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

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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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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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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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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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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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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[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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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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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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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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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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[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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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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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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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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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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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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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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