concerned about these issues.  Real Life LEED initially raised factor three.  Are we wrong?  Tell me. 

Related Links:

• LEED Risk Management:  Crossing the Model/Reality Chasm (Real Life LEED)
• "The Stimulus:  Now for the Hard Part" (GBLU)
• The Stimulus:  Green Building Provisions (GBLU)
• The Stimulus:  "LEEDS"ing the Way (GBLU)
• The Stimulus:  FedBizOpps Has Green (GBLU)
• The Stimulus:  States Have Green Too (GBLU)
• The Stimulus:  Build Relationships Now (GBLU)

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• D.C. Green Building Act
• SFAA and SBP Letter Regarding "Performance Bond" Requirement 
• Related GBLU "Bond" Posts

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Last week, I had the pleasure of speaking at the William and Mary Environmental Law & Policy Review symposium "It's Not Easy Building Green."  The students did a fantastic job and the audience was large and engaged. 

In particular, Mark Pike organized an interactive web 2.0 experience for the symposium that was quite impressive.  Many of the symposium participants used Twitter to discuss the event.  Additionally, Mark set up a blog (in less than 12 hours!) and live blogged each of the presentations.  From what I have heard, the event was even taped and should be made publicly available. 

In addition to the technology, there was plenty of substantive discussion about green building law.  Here are five things I learned at the symposium:

1.  Stephen Del Percio correctly pointed out that state legislation may run afoul of antitrust law if it only incorporates one green building rating system, like LEED.

2.  North Carolina's green building regulations focus on two specific green building strategies -- energy efficiency and water usage -- instead of requiring certification through a rating system.  This seems like a good idea to me. 

3.  If I am going to describe techniques to reduce water usage, I should be able to list more than just "low flow urinals."  Furthermore, I should not emphasize the awkwardness by repeating the word "urinal" and then pausing.  Thanks to everyone for pointing this out to me.

4.  Darren Prum described a ridiculous scenario in Nevada surrounding a property tax abatement that went awry.  Essentially, the property tax abatement that was provided to projects achieving LEED certification almost bankrupted the state. 

5.  There is a Property Tax Reduction regulation in Virginia for projects that achieve LEED certification or certification under another energy preferred standard.  You will definitely be hearing more about this at Green Building Law Update. 

Green Building Law Update will be looking at these issues in more depth in future posts.  Thanks to all of the symposium participants for their hard work and important ideas.

Related Links: 

• "It's Not Easy Building Green" homepage (W&M)
• "It's Not Easy Building Green" live blog (W&M)
• "It's Not Easy Building Green" twitter discussion (hashtags.org)

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[As part of the evolution of Green Building Law Update, I like to try out new post topics and formats.  Today I am beginning a new feature at Green Building Law Update:  “Sensible Interview.”  Please let me know what you think.]

Back in December, Kimberly Miller of Sensible City provided me with a press pass to EcoBuild, which is a fantastic event for those interested in discussing green building policy.  At EcoBuild, I was able to interview some brilliant people that have been involved with green building much longer than myself. One such individual was Marvin Malecha, the 2009 American Institute of Architects (AIA) President. I hope you enjoy the interview. 

Chris:  The topic of your keynote speech at Ecobuild was "Inheritance & Responsibility."  How does inheritance and responsibility tie into the current green building industry?

Marvin Malecha:  Perhaps our greatest inheritance is the environment. But it is important to understand that inheritance does not always imply that an abundance was given. In fact many times inheritance has also been defined as the debts of another generation to be paid by the next and the next. In the case of the environment we are in a position of both. We have inherited a world with areas still pure. Areas that contain within them the memory of a planet that was a pure habitat. A planet that nurtured life.

We have also inherited a planet with grave problems that have evolved over time causing toxic sites to be established and levels of carbon in the air that threaten life. Our recognition of both the unspoiled and the spoiled must lead us to a strategic action plan for the environment. Our responsibility is to protect that which is yet unspoiled and to save those species soon to be lost forever if we do not act. It is our responsibility to restore in as timely a fashion as possible those systems we have placed under duress. 

The current green industry provides the tools for both actions. We do have the technology to utilize building materials that are in harmony with the land. We do have the capability to purify water through natural systems that can be established in opposition to traditionally engineered water purification plants. We can plan settlements with a greater density to preserve open tracts of land and protect wildlife habitats. New building materials can utilized recycled materials. they can be produced utilizing manufacturing techniques that minimize carbon emissions in the manufacture and reduce waste. New systems can help to regulate building operations reducing the power necessary to operate a building and thereby reduce carbon emissions and more buildings can be constructed of local materials establishing the sense of region while minimizing the energy expended in delivery.

Chris:  Green Building Law Update tends to focus on the legal aspects of the green building industry.  As you know, the AIA recently incorporated new duties for architects related to green building.  Can you discuss these duties? 

Marvin Malecha:  The AIA has established a sustainability requirement for annual continuing education by members. Four hours out of a required eighteen hours are now necessary to maintain membership in the AIA. It is the intention of the Board to insure that every AIA member is knowledgeable about questions of sustainability and able to employ these ideas in architectural work. It is important to note that the AIA also considers sustainability course work as meeting the health, safety and welfare requirements of the institute.

Also, the Board of Directors has included a provision on sustainability in the institute Code of Ethics. The connection between environmental well-being and human health is essential and it recognizes the most fundamental responsibility of the architect. 

Chris: How do architects manage the risk associated with green building projects?

Marvin Malecha:  The management of risk in contemporary society is a reality of professional practice. Such risk is simply unavoidable and therefore several steps must be taken by the institute on behalf of its members and by members individually.  It is necessary for the institute to foster significant research on the subjects related to sustainability and environmental well-being so that members will be able to act from a basis of knowledge.  It will also be necessary to encourage research on the subject of building performance so that architects will be able to act from a body of knowledge rather than unconfirmed opinions.

Certainly, it is also necessary that to address the design of a truly environmentally responsible project a diverse team of professionals must be engaged. Diverse teams like a diverse natural environment are healthy, even vital in this age of heightened awareness. The Institute makes no assertion that it is the only source of knowledge on this subject. We are reaching out to a broad spectrum of partners from all of the associated professional disciplines and related professional associations. Our commitment is to a carbon neutral target not to any specific rating system. We encourage this same commitment to integrated teams by our members.
 

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Today, we bring you a first on Green Building Law Update:  my first radio interview. 

Vik Duggal, over at Konstructr, was kind enough to invite me to be a guest on his KCast interview series.  Konstructr is basically Facebook for the construction industry. 

Some of the topics we discuss include green building attorneys, President Obama's proposed economic recovery package, Twitter and Washington D.C.'s Green Building Act. 

There is one correction I need to make from the interview.  Despite what Vik says, I do not have a "LEED AP" tattoo (or any tattoo for that matter).  Enjoy and please send me your suggestions for future radio interviews! 
 

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I like categories.  I like to categorize ideas, issues and thoughts in order to develop my understanding.  The same is true for green building law; I like to think of this emerging practice in terms of categories.

The other day I was asked "what is green building law?" by an environmental attorney.  I had never really been asked that question before so I reverted to my categories.  This is what I told the environmental attorney, almost word for word:

Green building law has both front-end and back-end components.  At the front end, you have the contract.  Additionally, you have to deal with financing, land use and real estate legal issues.

At the back end, green building law deals with potential disputes.  These potential disputes fall into one of three categories:  

(1) Certification - Disputes arise from green building certification when a project fails to achieve certification.  Which party will be responsible for the failed certification?

(2) Regulations - Regulations refer to those green building regulations that require or incentivize green building development.  Failure to comply with these regulations can result in green building litigation.

(3) Green building strategies -  Specific components of a green building  that can result in litigation.  The example I give is a green roof that leaks.  Who will be responsible for the leaking green roof?

Do these categories properly define green building law?  What am I forgetting?  Most importantly, do you have a better understanding of what a green building attorney can do for your business?  

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One of Green Building Law Update's favorite topics in 2008 was the Shaw Development v. Southern Builders case. You may recall that the Shaw Development v. Southern Builders complaint was one of the first examples of green building litigation, which resulted from  a project's failure to obtain green building tax incentives.

After recently research the condominium project, I was stunned, but not all that shocked to read the following headlines:

Crisfield Condo Sales Slump; Captain's Galley Restaurant Closes

Condominium auction sale canceled

The first article describes the struggling Shaw Development project:
 

Twenty-three condominiums sit along the water in Crisfield. So far only six have been sold. At the bottom of the condominium is the empty Captain's Galley restaurant. It closed on Monday. Shaw said the operators have not paid rent in a couple of years.

The second article describes the results of the condominium project's struggles:

A foreclosure sale planned for the waterfront Captain's Galley Condominiums was called off Friday after the owner filed for Chapter 11 bankruptcy. The renewed interest in the condo units is due in part to recent price reductions. Two bedroom units now start at $247,000 and a three-bedroom listed at $369,000 will probably be reduced to $359,000, she said.

"They're huge reductions -- less than half the original price," she said.

If the Shaw Development v. Southern Builders case had gone to trial, it would have resulted in very messy green building litigation.  A good attorney would have argued that the condominium sales slump and the restaurant closing was the result of the project's failure to achieve LEED Silver certification.  A good attorney would have argued that the failure to achieve certification not only resulted in the lost tax incentives, but also resulted in the slumping sales and restaurant closing. 

Do you think Shaw Development could have successfully recovered these damages?

Related Links:

• Crisfield Condo Sales Slump; Captain's Galley Restaurant Closes (WBOC)
• Condominium auction sale canceled (DelmarvaNow.com)
• Shaw Development, LLC Files for Chapter 11 Bankruptcy Protection (GRELJ)
• Shaw Development v. Southern Builders (GBLU)

Photo Credit:  WBOC

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sarasweeney: Working on LEED application. Totally confused myself. Had 1 pt down for LEED Energy & Atmosphere Credit 1, when we had 6. Phew. All is right with world again.

 

chrischeatham: Glad you fixed that. Makes me wonder what happens when someone doesn't actually catch this type of mistake...

 

sarasweeney:  Yes, was wondering what I was going to tell the client for about 15 minutes. Um, we actually are Silver now...

*If you would like to learn more about twitter, watch this video.  You can also follow my twitter stream here.  Twitter is going to be all the rage in 2009, you should jump on board now.

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As we head towards the finish line of 2008, we turn our eyes towards 2009 and what lies ahead for green building.  The next two posts at Green Building Law Update will highlight the shift in political support for green building policies that will soon occur. 

In order to understand the shift, we must start with the current political support, or lack thereof, for green building policies.  Heading into the New Year, the Bush Administration has quietly been passing and killing regulations through the Office of Management and Budget (OMB).  One such regulation that the Bush Administration refused to adopt would have improved energy efficiency in federal buildings:

On Nov. 19, the OMB ordered the Energy Department to kill new regulations that would have forced the federal government to buy more-energy-efficient lights, appliances, and heating and cooling systems. Daniel J. Weiss, climate strategy director at the Center for American Progress Action Fund, called that retreat from a 2005 requirement "unbelievable."

Notably, 2005 energy efficiency requirements were passed by a Republican Congress.  According to Department spokeswoman Jennifer Scoggins, the energy efficiency regulations may be issued before or during the next administration.

As the economic downturn continues into 2009, construction players must seize all opportunities for new projects.  On Friday, we will discuss the shift in support for green building policies that will occur with the incoming Obama Administration and new business opportunities that result.

Related Links: 

• At the Last Minute, A Raft of Rules (Wash. Post)

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Here at Green Building Law Update, sometimes we wonder if we are just talking to our parents and significant other.  Then we get a comment or a great email from one of our readers and we realize someone is actually paying attention.  With that said, what happened this past week in the green building industry astounded and amazed Green Building Law Update.  

Earlier in the week, your humble author presented a seminar “Green Building Law from a Surety’s Perspective” to a client.  Just prior to the seminar, an article was published in the Washington Business Journal that highlighted the D.C. Green Building Act of 2006 performance bond requirement.  The first few paragraphs were sent to me but I didn’t have time to review the full article before the presentation. 

You may recall that this performance bond requirement drew the ire of the Surety and Fidelity Association of America (SFAA) and the National Association of Surety Bond Producers (NASBP) and Green Building Law Update.  When I first read the performance bond requirement, I literally gasped out loud and realized the green building industry may have some serious legal problems in the very near future.  Basically, the D.C. Council was demanding an insurance instrument that didn’t exist.

During the presentation to the surety client this past week, I highlighted the D.C. Green Building Act performance bond requirement as an enforcement regulation that was going to cause the surety industry problems.  After the presentation, I returned to my office and attempted to unbury myself from hundreds of emails.  With time on my hands, I opened the full version of the Washington Business Journal article and, once again, gasped out loud when I read the following paragraph:

Both trade groups, as well as the Surety and Fidelity Association of America, have met with D.C. officials to air their concerns, one of the first challenges to legislation that is among the first of its kind nationwide.

Alan Heymann, a spokesman for the D.C. Department of the Environment, said his agency has formed a working group with the Department of Consumer and Regulatory Affairs to address the surety industry’s concerns. Both agencies are tasked with implementing parts of the act.

Green Building Law Update is not taking credit for the D.C. Council’s reconsideration of the green building performance bond requirement.  But after writing numerous articles, posts and having discussions with the D.C. Council, I would like to think I played some small part in effecting change. 

Congratulations to the D.C. Council for taking steps to remedy what could have been a problematic regulation.  Congratulations to the SFAA and NASBP for pointing out this problematic provision.  Congratulations to the green building attorneys writing about these issues and helping the green building industry avoid legal problems. 

Of course, there are going to be more green building legal problems.  Green Building Law Update is excited about discussing these issues in 2009 and, hopefully, effecting more change.  

Related Links: 

• Green Bond Coming to a City Near You (GBLU)
• Surety groups fear risks in D.C. green building act (Wash. Bus. Journal)
• What's Your Green Construction Strategy? (GBLU Article)
• Surety Industry Continues to Critique (GRELJ)
• Will the surety industry kill Washington's green building law? (GBLB)

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Green Building Law Update came across an interesting lawsuit in Texas challenging a green cement regulation.  First, here's a little background on green cement regulations: 

Green cement resolutions put pressure on wet kiln operators to either update their smog-causing pollution controls to the level of dry kilns, or replace their wet kilns with new dry ones. They do this by incorporating state emissions standards as specs in bids for cement purchasing. These specs favor more aggressive pollution controls.
 

Late in the afternoon on the day before Thanksgiving, lawyers for Kansas City-based Ash Grove Cement filed suit in federal court against the cities of Dallas, Ft. Worth, Arlington, Plano, The Dallas County School District and Tarrant County for adopting “green cement” resolutions that favor modern, less polluting dry kilns over older, dirtier wet kilns - like the three the company operates at its 43-year-old Midlothian plant, south of Dallas.

 

“This is not a case about air quality; rather, it is about whether the defendants, however well intentioned but misguided their goals might be, may ignore laws they do not wish to follow, may pass resolutions which are unfair, unwise and unlawful, and may take property away from Ash Grove in an arbitrary and capricious manner,” Ash Grove’s complaint states.

• Group Condemns Ash Grove Lawsuit Against Texas Green Cement Cities, Predicts Backlash (Dallas Green Zine)
• Ash Grove sues over Texas green cement resolutions (KC Star)

 Credit:  Thanks to Rich Cartlidge for originally sending me this story. 

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Thanks to all of the Green Building Law Update readers that attended Rutherfoord’s symposium, “Green Building: Opportunity or Legal Quagmire.”  I went to bed last night without a voice, but thankfully, the laryngitis let up and we were able to discuss green building litigation issues. 

If you are interested in having me speak on green building legal issues with your company or organization, please email me at chris@greenbuildinglawupdate.com or call me at (703) 749-1056. 

So what did you think of the presentation?  Any outstanding issues that you didn't ask?  

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 Continuing our posts from GreenBuild, our next two posts will discuss two very different green building regulatory enforcement mechanisms from two very different cities.  The first city, Portland, has created a very innovative enforcement mechanism to enforce its stringent green building regulations. 

Portland is very similar to other cities in that they will require specific project to achieve varying LEED certification levels.  Portland's enforcement mechanism, however, is much different.  Called a "Feebate," Portland will require that some projects pay into a green building fund while other projects obtain rebates from the city.

Under the Feebate system, all new buildings built to code are assessed a fee.  If a project is built to LEED Silver, then the fee is waived and the owner obtains access to financing options.  Even better, if a project attains LEED Gold, the city writes the project owner a check! 

All money that is paid into the green building fund is used either for the incentives or to educate about green building.

Pretty neat, don't you think?  After the Holidays, Portland is coming out with its economic analysis of the plan, and I am looking forward to reviewing it with you. 

Photo Credit:  Scott_rtw

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Sorry, I won't be answering this rhetorical question today.  Instead, a group of construction, design and surety legal experts will attempt to address this difficult question at an upcoming symposium: 

What:  Trends in Green Building Seminar

Who:  Tom Mawson - The USGBC and Trends in Green Building; Chris Cheatham - The Emergence of Green Building Litigation; Bryan Phillips - Green Construction: A Legal Perspective, Dan Knise - Designing Green - With Reward Comes Risk, Geoff Delisio - A Surety Perspective on Green Building

When: Tuesday, December 2, 2008  9:00 - 12:00 AM

Where:  4301 Wilson Boulevard, Arlington, VA 22203

You can also download a complete invitation here. 

I will be speaking about the emergence of green building litigation with a focus on the Shaw Development v. Southern Builders case.  Other speakers will address green building issues from a construction, design and surety perspective.  Seating is limited so please RSVP by November 21 to Nancy Shipley at nancy.shipley@rutherfoord.com. 

Let me know if you have any questions regarding the event.  If you are going to attend let me know (chris@greenbuildinglawupdate.com) -- I would love to meet some of my readers!  
 

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In continuing our week of epiphanies, here’s another one that struck us here at Green Building Law Update:  should governments consider getting out of the green building certification process? 

Yes, I realize this epiphany is out there and that practically every state has implemented some sort of green building regulation.  Over the past few months, we have profiled green building regulations in D.C., Virginia, Indiana and Maryland, to name a few.  But the more I think about these regulations, the more I become concerned that governments should not mandate certification, particularly of public projects.

Apparently, I am not the only one with these concerns.  For example, this article cites an Evanston, Illinois official that is concerned with certification cost:

At the meeting, Evanston residents spoke about the Green Building Ordinance, which was drafted by the Evanston Environment Board. . . .  Ald. Lionel Jean-Baptiste (2nd) cited the need to look closer at the cost of the ordinance.

"It's difficult in this current economic climate for anyone to build," he said. "We need to look more into the cost, and have greater discussion at the committee level." 

And here is another example, this time a LaCrosse, Wisconsin official voicing concern over the costs for green building certification:

“When I think about all this discussion about certification and not certification, I think we’re going to do all this good stuff so let’s just declare it a green building and go home,” Supervisor John Medinger said during the Law Enforcement Center Construction Committee meeting this week. “We say it’s a green building. Who says it isn’t? I don’t mean to diminish this, but I’m trying to see what we’re going to get with this $161,000.”

With the state facing a $3 billion shortfall, Medinger said the county will take a hit and can’t afford to spend money that brings no return.

These officials represent a minority view that government’s should not mandate green building certification due to the associated costs.  But Mr. Medinger drives home the point:  what are governments getting out of certification? 

Green building certification is primarily a marketing tool used to sell a building.  Green building strategies can most definitely be incorporated without obtaining certification and the results can still be confirmed through commissioning.  What benefits are cities and states getting when their public buildings are deemed certified?

Related links: 

• Cost concerns may clash with green ordinance draft (Daily Northwestern)
• Several commissioners object to price tag for LEED certification (LaCrosse Tribune)
  
• Can state budgets support green building? (GBLU)

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Over the weekend, we here at Green Building Law Update had some green building epiphanies.  So let’s start with epiphany number one.  As I was driving into my law firm’s office in Tyson’s Corner on Saturday, I looked out at the construction and thought to myself, why am I not writing about that? 

This isn’t any regular construction I am referring to either.  The construction I see everyday is the beginning stages of the Tyson’s Land Use Task Force Recommendations.  While I have been perusing the Internet for green building stories, there is a green building story happening in my backyard! 

The first time I read about the Tyson’s Corner redevelopment project was in this post  from Kaid Benfield’s NRDC blog.  Kaid describes the current design of Tyson’s Corner:

an absolute mess of a place that would be hard-pressed to function worse environmentally or even as a place to navigate in a car.  You'd have to be suicidal to try it on foot. 

Kaid is right – I have worked in Tyson’s for three years and walked to lunch once.  Thankfully, the Tyson’s Land Use Task Force Recommendations are aiming to fix these problems by focusing on “smart growth.”  Smart growth generally is an urban planning and transportation theory that concentrates growth in the center of a city to avoid urban sprawl.  

Maybe you are wondering, what does this have to do with green building?  Next time we discuss the Tyson’s Corner redevelopment, we will look at the Task Force Recommendations, which include green building regulations.  

Related Links

• Retrofitting suburbia for the 21st century (Kaid Benfield)
• Smart Growth (Wikipedia)

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Today we are going to take a hiatus from the discussions of green building in the current financial markets and, instead, wrap up what potentially could have been major green building litigation.  On October 17, 2008, the Lerner family and the D.C. Government resolved litigation stemming from the LEED-Silver certified Washington Nationals Stadium. 

In previous Green Building Law Update posts, we focused on the stadium's certification and discussed the “green” stadium scoreboard that incorporated “high-definition LED technology that the Lerner family paid to have upgraded beyond the basic specifications called for in the ballpark's design.”  During negotiations over the protracted stadium dispute, it came out that Lerner representatives were unhappy, in part, about the lighting on the scoreboard that they paid for through an apparent change order.

Based on the published Settlement Agreement, the dispute over the LED-lit scoreboard remained a sticking point throughout the negotiations.  On page 1 of the Settlement Agreement, the Lerner Family agreed to withdraw and irrevocably waive “its demands for credits . . . for disputed scoreboard change orders.”  What were the final results of the negotiations?  The City will pay the Nationals $4 million to resolve the disputes and, in return, “the team will pay $3.5 million in rent that was due to the city last spring.”

With this settlement, the green building industry dodges what would have been the most substantial green building litigation to date.  But the day is coming.  Are you convinced that you need to have a rock solid green building contract?

Related Links

• Washington Nationals to pay overdue rent (BizJournal)
• Giving you the Score, Plus a Whole Lot More (Wash. Post) 
• Litigation Involving "Green" Nationals Stadium (GBLU)
• Stadium LED Lights Strike Out? (GBLU)
• Giving You the Score and A Whole Lot More (Wash. Post)
• Nationals Park Revenue Falls Short of the Mark (Wash. Post)
• Some Council Members Criticize Nats Settlement (Wash. Post)

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To finish off the week at Green Building Law Update, we are going to attempt to answer another reader question with the help of all the readers out there. In a previous post, Anna MacLeod posted the following question: 

I need to find some DC-based architect, commercial building development companies, etc… Anyone who would be affected by the requirement described in the article below.

"Washington, D.C., was among the early cities to require privately owned buildings to meet LEED standards. Now, it is requiring the city government as well as private building owners to benchmark their buildings using the Energy Star Portfolio Manager tool and to submit performance data to the City, which will then publish it for the public.'

If anyone can help me by sending me any contacts or websites it would mean a lot to me.

I am glad Anna asked about this issue because I have been meaning to post on this topic. Back on July 15, 2008, the D.C. City Council unanimously passed The Clean and Affordable Energy Act of 2008.  Among the provisions in the Act is a requirement for Energy Star benchmarking:

Beginning in 2010, it would require commercial property owners to generate an Energy Star efficiency "score" for their buildings using free online tools provided by the Energy Star program. That score would be made available to the public by the District Department of the Environment (DDOE).

You may be asking yourself, what is the point of this benchmarking program? According to Cliff Majersik, the program director for the Institute for Market Transformation, the benchmarking program will create “a market-based demand for energy disclosure.” If the D.C. Government’s plan works, there will be increased demand for green buildings. In short, you might want to think twice about developing a non-green building in the District of Columbia. 

So can anyone out there help out Anna? If you are currently using the Energy Star benchmarking tool or The Clean and Affordable Energy Act of 2008 will affect you, please drop a note in the comment section below with more details and contact info for Anna. Thanks!  

Related Links:

• The Clean and Affordable Energy Act of 2008 (DC Council)
• In Washington, DC, Energy Star Benchmarking Law Arrives (CoStar Group)

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Today we are wrapping up our discussion of Shaw Development v. Southern Builders, one of the first examples of major green building litigation.   On Monday we discussed the basic facts of the case; on Wednesday we looked at the contractual green building requirements between the two parties; and on Friday we looked at Shaw Development’s stated causes of action. We conclude our discussion today by looking at the damages alleged by Shaw Development. 

Parties that bring claims or lawsuits based on a green building project’s failure to achieve certification must also prove damages. Often, owners seek green building certification to obtain government incentives or comply with regulatory mandates. In Shaw Development’s counter-complaint, damages were based on the owner’s failure to obtain green building tax credits: 

Shaw Development demands judgment in its favor and against Southern Builders for . . . Six Hundred Thirty-Five Thousand Dollars ($635,000.00) in tax credits for failing to construct the Project in conformance with a (LEED) “Silver Certification . . . .”

The tax credits for which Shaw sought damages were part of a State of Maryland green building tax incentive program. Many cities throughout the country have enacted similar tax incentives to entice developers to build green. Failure to achieve anticipated incentives can result in litigation similar to this case. Additionally, many cities, including Washington, D.C., New York, Los Angeles and San Francisco, have adopted mandatory green building laws and codes that will require the incorporation of green building strategies into all construction projects. Failure to comply with green building laws and codes creates additional liability risks for contractors. 

As inexperienced parties undertake green building projects, unmet expectations will result in disputes and lawsuits. Parties must protect themselves from the start by clearly stating all parties’ understanding of the green building certification process and what is to be achieved. Furthermore, parties must fully understand the specific requirements of the green building incentives and mandates that apply in their locality. While Shaw Development v. Southern Builders was apparently settled without a trial, further green building litigation is just around the corner and is unlikely to be as easily settled.   Check back with Green Building Law Update as we continue to discuss how to mitigate your green building risks.   

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Today, Green Building Law Update continues a discussion of the Shaw Development v. Southern Builders case, which demonstrates the emergence of green building litigation.  On Monday, we reviewed basic facts related to the legal case and on Wednesday we looked at the contract between the two parties to determine green building responsibilities.  Today we focus on the causes of action alleged by Shaw Development in the counter-complaint.  

When owners and developers move forward with green building projects, they often do so with the goal of achieving a specific green building certification.  What happens if a building fails to achieve the anticipated level of green building certification?  

The owner may blame the designers, engineers, contractors and subcontractors for such a failure and sue one or all of the parties. Based on the counter-complaint and Project Manual, Shaw Development anticipated that the Project would achieve LEED Silver Certification and brought an action for breach of contract and negligence against Southern Builders when the certification was not obtained.  

The liability of parties for failure to achieve a green building certification will be determined by the relevant contracts or related promises, which were reviewed on Wednesday.  If a contractor guarantees a specific green building certification, the contractor will be responsible for the failure to achieve certification.  The contractor should only commit to constructing the building per the approved design and using the approved materials.  If the contractor performs in accordance with the contract, design and specifications, there should be no liability even if the building does not achieve the desired certification level.  The contractor also needs to make sure that potential liabilities flow down to its subcontractors.  The owner, on the other hand, may have valid reasons for requiring that the contractor guarantee green building certification.  For example, the project may have to achieve certification to comply with green building codes or regulations. 

On Monday, we will review the related damages alleged by Shaw Development and finish the discussion of this case.  In the meantime, check your green building contract! 

Related Links

• The Anatomy of America's First Green Building Litigation (gbNYC)
• The First LEED Lawsuit...Great.... (Real Life LEED)
• Open the Floodgates:  The Era of Green Building Litigation (Greener Buildings)

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This week at GBLU, we are focusing on the Shaw Development v. Southern Builders case, the first significant example of green building litigation.  On Monday, GBLU explained the importance of the case and reviewed the basic facts.  Today GBLU will review the most important part of the case, the contract between the parties and accompanying green building responsibilities.  

Why is the contract the most important part of this case?  The contract is the primary means for dictating a contractor’s green building obligations.  Shaw Development and Southern Builders relied on an AIA A101-1997 Standard Form of Agreement Between Owner and Contractor as their general contract, which did not include green building requirements.  Additional requirements were incorporated through a Project Manual that made specific reference to green building certification:  

Project is designed to comply with a Silver Certification Level according to the U.S. Green Building Council’s Leadership in Energy and Environmental Design (LEED) Rating System, as specified in Division I Section “LEED Requirements.” 

Shaw Development’s AIA contract and incorporated Project Manual lack clarity in articulating Southern Builders’ responsibility for constructing a LEED Silver certified project.  While the Project Manual does state that the project was designed to comply with LEED Silver certification, it does not assign the contractor responsibility to construct the project according to LEED Silver certification.  Instead, as stated in A101-1997, the contractor is responsible for building according to the designs and specifications.  Thus, the contractor could be liable if it failed to build according to plans and specifications, which resulted in a failure to achieve LEED certification. 

Owners and contractors are well served to clearly describe the contractor’s responsibilities related to the construction of a green building project.  If your green building contract looks anything like the contract from Southern Builders v. Shaw Development, you should think about revising it. 

Related Links

• The Anatomy of America's First Green Building Litigation (gbNYC)
• The First LEED Lawsuit...Great.... (Real Life LEED)
• Open the Floodgates:  The Era of Green Building Litigation (Greener Buildings)

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Way back on August 13, GBLU’s inaugural post focused on the impending green building litigation and factors that would cause the litigation.  One of the factors that was described focused on parties’ financial expectations:  “Parties undertaking green building projects for purely financial reasons will expect to make a profit.”  In order to make a profit from a green building, the project typically has to be certified.  Thus, it was anticipated that green building litigation would most likely occur when a project failed to achieve certification.  

Not surprisingly, we now have an example of green building litigation arising from this very scenario.  On February 16, 2007, Shaw Development, L.L.C. (Shaw Development) filed a counter-complaint against Southern Builders, Inc. (Southern Builders) in the Circuit Court of Somerset County, Maryland arising from, in part, the projects failure to achieve LEED Silver certification.  While the case never proceeded to trial, Shaw Development’s counter-complaint is instructive as to the future of green building litigation.  Our next three GBLU posts will look at the Shaw Development v. Southern Builders case in detail:  

•    Monday we will review the facts
•    Wednesday we will review the contract
•    Friday we will review the causes of action
•    Next Monday we will review the damages and provide some tips to avoid this type of litigation

The facts are similar to most construction projects.  Prior to the lawsuit, Shaw Development purchased property in Somerset County, Maryland and retained Southern Builders to construct a condominium project on the property.  In the counter-complaint, Shaw Development alleged, among other things, that Southern Builders failed to construct the condominium project in a good and workmanlike fashion and, as a result, the project did not achieve USGBC LEED Silver certification.

The contract between two parties is key to determining liability between two parties undertaking a green building project.  Check back Wednesday when we review the contract between Shaw Development and Southern Builders.  

Related LInks

• The Anatomy of America's First Green Building Litigation (gbNYC)
• The First LEED Lawsuit...Great.... (Real Life LEED)
• Open the Floodgates:  The Era of Green Building Litigation (Greener Buildings)

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On September 15, I had the opportunity to serve as a judge for the Associated General Contractors of DC’s Washington Contractor Awards for green buildings.  Tabbed the “2008 Anti-Boring Event of the Year,” contractors from across the D.C. metro area will gather on October 7 to honor this year’s award recipients.  I reviewed and voted for submissions from three green building categories:

•    Best Sustainable New Construction Project
•    Best Sustainable Design-Build Project
•    Best Company Sustainability Program

I was particularly impressed with the sustainable programs implemented by the nominated contractors. Hopefully we can discuss these programs with some of the nominees in a future GBLU post. 

Both the AGC and the AGC of DC are fantastic resources for contractors looking to learn more about green building construction practices.  For example, in the AGC of DC’s most recent newsletter, two green building training courses hosted by the AGC were highlighted: (1) LEED Estimating & Marketing; and (2) Building to LEED NC for Contractors.  I have attended similar courses hosted by the AGC and can attest to the thoroughness and quality of these programs.   

All of the sustainable submissions were very impressive but you are going to have to attend the AGC of DC’s event to learn the winners.  Tickets are still available!
 

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Back in August, GBLU discussed protracted disputes between the Washington D.C. Government and the Washington Nationals owners over the construction of the Nationals’ new stadium.  The dispute centers on when the LEED certified stadium was substantially complete.  To date the Lerner family, the team owners, have withheld payment of $3.5 million as a result of the dispute.  It appears the dispute is not going away either: 

In negotiations with the D.C. Sports and Entertainment Commission, which oversaw stadium construction, Lerner representatives have cited problems with the ballpark, including the quality of the sound system and the lighting on the scoreboard, according to sources familiar with the talks who spoke on condition of anonymity because of the dispute. 

What does this have to do with green building?  The lighting on the Nationals’ scoreboard is “made possible by high-definition LED technology that the Lerner family paid to have upgraded beyond the basic specifications called for in the ballpark’s design.”  LED lighting uses significantly less energy than traditional lights and is an increasingly popular green building strategy in stadiums, like the Beijing Olympic Basketball Gymnasium.  In this case, it appears the Lerner family’s expectations of the LED scoreboard lights were not met.  

Could this result in significant green building litigation between the D.C. and the Lerner family?  The City seems to think so:

Matthew Cutts, chairman of the D.C. Sports and Entertainment Commission, which oversaw stadium construction, said the agency is in the process of hiring the law firm Seyfarth Shaw to handle the case.   

Related links:

• Litigation Involving "Green" Nationals Stadium (GBLU)
• Nationals Park Revenue Falls Short of the Mark (Washington Post)
  
• 7 Amazing Olympic Green Buildings (Jetson Green) 

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While GBLU has written extensively about green building bonds, a reader recently pointed out that green building insurance should not be overlooked.  

When you talk about green building insurance programs, you have to start with Fireman's Fund.  Back in October 2006, Fireman’s Fund had the foresight to launch three products for commercial green buildings, just ahead of the green building curve.  Below is a summary of three of the insurance programs offered by Fireman’s Fund as part of its “Green-Gard” insurance suite.  

•    Green-Gard Certified – If you have a loss on your green-certified property, Fireman’s Fund will pay to rebuild and replace to recognized green specifications.  This includes coverage for vegetated roofs, alternative power systems and alternative water systems.  

•    Green-Gard Upgrade - This coverage is specifically designed for those who have not yet made green upgrades, or have not attained green certification from the U. S. Green Building Council (USGBC). If you have a total loss, Fireman’s Fund will pay to rebuild your structure, from top to bottom, as a green-certified building.

•    Green-Gard Commissioning - For any loss that exceeds $10,000, Fireman’s Fund will pay for a professional commissioning engineer to oversee your building’s repairs and inspect new or repaired systems.

One interesting component of the Green-Gard Certified program is that if green building certification requirements have changed since the owner built or upgraded, the additional cost of meeting the new specification is covered.  GBLU has often wondered what will happen when LEED v. 3 is released in 2009 and cities have regulations on the books requiring compliance with previous LEED rating systems.  Fireman’s Fund has already accounted for this development.  

So what other green building insurance programs are out there? 

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If you are in green building and worried about associated risks, this may be a post you do not want to read.  On September 11, the Journal Record published an illuminating, but chilling, article regarding green building litigation.  The opening sentence really says it all: 

As LEED projects proliferate, lawyers foresee an era of green-construction lawsuits.

The article also highlights one of the foremost experts on green building litigation, Frank Musica.  Musica is a risk-management lawyer with Victor O. Schinnerer & Co. Inc., a professional liability insurance underwriter.  Musica’s slideshow presentation “Don’t Let Green Design Cause Red Ink” provides over twenty actual green building claims involving architects.  Musica points how green building litigation will most likely develop:

“When a developer has a problem with a project, he’s going to claim a number of things,” Musica said, “including, ‘You told me I’d get a certification, and I’m not getting it.’”

In the article, many attorneys provide great advice on how to avoid green building liability.  For example, parties should not promise a “green building” but should instead provide detailed specifications that incorporate green building strategies.  After the sage advice, though, the article again turns ominous:

From the plaintiff’s perspective, Murano said, it won’t be necessary to identify who’s responsible when a building doesn’t get its anticipated certification or doesn’t perform up to snuff.

“You don’t have to pick among the carnage,” he said. “You just throw everybody into the mill and say, ‘You didn’t collectively perform. You guys flesh it out. All I know is that I asked for a LEED platinum building, you said OK, and you didn’t meet that.’”

Attorneys are starting to pay attention to green building in growing numbers.  GBLU will continue to review green building legal developments to keep you better informed.  In the meantime, maybe you should review those green building contracts again.

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GBLU has previously mentioned that September is going to be a big month for green building regulations and the green building performance bond in Washington, D.C.  So far, we have highlighted D.C.’s Green Building Act performance bond requirement and the surety industry’s response. It now appears the Government of D.C. is forging ahead with the green building performance bond requirement. 

On April 25, 2008, D.C.’s Department of Consumer and Regulatory Affairs (DCRA) included new building codes in a proposed rule.  DCRA has since completed the rule making process and on June 26 submitted the Construction Code Supplement of 2008 to the full D.C. Council.  The Construction Code Supplement includes the following rules to enforce the Green Building Act’s green building performance bond requirement. 

1301.2.3 Prior to Preliminary Review, the applicant shall file any

documentation required . . . and post a performance bond (or letter of credit or escrow

account) pursuant to Section 6 of the Green Building Act, D.C. Official Code

§6-1451.05.

1301.2.4. Upon or before construction completion, the permit holder (whose

permit has been obtained pursuant to the Expedited Green Building Permit

Process) must apply to the Certifying Entity for “certification” of its 

compliance with the Green Building Act.

1301.2.5 If green building verification is not obtained in accordance with

the requirements of D.C. Official Code § 6-1451.05, all or part of the

performance bond shall be forfeited as provided in D.C. Official Code § 6-1451.05(g) and (h).

The Government of D.C. remains very serious about incorporating a green building performance bond requirement that guarantees compliance with the Green Building Act.  The City Council is set to vote on the green building codes in September 2008. The final vote will have a significant impact on the surety industry’s bonding of D.C. projects. 

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In a previous post, GBLU referenced problems with a green building performance bond requirement in Washington D.C.’s Green Building Act.  So what are the apparent problems with this green performance bond? 

On August 13, 2007,  the Surety and Fidelity Association of America and the National Association of Surety Bond Producers detailed the problems with the bond requirement, pointing out that the Act “includes bond requirements that, if not clarified significantly, may make sureties reticent to issue such bonds.”  The SFAA and NASBP outlined several perceived problems with the Green Building Act’s performance bond requirement, including:

•    The Act incorrectly uses the term “performance bond” as the bond described in the Act “seems to function more in the manner of a license or compliance bond, which typically guarantees compliance with a law or code.” A performance bond typically assures one party that another party will perform the contract in accordance with its terms and conditions.

•    The Act does not designate which party is to furnish the performance bond.  The letter argues that “the building owner or developer, as the originator of the building project that retains the design professional and contractor, hold the ultimate responsibility for whether the building achieves compliance with the Act’s requirements.” 

The SFAA and NASBP’s primary concern with the Act is that contractors and performance bonds are improperly suited for guaranteeing green building compliance.  The Government of D.C. so far has continued to incorporate the green performance bond in building codes and rules used to enforce the Green Building Act.  September 2008 is going to be a big month in D.C. for green building codes and the green performance bond.  GBLU will continue to keep you apprised.

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Did you know the Washington Nationals stadium is the first LEED certified stadium built in the United States?  An interactive USA today article highlights some of the green building practices that helped the stadium obtain certification.  Among the green building practices incorporated into the stadium are green roofs, air cooled chillers and low flow faucets and toilets.  Despite successfully obtaining LEED certification, it appears the City and Owners will end up in significant litigation. 

    On July 11, the Washington Post ran an article about protracted disputes between the City and Washington Nationals' Owners over the construction of the Nationals stadium: 

"Although each side needs the other to make the stadium a success, neither appears willing to back down. The fight centers on whether the ballpark was 'substantially complete' by March 1, when the city, which oversaw the construction, was contractually obligated to hand the keys to the Lerners."

    I wonder if the dispute over "substantial completion" centers around green building features?  GBLU will keep you updated as more develops. 

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    When people ask me about green building lawsuits and legal issues, I usually start with Washington D.C.'s Green Building Act of 2006. 
  
    The Green Building Act is a very progressive Act that requires both that private and public projects comply with specific green measures.  I have written more extensively about the Act in the article "What's Your Green Construction Strategy" available here. 

    The biggest problem with the Green Building Act is the green performance bond requirement.  When I read this performance bond requirement I literally gasped so I am going to post portions of it word-for-word.  Please note that "section 4" details green building requirements for privately-owned construction projects: 

    (b)  On or before January 1, 2012, all applicants for construction governed by section 4
shall provide a performance bond, which shall be due and payable prior to receipt of a certificate
of occupancy.

    (g)  All or part of the performance bond shall be forfeited to the District and deposited in
the Green Building Fund if the building fails to meet the verification requirements described in
sections 3 and 4.

Did you gasp?  If not, make sure you catch my later posts detailing the potential problems with this green performance bond.
 

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