Posted on December 30, 2009 by Chris Cheatham

The Most Important Green Building Legal Story of the Year

[Today we are highlighting the what is, in my opinion, the most important green building legal story of 2009. 

With the launch of LEED v. 3.0, the United States Green Building Council (USGBC) announced it would revoke certification of projects that failed to meet minimum requirements.  The possibility of LEED de-certification creates new liability issues for all parties involved in any green building project and emphasizes the growing emphasis on building operations. 

This post resulted in a firestorm of comments (31) that are more interesting than the original post.  Thanks to everyone for contributing to the informative conversation.]

 

This Post is Really Important and Is Not for the Faint of Heart

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. 

Every time 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)

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Posted on July 17, 2009 by Chris Cheatham

Real Life Example of the Energy Performance Gap

[Sometimes I get great emails from readers and we discuss a green building topic or blog post.  Then I sit on the topic for a while, waiting for the right time to share with the Green Building Law Update readers.  Now seems like the right time to share an email I received from a reader.  

I received this great email from a reader who manages the operations and maintenance of a LEED Gold Certified building.  What follows is his response to my question "how are the green building efforts going?"]
 

At its best the going is very slow. At its worst... we're kind of afraid to go.
 
I'm meeting with the building HVAC technician once a week to try & review our LEED report and the 2.1 spec. We have a request in to our boss for information/documentation from the architectural firm that got us certified (M&V plan, etc.). We may or may not be deemed worthy of actually talking to the firm. I'm also putting in a request to purchase the ASHRAE books we seem to need (55, 90.1, etc.).
 
Right now I'm kind of frustrated with two aspects of this whole thing:
1) the lack of resources for anyone inheriting these buildings
2) the lack of clarity regarding who owns what.
 
The HVAC tech & I are pretty sure we're only verifying we got the building that was sold to us, but we have NO idea exactly how much of this we have to verify, how exactly to verify it, and how much we'll suffer for calling out anything wrong. State mentality FTL, I know, but blue-collars are that way due to experience.

There's the geek part of me that wants to set aside a portion of the Web to try and do something about this. But where do I start? My understanding of the problem is so small I can't even focus on that little nugget I "need to fix".
 
There's also part of me that really doesn't care. Chasing unfocused spec with no real understanding of who owns what or who is responsible for what is not something I want to focus my time on.
 
To using a coding analogy (which I'm not even qualified to use)... Right now all I see is a lot of coding framework for very little functional code. I'm not even sure I want to continue coding in this language.
 
I'd rather focus on playing guitar for a weekend band. :p

[This is a perfect example of the green building performance gap.  The building may be designed with the most state-of-the-art, energy saving strategies, but no one bothers explaining the operations and maintenance to the operations and maintenance crew.  You may recall that the performance gap is what led to USGBC authorizing LEED de-certification.  Green building education provided to operations and maintenance staff could go a long way to closing the performance gap.]

Photo:  Jim at Sonicchiken

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Posted on July 15, 2009 by Chris Cheatham

LEED De-Certification Raises Insurance Concerns

[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.]

Ok, time for me to finally chime in, here. As you attorneys begin incorporating new contractual requirements of energy performance to address LEED 2009's Minimum Project Requirements, please make sure to keep in mind that reporting the usage of natural resources and the subsequent efficiencies create unique risks and liabilities that my (insurance) community has yet to address.

As I have mentioned on numerous occasions, surety providers of performance bonds are underwriters based on the assumption of no losses. Should a contract contain language guaranteeing energy or natural resource performance/efficiency, the surety will exclude that language from their performance bond. In the event that a building fails to perform to a specified level of resource efficiency, should the surety be required to compensate the owner to rebuild the structure? That is not what they are in business to do and will not bond contracts guaranteeing efficiency and performance specifications.

The next question is if there is a situation in which a building is de-certified for either failure to report usage data or lackluster performance (should the program requirements change), than is their a potential for liability by a third party to the operation and maintenance of the building and has the owner incurred a financial injury due to de-certification. The plaintiffs will most likely argue that in fact, the building has lost value, but commercial general liability may not deem this as an occurrence caused by the negligence of their insured. Many professional liability contracts contain exclusions pertaining to guarantees and warranties, so who will provide the defense, what are the damages and what will the plaintiffs argue as their incurred damages?

The point is that we need to be proactive as our contractors enter the realm of performance contracting and they need to be clear as to how their liability insurance will and WILL NOT respond. Guarantees of building energy performance are not new, but they are UN-insurable. If you as a contractor or architect make these claims, you will be ON YOUR OWN if the building fails to meet the owners expectations.

 

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Posted on July 10, 2009 by Chris Cheatham

How I Learned to Stop Worrying and Love LEED De-Certification

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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Posted on July 8, 2009 by Chris Cheatham

This Post is Really Important and Is Not for the Faint of Heart

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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