Green Building Transactional Due Diligence

Due Diligence

As ever larger numbers of green buildings are bought and sold, due diligence related to the green features of commercial buildings takes on an increasing importance.

But apparently most real estate due diligence checklists are stuck in the 1980s and while they address matters ranging from title and zoning to tenants and leases, as well as review of litigation and physical property inspections, many green buildings are being transferred with little if any appreciation of the opportunities or for that matter the risks associated with the “greenness.”

We have seen a surprisingly large number of contemplated transfers of LEED certified buildings where the deliverables at closing do not anticipate including the GBCI Change Of Ownership Agreement. That Agreement is not only required by GBCI such that a new owner is entitled to claim the building is LEED certified, but also so that the new owner can access the project on Arc.

If there is a single issue that arises most often as a surprise, although admittedly it is of only modest dollar impact, if at all, new owners have not been pleased to be learn after the fact that a multi year commitment to purchase green power was a credit achieved for LEED certification. Those new owners that object to any USGBC requirements for continuing reporting of energy data to USGBC, simply choose not to report.

There is no widely accepted standard for green building due diligence, as there is for hazardous materials where the Phase I Environmental Site Assessment ASTM Standard is all but universally utilized. It is curious that Mike Italiano, one of the three founders of the U.S. Green Building Council, was also a co-originator of Phase I ASTM standard.

There are, of course, other environmental matters that are beyond a Phase I, including non-tidal wetlands, but it is clear that green building issues may be material in valuing a property correctly.

As such it is important to use a skilled practitioner to assist with green building due diligence. We regularly assist with these efforts work as well as the associated work of providing opinions of counsel in green building transactions.

A threshold matter is always determining if the property complies will state and local government building codes and other regulatory requirements. An increasing number of jurisdictions have adopted the International Green Construction Code, or some other green code (e.g., CalGreen) or made LEED certification mandatory for private building, and an even larger number of jurisdictions have adopted the International Energy Conservation Code that has the import of imposing high performance building requirements on most building.

Much of the profit associated with green building is often derived from green leases (e.g., a GSA lease mandates an Energy Star score of 75) and reviewing those writings with an eye to greenness is key.

Of course matters of photovoltaic panels on the roof or otherwise are contract matters that need to be appreciated and the economics incorporated into operating budgets as well as tax allocations.

Tax allocations are also a matter to be considered because there are often expedited and special tax treatments of energy efficient and other green features (e.g., the 179D federal tax deduction is an expedited depreciation that a new owner should be aware of). Similarly, there may be local property tax abatements, but most are of limited duration and start date is of import.

There may be other government incentives and such should not only be addressed as a contract term, but also verifiable through due diligence.

Most of our green building due diligence efforts are associated with the sale and purchase of commercial real estate, but we also do work for prospective tenants, for lenders, including those providing green bonds, and others who are concerned about the verifiable greenness of a building.

If we may be able to assist you with green building due diligence do not hesitate to contact Stuart at

Passive House is “In” in 2017

Passive House

As you consider what’s “in” and what’s “out” in 2017, within the realm of green building, Passive House is in.

It is not controversial to accept that a strategy to reduce greenhouse gas emissions from buildings at low cost, while also improving occupant comfort, is to improve the thermal performance of the building envelope. By increasing the insulation and airtightness of walls, roof, and windows, it is possible to reduce the energy used for heating buildings by up to 90% compared to common practice. This “passive” approach, in contrast with active systems based on a constant supply of conditioned air by HVAC systems is the basis of Passive House.

The origins of Passive House date back 40 years to the Saskatchewan Conservation House built in 1977 in Regina, Canada with an airtight building enclosure and one of the first modern heat recovery ventilation systems in the world. Those design principles were systematized by Bo Adamson and Wolfgang Feist, who founded the Passive House Institute (Passivhaus Institut) in 1996 in Darmstadt, Germany.

Buildings utilizing the Passive House standard use dramatically less energy than typical buildings due to a high level of insulation, high-performance windows, an airtight building enclosure, minimized thermal bridges, and continuous ventilation with energy recovery.

The number and size of Passive House projects in North America has rapidly grown in the last year. Several mid-rise residential projects currently under construction will more than quadruple the number of available units and triple the square footage of Passive buildings. And there is Cornell University’s 250 foot tall 26 story high rise under construction on Roosevelt Island that may be the tallest and biggest Passive building.

While most Passive buildings are residential (well over 3500 buildings worldwide and 300 in North America), there are a growing number of commercial and institutional projects (over 500) including office buildings, hotels, schools, and even a prison.

There are currently over 1600 professionals and trades trained in Passive House design and construction in North America, including non lawyer professionals associated with this firm.

Governments in North America are beginning to drive Passive House. The City of Vancouver Zero Emissions Building Plan calls for a 90% reduction in emissions from new buildings by 2025 and while it does not explicitly require Passive House design or certification, it will move that market.

New York City Zone Green thick wall exclusion allows for up to 8 inches of wall thickness to be exempted from the calculation of floor area to encourage high performance buildings without decreasing the amount of usable space in the building, including Passive construction.

Pennsylvania offers tax credits for low income Passive House building. Applications submitted under the PennHOMES and low income housing tax credit program are ranked. And while up to 25 points are awarded for green building, what is unique is that up to 10 points may be awarded to those developments which meet Passive House certification requirements under either the Passive House Institute standard or Passive House Institute US standard.

Which raises an interesting conflict that the two standards are not the same. By way of demonstration, a recent study found the cost to operate the same multi family building in Portland, Maine, if Passive House Institute certified was $20,806 per year versus if certified to Passive House US was $26,781 per year, .. so the two standards are definitely not the same.

There is a very good article by Bronwyn Barry that highlights the bleeding edge 100% renewable energy calculations embedded in the new Plus and Premium Passive House US standards.

You can come up to speed quickly at the North American Passive House Network annual convention on October 4-8, 2017 in Oakland, California. Information is available from

Much of the innovation in green building in recent years was in Passive House, but the real market driver for Passive House in 2017 will likely be the increased public education and training of professionals coupled with outreach among the building industries that will cumulatively make Passive House building feasible in the U.S.

FTC Order Restricts use of “All Natural”


The Federal Trade Commission issued a summary decision against California Naturel, Inc., for falsely advertising its sunscreen product as “all natural” in violation of Sections 5 and 12 of the FTC Act.

In a December 12, 2016 opinion, written by Chairwoman Edith Ramirez, the FTC describes how the company promotes its “all natural” sunscreen on its website as containing “only the purest, most luxurious and effective ingredients found in nature.”

The FTC’s Green Guides do not provide guidance on the term “natural.”  However, the FTC is clear that “marketers must identify all express and implied claims that the advertisement reasonably conveys” and “ensure that all reasonable interpretations of their claims are truthful . . . .”  77 Fed. Reg. 62125 (2012).

It is worthy of note that in November 2015, the FDA issued a request for comments regarding the use of the term “natural” in connection with product labeling. 80 Fed. Reg. 69905 (2015). But no action was publicly announced.

And there has been much discussion at the federal level and in several states about the term “natural light” in both visible transmittance of window glass and light bulbs.

But in this instance, California Naturel admitted that eight percent of its sunscreen formula is in fact dimethicone, (by its own admission triggering the summary decision without a hearing) a synthetic ingredient.

The FTC was not persuaded by the company’s argument that its ingredient list and a disclaimer recently added to the company’s web page cured its misleading advertising, noting that consumers should not have to search for and dig out information that contradicts what an advertisement expressly and prominently conveys. For example, the “all natural” claims were prominent on the webpage, while the disclaimer was added to the bottom of the webpage, was not visible without scrolling down, and was well below the “Add to Cart” button.

Other than adding the disclaimer, California Naturel has not changed the representations challenged in the complaint. The website still claims the Sunscreen SPF 30 is “all natural.” The FTC concluded this “plainly conveys to reasonable consumers that every ingredient in the product is natural” which it is not.

Nor was the FTC persuaded by California Naturel’s argument that the disclaimer it added renders its marketing claims “transparent” (the word of the year, but that has no legal or other import).

The FTC regularly holds that “an advertisement is deceptive if it contains a representation or omission of fact that is likely to mislead a consumer acting reasonably under the circumstances, and that representation or omission is material to a consumer’s purchasing decision.”

The FTC’s final order prohibits California Naturel from misrepresenting the ingredients or composition of its products; whether a product is “all natural” or “100% natural;” the extent to which a product contains any natural or synthetic ingredient or component; or the environmental or health benefits of such a product. It also requires the company have competent and reliable evidence to support any of the claims it makes about any of its products (the FTC’s usual ‘suppression of material’ standard, that all but amounts to prior restraint, violative of the First Amendment).

The company may file a petition for review with a United States Court of Appeals within 60 days.

There’s an old adage “bad facts make bad law” and this extreme case is a poor basis for the FTC’s broader interpretation of what is natural.

Refocus the EPA through the Lens of Green Building

Green Monopoly e

In a time of changing national environmental agendas, including the Trump Pence Transition Team announced plan “to refocus the EPA” it is an ideal moment to articulate how green building is “the” ideal means of voluntarily mitigating the negative impacts that human activity has on the planet.

While buildings and the construction of buildings provide countless benefits to human beings far beyond merely providing shelter, voluntary stewardship of the environment through green building can save the planet.

Given the broad environmental impact that buildings have on the planet, it is not necessary to go down the rabbit hole of a political debate with the new Administration over global warming. Moreover, today the debate about climate change has shifting away from a discussion of costs and risks toward the question of how to capitalize on exciting opportunities.

While there is no one homogenized building type, we regularly articulate that green buildings can significantly reduce energy use, water use, solid waste and greenhouse gas emissions.

By way of example, compared to the average commercial building, an oft quoted study found the LEED Gold buildings in the U.S. General Services Administration’s portfolio generally: Consume 25% less energy, use 11% less potable water, have 19% lower maintenance costs, 27% higher occupant satisfaction, and emit 34% lower greenhouse gas emissions.

But at a time when many in society describe environmental matters apocalyptically, as if human existence on the planet is at risk we need to talk more than only about reducing energy use, water use, solid waste and greenhouse gas emissions. And green buildings do so much more.

Such is not a new idea. In fact in the early 1990s the U.S. National Institute of Standards and Technology (NIST) began the Building for Environmental and Economic Sustainability (known to most of us simply as BEES) project. (Some will remember the first pre Greenbuild USGBC green building convention in 1994 hosted by NIST.)

The first version of LEED allocated points based substantially upon the BEES environmental impacts. (An updated version of BEES is expected in 2017.)

Later, LEED version 2009 reweighted the solutions to environmental impacts using the U.S. EPA Tool for the Reduction and Assessment of Chemical and other environmental Impacts (TRACI). Such was not a leap because (the previously utilized) BEES is based upon TRACI.

The current 10 TRACI impacts are:

  • Ozone Depletion
  • Global Climate
  • Acidification
  • Eutrophication
  • Smog Formation
  • Human Health Particulate
  • Human Health Cancer
  • Human Health Noncancer and
  • Ecoxicity

BEES also assesses Indoor Air Quality, an impact not included in TRACI because it is unique to the building industry.

Green building provides powerful improvements to each and all of those 11 environmental impacts.

Interestingly, the new LEED version 4 describes the benefits of green building in terms of “Impact Categories.” It seeks to answer the questions, “What should a LEED project accomplish?” with a very much stylized and narrowed down list of environmental impacts: Reverse Contribution to Global Climate Change; Enhance Individual Human Health and Well-Being; Protect and Restore Water Resources; Protect, Enhance and Restore Biodiversity and Ecosystem Services; Promote Sustainable and Regenerative Material Resources Cycles; Build a Greener Economy; and, Enhance Social Equity, Environmental Justice, and Community Quality of Life. It is not clear why the USGBC abandoned the standardized TRACI listing in favor of a proprietary test, but the positive environmental impacts of building green remain.

And while some desire a hyperbolic government response to the environmental issues of the day, even at the risk of changing our way of life, the recent U.S. election has shown, today, most Americans have a deep distrust of the federal government and of far reaching public programs. An ideal solution then, to address environmental issues, is for government to make it possible for business to voluntarily build green including the greening of existing buildings.

As the nation refocuses environmental policy beginning in 2017, voluntary green building is the solution to many of the very real environmental impacts of the day.

A Day in the Life of a Green Building Attorney

Stuart Kaplow

This blog post is not as epic as A Day in the Life, the last song on the Sgt. Pepper’s Lonely Hearts Club Band album that Rolling Stone magazine ranked as the greatest Beatles song ever.  But rather, this responds to a question I was recently asked when speaking at a law school forum on innovation in the law, “what does a green building attorney do?

My practice is almost exclusively sustainability including green building law, so a good response may be to look at a typical day. Admittedly my practice is varied such that there may be no truly typical day, so let’s look at a real day in the life, what I did this past Friday. (Client names and other specific references are omitted to protect the not so innocent.)

04:45 a.m.  Responding to client email about impact of construction project change order on contemplated LEED certification, so that payment can be released today.

04:55 a.m.  Responding to client email described as a “sustainability emergency” seeking advice and comment on a revised footnote in a public company annual report, responding to the SEC mandated disclosure of the risk that climate change developments may have on their business, being considered by the board of directors today.

05:00 a.m.  [Off to my gym where I am training for an April mountain climb.]

07:00 a.m.  Responding to consultant email and draft report of Phase II environmental site assessment.

07:10 a.m.  Responding to consultant with comments on selection of a DOE approved energy model for 179D tax deduction.

07:30 a.m.  Reviewing and approving quotes in draft third party journal article on defects in green building contracts.

08:00 a.m.  Drafting form contract for LEED consultant to use in responding to RFPs.

09:00 a.m.  Reviewing and editing proposed specifications for university mandated to be green building construction contract.

09:50 a.m.  Responding to email with requested revisions and finalizing our firm opinion of counsel on green building construction loan closing.

10:10 a.m.  Participating in portion of online value engineering session for “way over budget” green multifamily project.

11:00 a.m.  Responding to client email and text about requested revisions to contract for green building services.

11:10 a.m.  Drafting contract for general contractor on large project pursuing LEED certification.

12:15 p.m.  [Lunch with prospective client]

01:00 p.m.  Drafting settlement agreement and release reflecting amicable resolution of disputes and differences arising out of construction of green building.

01:30 p.m.  Representing client in telephone informal mediation of construction dispute aimed at keeping construction on schedule while apportioning responsibility for design defect.

02:55 p.m.  Telephone call with client and others including local counsel re application of DC mandatory green building law related to shared photovoltaic panel and vegetated green roof.

03:00 p.m.  Reviewing, considering and revising an enhanced commissioning scope.

03:30 p.m.  Telephone call with client and others including local counsel re application of Phoenix newly adopted IgCC 2015 with alternative compliance path in energy code for reskinning existing building.

03:50 p.m.  Reviewing and editing PR firm prepared copy for website advertising construction of new green mixed use high rise building.

04:00 p.m.  Conference call with trade association about proposed ASHRAE 189.1 addendum public comment.

04:30 p.m.  Telephone call with client about recommendation on how to address changing GBCI fees in existing contracts.

04:40 p.m.  Telephone call with state elected official about increased school construction costs associated with green schools.

04:50 p.m.  Telephone call with print media reporter, on background only, about Task Force on Climate-Related Financial Disclosures.

05:20 p.m.  Telephone call with client about water use reduction alternatives for redevelopment that is striving to be net zero water use in jurisdiction with water use restrictions.

05:30 p.m.  Responding to client email about LEED no cigarette smoking policy in Massachusetts where recreational cannabis will be allowed.

Following an orchestral crescendo, the Beatle’s A Day in the Life ends with one of the most famous final chords in music history. My day in the life of a sustainability and green building attorney ended with the keypad chirps of setting the alarm as I exit the door of my office on my may to a dinner party.

Less Climate Change Disclosure by Public Companies

SEC Headquarters

Publicly traded companies are required to disclose material business risks to investors through regular filings with the Securities and Exchange Commission. Since February 8, 2010, the SEC has expressly required disclosure related to climate change.

While it has been controversial, the SEC’s 2010 interpretive guidance, the Commission Guidance Regarding Disclosure Related to Climate Change, which technically did not create a new legal obligation, but clarified how publicly traded corporations should apply existing SEC disclosure rules to certain mandatory financial filings with the SEC regarding “the risk that climate change developments may have on their business” remains unchanged since it was issued.

Specifically, the SEC Guidance states what companies could be required to disclose in relation to climate change under the corporate disclosure requirements that fall under the SEC’s Regulation S-K, including Forms 10-K annual reports.

In 2010, immediately after the SEC guidance, this law firm worked with a large number of publicly traded companies and their counsel and outside consultants to advise them about climate change. That year more than 25% of public companies used the term “climate change” in their annual report, most for the first time.

Data culled from filings of public companies listed on U.S. stock exchanges reveals that last year less than 30% of all publicly traded companies made a climate change disclosure. That number is dramatically higher for larger companies with 59% of S&P 500 companies including a climate related disclosure in their 10-K filings.

But I suggest that the less than complete response by companies is not out of ignorance, but rather is a knowing voluntary election by company management supported by boards of directors.

In point of fact, in 2016 this law firm received more inquiries than any year before about SEC disclosure requirements as they apply to climate change. The number of inquiries has grown each years since 2010 and actually more than doubled since 2015. Possibly the publicity over the effective date of the Paris Climate Agreement or state’s public efforts to comply with the EPA power plant rule, resulted in the heightened interest we have experienced. And I have written in this blog about More Robust Enforcement of SEC Climate Change Disclosures.

Most dramatic, of the public companies this firm assisted with SEC disclosure requirements, those companies making a disclosure in Forms 10-K and 20-F filings dropped by more than 20% from last year.

And public companies are saying less. Those that have notes explaining the possible material impact of climate change are using, on average, more than 50% fewer words on the subject.

It should not be surprising that many companies report a general lack of interest in the subject of climate change from investors and the financial community at large.

After analysis, many companies concluded disclosing climate change associated information was uncertain and speculative when compared to other disclosures being made. Many companies observed that the process for reaching conclusions about climate change did not have any recognized standards. And the administrative and compliance costs of providing the evaluating a possible disclosure could be significant.

Many public companies determined there were no meaningful business opportunities arising from climate change disclosures, but that they carried a potential for creating risk. Wherefore, an increasing number of companies concluded there was little upside and more possible downside in climate change disclosures.

So, those companies that we worked with making a climate change disclosure in Forms 10-K and 20-F filings dropped by more than 20% from last year.

Disclosure of material risk arising from climate change poses an ongoing challenge for public companies. At the close of 2016, there is no consensus on when such risks should be disclosed and how much detail should be included in SEC filings. While the response to the SEC’s 2010 interpretive guidance has been more activity in this area, few think it has resulted in any greater transparency that aides investors.

It can be anticipated that a Trump Administration will move to determine if the SEC climate change guidance results in disclosures that continue to provide useful information to investors? If not, the guidance could be withdrawn and there will be less climate change disclosure.

We assist public companies in legal and non-law matters associated with climate change and sustainability, including voluntary environmental reports, as well as SEC disclosures and financial statement compliance. If we can assist your company, please contact Stuart Kaplow.

Suing But Not Because it was Not a Green Building

Haywood Community College

With the maturation of the green building industrial complex it has become clear there is no more or additional liability associated with constructing a green building versus a similar non green structure. But, the claims that have resulted in much of the recent litigation involving green building projects are different from those in other construction disputes.

Typical is the case recently commenced over the construction of the Haywood Community College Creative Arts Building in North Carolina which was pursuing LEED New Construction v2009 certification.

The Haywood Community College’s Creative Arts Building‘s very sustainable design was featured in a 2013 issue of Solar which described the project as pursing LEED Platinum. The architect’s website still highlights the project describing it as “designed to achieve LEED Platinum.”

The project was substantially completed in 2014, late and over budget, but only days ago on October 28, 2016, a complaint was filed against the architect, general contractor, flooring contractor and insurance companies. The complaint enumerates 20 different defects over 22 pages, including describing in great detail the cracking and failure of the building’s floor that has an imbedded radiant heat system in a gypsum floor underlayment. Whether or not that multi layered floor system is the perfect base for the floor covering may be a design issue, but it is not a uniquely green issue nor innovative (.. the 1950s era house I grew up in had a similar radiant heat under terrazzo).

The 25,000 gallon rainwater cistern in the courtyard, that was designed to provide 100% of the potable water for toilet flushing and 90% of that required for the cooling tower, doesn’t function allegedly because of a software programming glitch triggered by a power surge.

The solar thermal based absorption chiller, with 152 solar thermal collectors on the south wing roof, is designed to heat and cool the building, but it is claimed the condensation, evaporation, and pressurization cycle that was to absorb the heat and cool the building in summer hasn’t functioned since 2014 because of a pump failure.

Over 90% of the storm water was to be collected via a bio-swale into a manmade wetland pond, but the complaint says the artificial wetland fails to hold water.

The lawsuit makes other (.. not particularly green building related) allegations but the academic building is occupied and is incredibly energy efficient. According to a published report the building exceeds the energy requirements of the building code by 48% when state law only mandates public buildings exceed that benchmark by 30%.

The problems with the building may involve defective designs, but the complaint reads like a usual and ordinary construction dispute based on warranting the work’s conformance to the contract documents, warranting the quality of materials, and warranting the work is free of defects.

This appears not to be a case about green building despite that the building is registered with GBCI as pursuing LEED and after years is still listed as “certification in progress.” The underlying disputes and differences are not about untested materials or new equipment, as is often the instance with sustainable construction.

It is important to make clear there are very few instances of litigation involving substantive matters of green building.

And curiously the contract did not have a consequential damage waiver so the plaintiff is seeking far more dollars than are simply required to remedy what doesn’t work and such may make any amicable resolution of the disputes and differences impossible.

As with the vast majority of claims involving a green building that this law firm reviews (.. and I see more than a claim a week), this lawsuit has little, if anything, to substantively do with the fact that the building was pursuing LEED Platinum certification. This is a garden variety owner seeking damages from an architect and construction company for a technologically advanced building that does not work as the owner contemplated.

Verdant Checked Cannabis is Coming

Verdant Cannabis

Nearly one quarter of U.S. residents now live in states that allow the recreational use of cannabis.

While we all have been focused on the Presidential election results, cannabis law reform won in eight out of the nine states where it was on the ballot, from California to Massachusetts, on November 8, making clear the that the public is ready to put the harsh prohibitionist pot policies of the past behind us.

The legal cannabis market could triple over the next for years to $22 Billion, according to a pre-election day editorial in The Wall Street Journal.

In this brave new weed world, people care about the cannabis they smoke (and eat).

The fast growing cannabis business could benefit from a voluntary certification system that producers could participate in to show consumers that they employ environmental best practices. But the U.S. Department of Agriculture claims it controls “organic” agricultural and because marijuana is a Schedule I drug under the federal Controlled Substances Act of 1970, federal policy does not permit cannabis, a federally banned substance, to be labeled as organic. In response, this law firm has been working with a cannabis industry group to create a ‘pesticide free, fertilizer free and fungicide free’ Verdant Check third party certification for sustainably produced “organic equivalent” cannabis.

Verdant Check will simultaneously encourage energy and water conservation and will provide a marketing boost to producers that participate in the program. Many cannabis consumers might prefer to purchase a sustainably produced product, and a label of certification would provide these producers a means by which to differentiate their products from others in the market. The USDA reports that consumer demand for organically produced goods continues to show double‐digit growth.

An early reviewer of the standard, observed, “this is like LEED for weed.”

Verdant Check is a voluntary third party program that can be self administered or third party certified. Producers can choose to participate in whole or in part or not, depending on whether it makes business sense to them.

Verdant Check has created a set of protocols for cannabis production. Verdant Check certified operations must demonstrate that they are using only approved substances and protecting natural resources.

Specifically, Verdant Check has established a national standard for the marketing of certain legal cannabis products as sustainably produced including to assure consumers that Verdant Check produced cannabis meets a consistent standard.

To be sold or labeled as a Verdant Check certified cannabis product, the product must:

Have been produced and handled without the use of synthetic chemicals, except as otherwise expressly approved in the program;

Not be produced on land or in growing medium to which any prohibited substances, including synthetic chemicals, have been applied during the 3 years immediately preceding the harvest of the cannabis plants; and

Be produced and handled in compliance with a Verdant Check plan agreed to by the producer and handler of such product.

This program for organic equivalent cannabis was prepared and vetted by a team of experienced scientists and attorneys, and not by some loose coterie of potheads simply looking for consensus.

Verdant Check is currently being piloted both with medical marijuana and recreational cannabis produces with a proposed first quarter 2017 public release.

Note, in the instance of a cannabis product certified under the Verdant Check program, it is intended that the certification will be considered sufficient to make a claim regarding the absence of bioengineering in the cannabis, such as “not bioengineered”, “non-GMO” or other similar claims.

Organic marijuana Verdant Checked cannabis is coming ..

False Advertising Claims over Net Zero and LEED Certified Homes

2500 R Street

Homebuyers are making claims of false advertising over “Net Zero LEED certified” houses in midtown Sacramento – that may be neither.

The website for the architect on the project, today still says, “2500 R Street located on a two acre site along the R Street light rail corridor in Midtown Sacramento, this new single-family home community is designed to be rated LEED Silver for Homes and LEED Silver for Neighborhood Development.”

The application to the Sacramento City Council in 2010 for 34 sewer connection fee credits by Pacific Housing, Inc. (which request was granted) included as its justification, “the project will bring 34, anticipated LEED Platinum rating, infill housing units to the Midtown neighborhood creating a sustainable and livable community.”

Advertising that dates to August 2013 and is still online for “the new 34 unit development of 2500 R Midtown” said, “Home offers 2 master suites, 2 1/2 bathrooms and a 3rd floor loft that is private and perfect for flexible use. Home is a Net Zero LEED certified home that includes solar with electrical storage, smart meter and more.”

A 2012 paper authored by representatives of California’s three investor-owned utilities, including the Sacramento Municipal Utility District (SMUD) stated,

SMUD’s 2500 R Street project is the first net zero energy community in Sacramento’s midtown district. In this project, net zero energy means that over the course of a year, each unit will generate as much energy as it consumes. The combined effort of community partners – Pacific Housing, Sunverge and SMUD – has produced a major achievement in modern, efficient housing. The homes at 2500 R Street are net zero energy, zero carbon, zero emissions, LEED®- certified residences.

But are they?

According to print media accounts, 17 of the 34 homebuyers filed a statement of claim on September 30, 2016 commencing an arbitration proceeding against Pacific Housing, Inc., 2500 R Group LLC, and Pach Sustainable, LLC for falsely advertising that the houses were net zero energy and LEED certified. Counsel for the parties did not reply to a request for information in response to that filing. This blog post is based upon publicly available information.

The easier of the two to address may be the claim that the houses are not LEED certified. They apparently are not. None of the 34 houses were registered with GBCI as pursuing LEED certification. Accordingly none of the houses are LEED certified. The architect also claims this “community is designed to be .. LEED Silver for Neighborhood Development” and it may well have been so ‘designed’ but it was also never registered nor pursued LEED ND. All of that observed, it is key what homebuyers were told?

The other claim of falsely advertising that the houses are net zero energy appears spurious but also requires facts to prove or disprove about how much energy each house generates and consumes each year. Project advertising said, each of the houses comes with a 2-kW solar photovoltaic system on the roof and each house also is fitted with a battery that can store solar energy during the day for use in the early evening. In addition to electricity, “each of the homes has gas cooktops, gas-powered water heaters and gas-fired heat pumps.” Depending upon individual family electricity consumption, a house might be net zero electricity, but not next zero ‘energy’ given the natural gas consumption?

Again, the 17 homeowners, who receive monthly utility bills are claiming in this action that the houses are not net zero energy (which allegation appears buttressed by the data released by SMUD in December 2014 showing that not one of the houses was net zero electricity in 2014). That 2014 release of data included a reference to the fact that homebuyers were presented with a document that explained they would be participating in a research project. Information not publicly available, including what else each homebuyer was told, is required to evaluate this claim.

Watch this blog for information about this arbitration as it moves forward. The process is private and not public, so information may be limited.

Given that most consumer protection laws across the country set a low threshold for what is false advertising to a consumer, these claims arising in Sacramento should be instructive to all marketing the environmental attributes of green homes.

And the disputes and differences about what is net zero energy should be of great interest to many.

Trump Election Can Make Green Building Great Again

Donald Trump

Election day 2016 in which Donald Trump was elected the 45th President of the United States and Republicans control both houses of Congress portends huge business opportunities for green building.

As the Executive and Legislative Branches look to arrest existing environmental and energy policies while driving up growth and lowering taxes, enabling voluntary green building is positioned to be part of the new agenda.

The newly elected President is not a 1960s Barry Goldwater environmentalist who favored “federal intervention with regards to the environment.” To the contrary, President elect Trump is a real estate developer who campaigned on dismantling much of the EPA and repealing executive orders on climate change (e.g., potentially including the Guiding Principles for Sustainable Federal Buildings) and rolling back regulations (e.g.,  power plant carbon emissions, non tidal wetlands, etc.).

That view is consistent with many elected conservatives and land owners who believe that a voluntary, non-mandatory approach to environmental protection is the best hope for stewardship of our planet. And that is the same belief that has led to the broad brand and wide market share acceptance of LEED. Many believe that burdening business and land owners with yet more government mandates is wrong and is not efficacious.

The broad failure of the International Green Construction Code to be enacted suggests a mandatory green building code that goes far beyond life safety is going too far. Further, the fact that ASHRAE 189.1 has only been implemented by the U.S. military is equally damning. Mandatory green codes and energy standards touted by the current Administration when Congress would not enact hyperbolic responses to climate change at the risk of changing our way of life, will not be popular with thought leaders in a Trump Administration.

Additionally, attempting to mandate that a private land owner must build a LEED or Green Globes certified structure misuses the voluntary rating systems. David Gottfried, the U.S. Green Building Council co-founder who unabashedly believes “all building should be green” said in a 2014 interview, “LEED was designed as a voluntary standard” acknowledging that “some governments have grabbed onto it.” And Jerry Yudelson, the former President of GBI (the Green Globes folks), makes clear he does not advocate mandatory green building laws for private building and he sees “a benefit of allowing the freedom of the marketplace to control this rapidly changing field, where performance counts.”

As the transition team for the newly elected President looks for environmental and energy policies that will be no cost to government and not burden business, the environmental industrial complex needs to advocate for government policies that allow and incentivize sustainability and green building (including the resultant reduced electricity use, savings in potable water, less solid waste, eliminating toxics, and more). It is time to stop the intolerant ridiculing of people, who are now in control of Congress and the White House, as climate change deniers (making it a moral issue equating them with Holocaust deniers). And it is time to reconsider the abject failure of the green building community to articulate the advantages of building sustainably that has resulted in green building no longer being the cool kid.

In its post Fedrizzi era, the USGBC might best advantage green building in the United States by being less partisan, including walking back Fedrezzi’s widely criticized Clinton Global Initiative commitment to construct a LEED Platinum orphanage in Haiti to be named the William Jefferson Clinton Children’s Center. And the USGBC might rethink its relationship with United Technologies when on the same day in April the two announced an overseas joint lecture series, Donald Trump was criticizing the company’s Carrier subsidiary for moving jobs overseas. The USGBC gave us the words and terms to describe green building and it is within its control to be great again and at the center of this awesome expansion of green building across the U.S.

But make no mistake, the green building industrial complex has its work cut out for it. In a now widely rewatched 2012 Squawk Box interview, Donald Trump did not have positive things to say about a friend’s green office building, including, “You won’t have enough light in the winter and you’re going to be extremely cold. In the summer you’re going to be sweating at your desk.”

But not only is green building a solution for many of the environmental impacts arising from human activity, from an economic perspective it is clear that green building is profitable. There is nothing wrong with making a profit while saving the planet, whether it needs to be saved or not. George Carlin famously quipped in one of his oft repeated comedy routines, “The planet is fine. People are fucked.”

Apparently the prospect of people moving to Canada drew so much online interest last Tuesday night as election returns favoring Donald Trump were announced, it knocked out the country’s immigration website. And while much of that was no doubt tongue in cheek, it was happening at that same time the President elect was delivering his election night speech, including describing as one of his initiatives for the first 100 days the $1 trillion reconstructing of America’s built environment from airports to roads. This election has presented an opportunity for the green building industry to thrive and be great again.

Green building policies that promote innovation and create an environment rich for investment in real estate can save both mankind and our current way of life; and we all can get wealthy from building green.