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

Continuing our discussion of topics from Greenbuild, we now move to Los Angeles’ green building regulation.  We have already highlighted Portland’s innovative Feebate enforcement mechanism.  Los Angeles has created a very different enforcement mechanism that, frankly, may cause problems. 

Under Los Angeles’ Green Building Program Standard of Sustainability, projects meeting certain size requirements must:  (1) include a LEED AP on the project and (2) demonstrate that the project has met the intent of the USGBC’s LEED certified level.  Importantly, Los Angeles’ Standard of Sustainability states that “formal certification by the USGBC is not required.” 

Los Angeles’ plan to enforce the Standard differs significantly from other regulatory schemes and includes the following steps:

1. Developers must submit plans and a preliminary LEED checklist to the Department of Building and Safety (DBS);
2. DBS will then refer an applicant that meets the sustainability requirements to the Department of City Planning for clearance; and
3. Every seventh project is then audited to ensure compliance with LEED certification.

The Standard never states the punishment if a project fails an audit.  Absent a sufficiently punitive fine for failed audits, owners may be willing to gamble that they will not be audited.  Furthermore, the Standard does not include any provision to ensure that green building strategies are incorporated into actual construction.  Owners can simply eliminate green building strategies after the design phase and avoid punishment. 

Which system do you prefer, Portland’s Feebate or Los Angeles’ Audits? 

Related Links: 

• Building A Green Los Angeles (PDF)
• A Tale of Two Cities: Portland's Feebate (GBLU)

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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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