Blockchain has come to U.S. Real Estate

Earlier this year a precedent setting property sale in Vermont was the first real estate transaction in the United States using blockchain, portending a new era in the sale of land and improvements.

Blockchain technology is an industry disrupter on the cusp of improving transactions across all sectors and borders. It is suggested blockchain may do for the $217 trillion U.S. real estate market what the portable phone did for communication, .. and that may be an understatement. Blockchain will address high transaction costs, long time delays, and heterogeneity of real estate transaction types, accelerating the investment in real estate across sectors, the nation and the globe.

Blockchain, a digitized, distributed ledger that records and shares information, could enable the real estate industry to address many of its inefficiencies. Think of blockchain as the technology, or better yet the operating system, that supports the software, Bitcoin, the digital currency launched in 2009 that has been very much in the media in recent days as prices have gone up and down. Cryptocurrency is only one (.. although a high profile one) of an untold number of applications of blockchain. In another high profile application, Walmart just announced it is requiring suppliers of leafy green vegetables upload growing and shipping data to blockchain by September 2019.

There is no requirement for a cryptocurrency (.. Bitcoin or other) exchange in a business transaction undertaken with a smart contract stored over the peer to peer network that is blockchain. Consideration may be paid by any agreed to ordinary means.

Real estate is a highly regulated industry and real estate transactions must to be recorded in a government ledger to be recognized and enforceable by all. There are more than 3,600 governments in the United States alone where real estate deeds are filed and the vast majority are paper instruments filed with a court clerk and made much more expensive and not easily accessible except to a dinosaur industry of local courthouse title abstracters supported by a coterie of indemnity title insurance companies.

There have been government studies and pilot programs, including the much ballyhooed Cook County, Illinois pilot that designed blockchain real estate conveyance software, but did not result in an actual conveyance.

Then Palo Alto based private company, Propy, announced that in a Vermont pilot program it had used blockchain for a property purchase on February 20, 2018 in Chittenden County, Vermont, a first in the U.S.

Propy later announced on July 23, 2018 a blockchain recorded property transaction in California involving the sale of 10 acres of land. Actually, the first deed in In California, was apparently recorded by Propy on a blockchain transaction in May and the San Francisco Recording office holds a deed containing blockchain information (.. so maybe not a pure blockchain transaction).

I posted to this blog last year when Propy announced the very first blockchain sale anywhere, an apartment in Kiev, Ukraine in 2017. And on October 9, 2018 Propy announced it had used blockchain for a property purchase in Seville, Spain.

Laws will need to be changed across the U.S. and the globe to allow more than the old fashioned register of deeds because today in most of the thousands of local jurisdictions in the U.S. the transfer of ownership of real estate is enforceable only when the deed in presented for recording among the land records in the courthouse.

There is of course some risk that a patchwork of state laws may inhibit blockchain growth, so most states are adopting minimalist legislation demonstrating that the jurisdiction and its courts are blockchain friendly.

States have been actively making the necessary changes in law since 2016.

In 2016, Vermont enacted House Bill 868, now a model across the country, that provides for the enforcement of transactions using blockchain by providing a rebuttable presumption of admissibility of a blockchain based digital record as a ‘business record’ under Vermont’s rules of evidence in any judicial matter,

A digital record electronically registered in a blockchain, if accompanied by a declaration that meets the requirements of subdivision (1) of this subsection [.. notarized], shall be considered a record of regularly conducted business activity pursuant to Vermont Rule of Evidence 803(6) ..

Flowing from that law came the first real estate transaction in the U.S. described above.

Similarly in 2018, Ohio passed Senate Bill 200 providing that “a record or contract that is secured through blockchain technology is considered to be in an electronic form and to be an electronic record.” Electronic signatures secured through blockchain technology are also considered to have the same legal standing as any other electronic signatures.

In 2017, Arizona went even further enacting a broad sweeping House Bill 2417 recognizing blockchain signatures and smart contracts as an electronic record and Senate Bill 1084 requiring governmental agencies to allow the use of electronic records or electronic signatures, including for the transfer of real estate.

At least 25 other states have some blockchain authorizing law; as do Dubai, Israel, Canada, Sweden, and the Ukraine.

This law firm has worked with clients in the outdoor sports apparel and agricultural sectors in matters of blockchain and we see the application in real estate.

Interestingly, it may well be leasing that will elevate blockchain in the real estate marketplace ahead of deeds because most leasing transactions do not require involvement of a statutorily mandated government registrar.

Owners of green buildings, as among some of the most progressive in the real estate industry will all but certainly be at the forefront of this technological revolution. But all owners of commercial real estate, whether or not their immediate aim is improve elasticity, risk becoming as outmoded as the buggy whip industry, if they do not consider adopting blockchain technology.

State Not County has Authority to Regulate Solar Farms

At a time when solar panels are de riguere a recent decision by a Maryland appellate court limiting the authority of local governments to regulate the location and specifics of construction of a solar farm has broad implications far beyond this case.

Perennial Solar, LLC filed an application for a zoning special exception and variance to construct a solar panel farm in Washington County, Maryland. The Washington County Board of Zoning Appeals granted the relief requested. The Board of County Commissioners of Washington County and several aggrieved residents, appealed the decision to the Circuit Court. On a preliminary motion filed by Perennial, the court determined that the authority of the Board of Zoning Appeals and the circuit court to consider the application for special exception was preempted by state law and the court dismissed the appeal.

The question before the Maryland Court of Special Appeals was whether existing state law, which grants the Maryland Public Service Commission general regulatory powers over electric generating stations, including a “solar energy generating system,” preempts local zoning regulation regarding the location and construction of such a generating station.

Preemption of local law by state law can be express or implied or can occur when local law conflicts with state law. The appellate court found relevant to this case, preemption by implication occurs when a local law “deals with an area in which the [General Assembly] has acted with such force that an intent by the State to occupy the entire field must be implied.” Therefore, the inquiry was focused on “whether the General Assembly has manifested a purpose to occupy exclusively a particular field.”

With regard to generating stations, existing law “defines the nature and extent of the PSC’s regulatory powers and responsibilities.” And the courts have held in other cases, local government is impliedly preempted from regulating the location and construction of generating stations that require a Certificate of Public Convenience and Necessity from the PSC, as was the case here.

The court, at best gratuitously or at worst goading the state legislature to correct the law being interpreted, in dicta said, Washington County’s Zoning Ordinance and Comprehensive Plan are much less thorough than the PSC public review and approval process regarding the construction of generating stations.

Following existing law and as evident in the legislative intent of Senate Bill 887 in 2013 that created this PSC authority, the court here held in Board of County Commissioners of Washington County, et al. v. Perennial Solar, LLC, No. 1022, September Term 2016 “that the PSC preempts, by implication, local zoning regulation” and it affirmed the circuit court.

Significantly, originally this was an unpublished opinion (not able to be cited for precedent) but after lobbying by big solar and its lawyers, the opinion is now published.

We have no doubt about the correctness of this legal decision, but the larger issue may be if the law is good public policy? This is not the same as location of a utility scale power plant or transmission lines that benefit the greater public good. Onsite alternative energy generation and distributed small generation systems not only do not offer the same overwhelming good benefit, but often have unintended consequences that impact the quality of life on our planet. It is widely accepted that the legislature should correct this questionable energy public policy that usurps the near 100 year old historical convention of local land use control.

In context, this is the same legislature that made it the law that All Solar Panels are Pervious in Maryland, for the purposes of zoning, construction and stormwater; in a Solomonic public policy balancing act between water quality and energy, where the importance of onsite renewable energy won out.

That all observed this decision is instructive and an excellent guide to similar statutory schemes common across the country. And note a petition for certiorari seeking further review by Maryland’s highest court, the Maryland Court of Appeals, has been filed (but not yet acted on), so watch this blog to see if the sun ultimately sets on local government solar panel laws.

Tenant’s New Defense to Hazardous Substance Liability

Buried in the omnibus spending bill signed earlier this year were amendments to the Superfund law that for the first time make clear that tenants can qualify as bona fide prospective purchasers, protected from cleanup costs from the presence of hazardous substances on a property.

The Consolidated Appropriations Act signed on March 23, 2018 included in Division N, the ‘‘Brownfields Utilization, Investment, and Local Development Act of 2018’’ (the BUILD Act).

The Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (CERCLA, commonly referred to as Superfund), 42 U.S.C. § 9601 et seq., provides an important liability protection, including from cleanup costs, for parties who qualify as bona fide prospective purchasers (BFPPs).

The potential applicability of the BFPP protection for a tenant who leases contaminated or formerly contaminated real estate and improvements has been the subject of debate for the decades since the CERCLA’s enactment.

The cases interpreting CERCLA make clear that the mere execution of a lease does not necessarily make a tenant liable as an owner or operator under the law. But courts have recognized the uncertainty regarding the potential liability of tenants under CERCLA including because a tenant may be a responsible person as an operator and more broadly of a lack of express protection in the federal law for tenants. Understandably, a prospective tenant may wish to seek BFPP treatment in the event of a future federal CERCLA cleanup action at the leased property or to ensure its appropriate environmental stewardship of the property.

Such is a real issue when in any given year the vast majority of commercial and industrial real estate transactions are leases and not contracts of sale.

In 2002, as part of the Small Business Liability Relief and Brownfields Revitalization Act, the BFPP definition was amended to include the parenthetical phrase “(or a tenant of a person)” in the description of who can claim the BFPP defense, but there was no other direction on the treatment of tenants.

EPA issued guidance in 2012 on the treatment of tenants as BFPPs, but only provided that the tenant could derive it BFPP status through the property owner, and that status was limited to “so long as the owner maintains its BFPP status.” So while instructive, it provided little comfort to tenants.

This 2018 BUILD Act addresses the uncertainty dating to 1980, by amending CERCLA § 101(40) including by in subclause (II), by inserting ‘‘, by a tenancy, by the instruments by which a leasehold interest in the facility is created,’’ ..

And in that subsection, the term “bona fide prospective purchaser” has been amended to mean,

(ii) a person who (I) who acquires a leasehold interest in the facility after January 11, 2002; (II) who establishes by a preponderance of the evidence that the leasehold interest is not designed to avoid liability under this Act by any person; and ..”

Which has the effect of increasing the value of many properties making reuse a viable option obviating one of the longstanding criticisms of CERCLA, that the law limits redevelopment across America, allowing a tenant to avoid CERCLA liability by any of the following three means:

Establishing the landlord is a BFPP because that landlord completed the “all appropriate inquiries” as required by federal law; or establish that the landlord completed all appropriate inquiries, but later failed either with compliance or to complete additional requirements; or establish the tenant itself, as the BFPP, by completing all appropriate inquiries prior to acquiring the leasehold interest and maintaining compliance with the additional requirements, if any.

All appropriate inquiries has been determined by EPA regulation to be a Phase I Environmental Site Assessment conducted in accordance with ASTM E1527-00. Phase l ESAs will now become much more common in commercial and industrial leasing.

A tenant can now assert, without having to rely on the landlord’s status, the innocent landowner defense being protected from CERCLA liability including cleanup costs from the presence of a hazardous substances on the property.

2018 IgCC – A Fast Paced Deep Dive

The 2018 International Green Construction Code was released on November 8, 2018 by the U.S. Green Building Council, International Code Council, ASHRAE and the Illuminating Engineering Society.

Make no mistake, the 203 page document unveiled by the coterie of trade group authors and available from the ICC for sale to the public (.. click here for a free read only copy of the 2018 IgCC), is an entirely new standard and bears little, if any relationship to earlier IgCC versions.

Which is not necessarily a bad thing, given that the IgCC, first published in 2009, has only been adopted, in whole, but mostly in part, in maybe 17 jurisdictions, out of the more than 4,400 code adopting jurisdictions across the U.S. So there is room for wider adoption of a 2018 IgCC.

For purposes of this blog post highlighting some of the significant changes in the 2018 IgCC, the new code will be contrasted with the 2012 IgCC and not the 2015 version (which later version we are only aware a single jurisdiction has adopted).

The 2018 IgCC is ideally suited to be edited and revised for use as a voluntary compliance code promoting sustainability and energy efficiency, for specifications in contract documents, for college and professional school textbooks and curricula, and the like, but it is not ideal for use in a regulatory setting for the compulsory certification of green buildings and construction related materials.

The previous versions of the IgCC were developed utilizing ICC’s Code Development Process as part of the ICC Family of Codes. Arising from the 2014 confidential agreement signed by ICC, ASHRAE, the American Institute of Architects, the IES, and the USGBC “to collaborate on the development of future versions of Standard 189.1, the IgCC and the LEED green building program,” the ICC was only responsible for Chapter 1, Scope and Administration of the 2018 IgCC (.. and be aware AIA was not a party to the final code release?). The remainder of the code is the substantive content that is the 2017 edition of ANSI/ASHRAE/ICC/USGBC Standard 189.1 for the Design of High Performance Green Buildings Except Low-Rise Residential Buildings. Note, the 2017 edition of Standard 189.1 incorporated 75 separate addenda to the 2014 edition (so it is also in large part new).

This 2018 IgCC contains requirements that address site sustainability, water use efficiency, energy efficiency, indoor environmental quality, materials and resources, and construction and plans for operation.

The 2018 IgCC applies to “1. New buildings and their systems. 2. New portions of buildings and their systems.” and significantly “3. New systems and equipment in existing buildings.” Sec 101.3.1.

The scope of the code then does not apply to single family dwellings or multifamily dwellings of three stories or fewer. The provisions in Appendix J for residential and multifamily construction apply only when expressly adopted, providing for an option for incorporating residential building using the ICC 700 National Green Building Standard.

On the very first page of the site sustainability provisions, sec 501.3.1.2 provides there “shall be no site disturbance or development of the following: a. Previously undeveloped land having an elevation lower than 5 ft (1.5 m) above the elevation of the 100-year flood, as defined by USFEMA.” This prohibition on development in many areas is a dramatic increase from the 1 ft above the 100 year flood in the 2012 IgCC.

That section goes on to prohibit site disturbance of “land within 100 ft (35 m) of any wetland” where the 2012 version only says buildings or building site improvements shall not be located within a wetland or a buffer established by the jurisdiction; again a significant increase in prohibited developable area.

Some things have remained the same; okay very few. Inexplicably sec 501.3.5.1, the mitigation of heat island effect provision mandates that “at least 50% of the site hardscape” shall have “paving materials with a minimum initial solar reflectance index (SRI) of 29” which greatly limits the use of asphalt pavement (including even porous asphalt), is substantially repeated from 2012, despite the preponderance of scientific evidence that such is not efficacious.

Sec 501.3.7.2.1 tremendously increases the number of ordered bicycle parking spaces, providing “bicycle parking spaces shall be provided for at least 5% of the occupant load of each building” when the standard in 2012 was use based including 1 per 500 seats in a house of worship (.. now requiring not 2 but 25 spaces), 1 per 50 seats in a restaurant (.. now requiring not 1 but 3 spaces), and the like.

Sec 501.3.8.1 now requires “not less than 90% of the land-clearing debris, excluding invasive plant materials, shall be diverted from disposal in landfills and incinerators” versus 75% of building site waste management in 2012.

The 2018 IgCC “specifies requirements for potable water and nonpotable water use efficiency” but the plumbing fixture and fittings requirements are not substantially increased. There are some modest changes and some that are idiosyncratic like sec 601.3.2.1.j, “water-bottle filling stations shall be an integral part of, or shall be installed adjacent to, not less than 50% of all drinking fountains.”

A material change in water use efficiency provisions is sec 601.3.4.1, which for the first time requires “for individual leased, rented, or other tenant or subtenant space within any building totaling in excess of 50,000 ft2 (5000 m2), separate submeters shall be provided.”

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Greenbuild Clearly Showed the State of LEED is Strong

The Lorax Partnerships team at Greenbuild

This post is a compilation of the highlights from the just completed Greenbuild International Conference and Expo that took place last week in Chicago. Possibly more accurately stated, this is a report on the state of the LEED green building rating system.

The state of LEED is strong.

It is a given that each year Greenbuild is “the” target rich environment for networking with others across the environmental industrial complex and for learning about what is new from the U.S. Green Building Council. But this year it was much more than just that.

Last week Greenbuild was like drinking from a fire hose, being inundated with enormous amounts of information about all that is going on with green building.

Even before the conference started, on the preceding Thursday came the biggest announcement of Greenbuild, the new 2018 International Green Construction Code was finally being unveiled by the coterie of trade group authors and available from the ICC to the public. I will write more about the 2018 IgCC in this blog next week.

Last Monday saw a host of education sessions and tours, including the launch and a learning session for RELi 2.0, a GBCI rating system that provides strategies and tools for resilient building and design. RELi is going to be a big deal.

Monday also saw the announcement that Parksmart Reaches 100 Registered Projects . The 100th project to register under this GBCI program was St. Armands parking garage in Sarasota, Florida.

A white paper was released on Monday by USGBC and the Center for Green Schools about the sorry state of lead testing of drinking water in schools. While the paper on this critical issue of the day is very good, it may not go far enough for some on the subject I have previously posted about, Is There Lead in the Drinking Water of Your Green School?

Tuesday was largely set aside for educational summits and the WaterBuild Summit articulating that access to safe drinking water is a fundamental human right, may have been the most consequential, focusing on innovative approaches to improving water quality.

Wednesday was the Greenbuild Opening Plenary featuring Amal Clooney, the international lawyer and human rights activist who of course is married to George. Her motivational talk was about the impact that one person can have.

Later that day USGBC launched LEED Zero, a new program, that was the subject of an earlier blog post, addressing net zero building.

There were hundreds of vendors and dozens of classes on the Expo floor, and among the most enlightening was the National Asphalt Pavement Association booth offering a series of documents outlining how asphalt pavements can help owners earn credits under green construction rating systems, including Asphalt Pavements & LEED v4.

On Thursday USGBC made what may have been its second biggest announcement of Greenbuild that it will begin offering LEED “recertification” for all LEED certified projects. Details will be forthcoming, but to be eligible for recertification projects will submit 12 months of data demonstrating continued or improved performance. Once recertified, projects will meet the standards of the newest version of the LEED rating system available and recertification will be valid for 3 years.

Also on Thursday USGBC and the Health Product Declaration Collaborative unveiled a plan to expand their collective efforts to accelerate the development and use of HPDs. Even as builders and architects strive to understand the environmental impact of materials, material ingredient reporting and product transparency are on the rise. I will write more about HPDs on this blog in the coming days.

Thursday also saw the USGBC announcement that the STAR Community Rating System, which offers certification for sustainable communities, will be integrated into USGBC’s LEED for Cities and LEED for Communities programs.

And on Thursday Microsoft’s one week Hackathon event was awarded Gold under the new TRUE (Total Resource Use and Efficiency) certification system for events, as part of a pilot administered by GBCI.

That night the Greenbuild Celebration at the Field Museum was headlined by blues legend Buddy Guy. And the After-Party at Chicago’s House of Blues was not only this Greenbuild’s biggest and best after party, but brought back memories of the last time Greenbuild was in Chicago.

On Friday, Greenbuild wrapped with a Closing Plenary after a successful week of far more than could be reported here. In 2019, from November 20 thru 22, Greenbuild will be in Atlanta. I will be there with friends from Lorax Partnerships, in the photo above taken last week, and with thousands of other people who agree that voluntary green building is good stewardship of our planet and good for business.

Buying a LEED Certified Building Is Easy But ..

Despite that a frog told us all in a song lyric, “it’s not easy bein’ green,” it is easy to buy a green building, but ..

And there are many good reasons for purchasing a green building that is LEED Certified. LEED gave us the technologies and methodologies revolutionizing the way we construct and occupy buildings. And while there is no debate that a LEED Certified building has a higher return on investment than a comparable nongreen structure, the certification in and of itself may be of particular import for a building that benefits from a government incentive arising from LEED certification or for a building advantaged by a contractual arrangement requiring it be LEED Certified.

Today when there are more 95,600 LEED Certified projects, with many of them among the most desirable buildings in their respective market, those innovative buildings are regularly being bought and sold. In fact we know from the proprietary data of a commercial real estate information company that LEED Certified buildings are being conveyed at a faster pace than the broader commercial real estate market.

That being the case, then why has the GBCI Change Of Owner Agreement been uploaded into LEED Online only 700 times since February 2015?

Recognizing that the ownership of buildings frequently changes, GBCI created the change of owner form in order to be able to update its directory and to honor the current owners of GBCI-certified projects. The form can be used to indicate the change of ownership for any projects certified by GBCI, including LEED, SITES, and PEER,”

according to Susan Dorn, the General Counsel of USGBC and GBCI.

So, GBCI even provides a form, making affecting the change in their system easy, but the Change of Owner Agreement form is little used. Is it possible, “what we’ve got here is failure to communicate” similar to the plight of Paul Newman in the 1967 movie classic Cool Hand Luke? Is it possible that real estate professionals are flouting care and caution and do not know the form exists?

The standard of care today has evolved such that in a contract of sale for a commercial building that is LEED Certified, the due diligence materials provided by the seller to the purchaser must include access to the LEED Online project registration or a copy of the entire LEED Online project file (that can be downloaded).

Additionally, the contract will include representations and warranties describing that the building is LEED Certified under a particular rating system (e.g., LEED New Construction v2009 Silver Certified), include the “project name” used in the GBCI application as well as the GBCI ID Number.

Moreover, within the representations and warranties about contractual obligations that will survive closing may properly be something like, “To satisfy the LEED NC v4 EAc7: Green Power and Carbon Offsets credit, the building has entered into a contract for qualified resources that have come online since January 1, 2005, for a minimum of five years, to be delivered at least annually. A copy of the contract, which is attached in Exhibit __ specifies the provision of 100% of the project’s energy from green power, carbon offsets, or renewable energy certificates (RECs).”

And there are other obligations associated with LEED that may survive closing (e.g., the credit indoor chemical and pollutant source control, the obligation to submit energy and water consumption data to USGBC, etc.), but this law firm regularly reviews contracts of sale that fail to make any such disclosures. More than 39% of LEED NC 2009 projects have achieved the Green Power credit, arguably the most common rating system for a building being sold this year, but we know anecdotally the obligation is rarely disclosed in a contract of sale; something potentially imposing post closing liability on the seller.

Finally, a contract of sale should list as a document to be delivered at closing (.. but arguably most do not), in addition to a warranty deed, originals of all leases and the like, “a GBCI Change of Owner Agreement completed and executed by the seller.”

But assuming none of that happens, yet someone acquires a LEED Certified building and desires to pursue recertification or even just be correctly listed in the LEED Project Directory, GBCI will have your back, as Susan Dorn explains,

We are also aware that it’s not always possible to obtain the signature of the initial owner after a period of time has passed. In such circumstances, GBCI legal works with the current owners to find ways they can demonstrate their ownership interest [for example, a copy of a deed].  USGBC and GBCI want to celebrate, with the current owners, their pride and value in their LEED certified buildings.”

From time to time this firm is asked to provide an “opinion of counsel” that a LEED Certified building is really a LEED Certified building and while we do provide legal opinions such is more common as a condition of a lender for financing, including often in a lender program offering a discounted interest rate for green building.

Purchasing a LEED Certified building, or a project certified under any of the GBCI rating systems, is easy, but in this new and emergent field of green building, there are now resultant accepted legal niceties, including delivery of a GBCI Change of Owner Agreement, that are necessary and proper between seller and buyer.

Green Building Codes Not Eligible for Copyright Protection

A decision earlier this month by the Eleventh Circuit United States Courts Of Appeals goes further than other modern courts in describing that building codes when adopted by local government cannot be copyrighted.

Ruling that “the law,” whether by statute, ordinance, regulations, or code, and even when its source is a judicial opinion, is not subject to federal copyright law, has broad implications, particularly for green building.

And it is not new law that government’s building codes are unprotectible under copyright law, although not all courts have been universally consistent across the country, but this federal appellate court’s rationale has implications for all building codes, and not just for the new 2018 IgCC being released next month, but also for LEED where compliance with the private rating system is made a requirement by law.

To appreciate the importance of this court ruling, by way of example, as the organizational author of original works, the U.S. Green Building Council indisputably holds a copyright in its LEED rating systems. See 17 U.S.C. § 102(a). The question might be if a person infringes on USGBC’s copyright if they post the LEED rating system online? Put another way, does USGBC retain the right wholly to exclude others from copying the rating systems after and to the extent to which they are adopted as “the law” of various jurisdictions? The answer to this narrow issue, while debated in the past, seems compelled by this new decision, that was actually about a private party’s annotations to the legislature’s enacted law.

Excluding “the law” from the purview of the copyright statutes dates back to this nation’s earliest period. In 1834, the Supreme Court in Wheaton v. Peters interpreted the first federal copyright laws and unanimously held that “no reporter has or can have any copyright in the written opinions delivered by this Court …” That decision was the foundation of our continuing understanding that “the law,” whether articulated in judicial opinions or legislative acts or ordinances, is in the public domain and thus not amenable to copyright. Courts have applied that still governing law to rule that the building codes of various governments from Massachusetts to Texas cannot be copyrighted. But in recent years, some courts have sought to distinguish cases from that bedrock law.

And such is why this new decision from the Eleventh Circuit is so important.

It uses an untrammeled and broader rationale, “.. confronting profound and difficult issues about the nature of law in our society and the rights of citizens to have unfettered access to the legal edicts that govern their lives” to hold that no valid copyright interest can be asserted in any part of a code adopted by government.

The court provides a fundamental lesson in American history when it explains, the United States Constitution grants Congress the power “[t]o promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries.” Art. I, Sec. 8, cl. 8. Congress has exercised this power by passing what is described as the single most important law in American history, the Copyright Act. 17 U.S.C. § 101, et seq.

Copyright protection subsists .. in original works of authorship fixed in any tangible medium of expression, now known or later developed, from which they can be perceived, reproduced, or otherwise communicated, either directly or with the aid of a machine or device. 17 U.S.C. § 102.

That is, “authorship” is central to copyright law. Only “original works of authorship” are eligible for copyright protection.

The court explains that the meaning of authorship takes on special significance in instances like this where we consider the copyrightability of a government edict. A long line of judicial authority, stretching back more than 180 years, establishes that, with respect to certain governmental works, the term “author” should be construed to mean “the People,” so that the general public is treated as the owner of the work.

The metaphorical concept of citizen authorship actually dates to James Madison’s government as “the public voice” in Federalist No. 10, as he argued for the ratification of the United States Constitution.

The “rule that legislative codifications are uncopyrightable derives from an understanding of the nature of law and the basic idea that the People, as the reservoir of all sovereignty, are the source of our law.” This is a true today as it was in 1787.

The 2014 confidential agreement signed by ICC, ASHRAE, the American Institute of Architects, the IES, and the USGBC “to collaborate on the development of future versions of Standard 189.1, the IgCC and the LEED green building program,” does not defeat the foundational American law concept that the people are the authors when writings are adopted as the law by governments. Moreover, existing only as a creature of standards, rating systems and codes, green building is particularly vulnerable to this decision.

And answering the question posed above, to its credit the USGBC has long ago addressed this issue when the LEED Terms and Conditions includes,

“Permission is hereby granted to those wishing to use, reproduce, and/or display all or any portion of any LEED® Rating System appearing on the USGBC website in the form of a limited, royalty-free, nonexclusive, revocable license, so long as the user attributes the permission of and authorship and copyright to the U.S. Green Building Council, Inc. in any such use, reproduction, and/or display.”

This blog post does Not suggest that anyone violate a claimed copyright on a code or otherwise, but it is time the green building industrial complex reconsider how green building standards, rating systems and codes are developed and managed.

This case is Code Revision Commission v. Public Resource Org, Inc. In the United States Courts Of Appeals for the Eleventh Circuit, No. 17-11589, filed October 19, 2018.

RELi Could be Standard Practice in Nearly Every Real Estate Transaction

RELi 2.0, a comprehensive rating system that provides strategies and tools for resilient building and design, is expected to be launched on Monday, November 12th.

The launch of RELi 2.0 is significant because it is widely suggested, just as a Phase I Environmental Site Assessment is now standard practice in nearly every commercial real estate transaction in this country, that in the future the same will be true of a resilience assessment.

The Green Business Certification Inc.’s newest rating system, RELi 2.0 will help identify and reduce the risk of damage in the event of a natural disaster, economic disruption, resource depletion or other crisis for buildings, homes, neighborhoods and infrastructure.

Much more than only anticipating weather extremes, in the draft document expected to be approved in the coming days, RELi 2.0 criteria include acute hazard preparation and adaptation strategies along with chronic risk mitigation at the building and neighborhood scale.

Susan Dorn, the General Counsel of USGBC and GBCI could not be more emphatic,

RELi 2.0 offers the most comprehensive certification available anywhere for environmentally and socially resilient design. By selectively bundling existing sustainable and regenerative guidelines with RELi’s groundbreaking credits for emergency preparedness, adaptation, and community vitality, RELi 2.0 is designed to protect occupants, offer shelter to those in the nearby community, allow business continuity, and reduce the cost of disaster-related repair and rebuilding.

Resilience is becoming widely accepted. In a conspicuous example, language in the Defense Authorization Act for Fiscal Year 2019 for the first time requires the Department of Defense, the largest owner of buildings in North America to respond to sea level rise and flooding by constructing new mission critical buildings 3 feet above the base flood 100 year elevation. Of note, RELi 2.0 addresses the issue differently, when it prescribes, “building on green field sites below the 500 year floodplain is not permitted.”

And New York, the largest city in North America, tackled resilience with the NYC Climate Resilience Design Guidelines v2.0 on April 28, 2017, addressing the same flooding issues, but differently, acknowledging the large urban area’s drainage systems are designed to handle approximately the current 3 year storm (.. not RELi’s 500 year storm).

RELi was first developed over 5 years ago by the Institute for Market Transformation to Sustainability and adopted by MTS in 2014, following the ANSI accredited American National Standards procedure. Since 2017, RELi has been managed by the USGBC which, in conjunction with MTS and others led the evolution of RELi 2.0 in large measure synthesizing the LEED Resilient Design pilot credits with RELi’s Hazard Mitigation and Adaptation credits.

RELi 2.0 is similar to LEED in format with certification by GBCI based on a point system. The 15 requirements within the rating system are mandatory and do not carry a point value. Optional credits have point values, allowing projects to seek credits and certification levels that fit their needs. Point values are: 300 to 349 points earned for RELi Certified, 350 to 440 points earned for RELi Silver, 450 to 599 points earned for RELi Gold, and 600 to 800 points earned for RELi Platinum.

Those in the know have described RELi 2.0 as by far the best GBCI associated rating system since LEED v2.2.

The gravitas of this update from version 1.2.1 is made clear by the draft’s own words, “[t]he RELi 2.0 Rating System assumes that there will be an initial emergency response from state and/or federal emergency authorities within four days after the occurrence of a major event.”

As one might expect the rating system contains a requirement, Hazard Mitigation + Adaptation requirement 2.0 Fundamental Emergency Operations: Back – Up Power, that makes a prerequisite of “permanent back – power, switching gear and/ or power hook – ups, and infrastructure for temporary generators ..”

There is a credit, Productivity, Health + Diversity 4.0: Human + Eco HPD: Reduce Pesticides, Prevent Surface + Groundwater Contamination, that rewards “no pesticide, herbicide or fertilizer use” and while such is well intentioned, the credit will have limited geographic appeal as pesticide use, to control mosquito borne disease and the like is widely practiced in many places in this country and the world.

True to the inability to end the long running and loosing wood war, Materials and Artifacts A Credit 5.0: Use Legally Logged Wood from Ecologically Managed Forests, recognizes “FSC Certified Wood” only, (.. okay it is not the Peloponnesian War) and such and is more a distraction than a negative.

Similar to the LEED Innovation and Design Credits, the RELi Applied Creativity credits were created with the intent of providing projects the opportunity to be awarded points for exceptional performance. Up to 20 AC Credits can be awarded for creative thinking and innovative techniques.

Just about the only criticism of RELi 2.0 is that the 91 pages of rating guidelines reads like an architect’s dystopian rule book for society, however, for those readers old enough to have participated in ‘duck and cover’ (under our desks) elementary school nuclear attack drills or had a Cold War era bomb shelter in your back yard, these guidelines seem tame.

In an age where deaths from natural disasters have fallen precipitously, when many believe that the biggest global risk in the future is a pandemic disease outbreak, RELi 2.0 even advances pandemic preparedness.

Mike Italiano, one of the founders of USGBC and CEO of MTS, reiterates, what he sees as only a genesis, “RELi specifies resilience design and construction performance metrics for buildings, homes, communities and related infrastructure.”  He goes to elevate the opportunities,

RELi was also created to serve as an underwriting standard, by identifying resilience metrics which increase tangible economic value / green + resilient building bond cash flow.

And Mike quantifies that vision acknowledging that there are dollar costs, “resilience is the most expensive market in history.  RELi Special Reports issued by CMP and Perkins+Will in 2017 documented existing resilience costs of $6.8 trillion for Pennsylvania and Massachusetts, with $1.9 billion and $326 billion respectively for accelerating sea level rise flooding.  Fortunately, investors with over $70 trillion in assets want to buy Green + Resilient Bonds creating favorable bond financials documented in the Green Bond Business Case released at the NYSE and updated by leading economists.”

If you doubt that a resiliency assessment and underwriting will in the future be standard practice in commercial real estate transactions in this country, be aware that Mike chaired the panel that created the ASTM standard for the Phase 1 Environmental Site Assessment. He already revolutionized real estate once. And then there was his role as a co-originator of LEED. Two. You might want to follow his lead this time about resilience and learn about RELi (.. by the way, pronounced ri’lai like rely).

RELi 2.0 is being soft launched on November 12th and projects can be piloted even in advance of a final online process.

There will be a free RELi 2.0 kick-off and education session that will highlight a case study of a project pursuing RELi certification, on Monday, November 12 in Chicago (just before Greenbuild), from 1 – 5 pm. For more information and register click here.

Is There Lead in the Drinking Water of Your Green School?

EPA and the Centers for Disease Control and Prevention agree that there is no known safe level of lead in a child’s blood. Lead is harmful to health, especially for children.

Though most lead exposure occurs when people eat paint chips and inhale dust, the EPA estimates that up to 20% of lead exposure comes from drinking water. Lead enters drinking water through multiple pathways and the largest quantity is through corrosion, that is a dissolving metal caused by a chemical reaction between water and plumbing. The most significant factor in the extent to which lead enters the water is “water age,” that is how long the water stays in pipes.

EPA advises drinking water in schools is particularly important because children spend a significant portion of the day in these facilities and are likely to consume water while they are there.

Against that backdrop, to reduce indoor water consumption, LEED v4 New Construction offers points for further reducing by 25% and up to 50% “fixture and fitting water use from the calculated baseline in WE Prerequisite Indoor Water Use Reduction.” Other green building programs have similar targets.

Very low use at each fixture in bathrooms, coupled with large diameter pipes stipulated by plumbing codes, at a recently tested school this firm is aware of, resulted in an average overall premises water age of 8 days. Water age of 8 days raises concerns with respect to lead, but also with respect to the chemical and microbiological stability of the drinking water. There are externalities associated with water age, including that a disinfectant residual (e.g., a residual level of chlorine) is generally not maintained in the plumbing of a building with a water age over 3 days.

But little of this including lead is regulated.

Lead is regulated in public drinking water supplies under SDWA, a federal law that was initially passed in 1974. SDWA requirements apply to “public water systems.” Schools that are served by a public water system are not subject to SDWA monitoring and treatment requirements because those schools do not meet the definition of a public water system. The vast majority of public water suppliers do not include schools in their sampling plans because regulations only require sampling of single family dwellings.

To address this gap in testing, EPA developed a guidance document, 3Ts Technical Guidance for Reducing Lead in Drinking Water in Schools. EPA advises that schools may have elevated lead concentrations from the plumbing in the facility because the potential for lead to leach into water including because of the water age.

Several states have recently taken action to address concerns regarding lead in drinking water in schools. For example, in 2017 legislation was enacted in Maryland and in 2016, legislation was enacted in New York to require schools to test drinking water for lead contamination. Also in 2016, New Jersey adopted regulations regarding testing for lead in drinking water in public schools statewide, and Rhode Island enacted legislation to provide grants to local governments to conduct lead testing.

But the testing is daunting. There are 1,447 public and 1,397 nonpublic schools in Maryland alone and it will take almost 5 years to test those; which of course does not include addressing any conditions found. But a flaw in the Maryland and New York testing protocol is that they are starting with older schools, under the mistaken impression that aged pipes in pre 1988 schools are the key problem; when in fact newer green schools with water reduction features can have water age issues that results in lead in drinking water.

But the issue is real. As of September 28, 2018, the Maryland Department of the Environment has received the first required lead in water sample results from eight public school systems and 89 nonpublic schools. Of this number, 539 of the 22,327 samples exceeded the state self imposed action level of 20 parts per billion of lead. It should be noted that some think that action level is too high.

This is a tough subject. Have the green building programs not taken into account science in the area of water quality in the quest to reduce the quantity of water used? More and additional research is needed now from the environmental industrial complex to assist in justifying potable water conservation goals without compromising water quality and the public health.

Until there is new and good research. Many are suggesting new to be constructed schools should not exceed minimums for water use reduction required by green building programs.

All schools and day care centers should test for lead in drinking water, now.

And you might want to test the water in your green building for lead.

With Over $3.6 Trillion in Value You Should Pay Attention to GRESB

For the uninitiated GRESB assesses the sustainability performance of real estate and infrastructure portfolios worldwide. GRESB is the global environmental, social and governance (ESG) benchmark for real estate assets.

GRESB’s stated “mission is to enhance and protect shareholder value by assessing and empowering sustainability practices in the real asset sector.”

They do that by offering ESG data transparency in scorecards, benchmark reports and portfolio analysis tools.

The bottom line is that ESG data is increasingly used by institutional property investors to make investment decisions. There are meaningful differences between real estate owning companies and GRESB provides ‘actionable data’ within a framework for an assessment of the differences that influence risk and returns.

Of course there are strong geographic variations in when and how investors including capital markets engage on ESG. European investors are significantly more engaged than U.S. investors (some speculate publicly associating with United Nations global warming rhetoric results in U.S. investors being less engaged).

But you care because this year 903 property companies, REITs, funds, and developers participated in GRESB’s annual Real Estate Assessment, an increase of 6% over the previous year. The Assessment now covers more than 79,000 assets (.. of which more than 49,000 reported at the asset level versus only company portfolio data) in 64 countries representing over $3.6 Trillion in gross asset value.

A trillion is 1,000 times larger than a billion, so 3,600,000,000,000 in gross asset value is a huge dollar amount. Hence you should be paying attention.

The GRESB listed real estate data covers 207 entities representing 61.2% coverage of the major developed listed real estate indices. This includes 75 of the top 100 largest REITs by market cap. The non-listed real estate dataset covers 666 private entities, representing 75 of IPE’s Top 100 Real Estate Investment Managers (participating with at least one fund).

And you should really care because GRESB data is incredibly valuable not only for institutional investors in real estate on the East and West coasts of North America, but also for banks, brokerages and a host of others interested in risk and returns in a broader breadth of real estate owning entities. GRESB data assessments are guided by what the industry considers to be material issues in the sustainability performance of real asset investments.

Owners participating in the annual Assessment receive comparative business intelligence on where their data stands against their peers, a roadmap with the actions they can take to improve their ESG performance and a communication platform to engage with investors.

Significantly, the 2018 global average GRESB Score increased to 68, up from 63 in 2017. This “strong improvement reflects the industry’s commitment to further integrate best practices related to ESG issues.”

Periodically a new issue emerges as an important consideration for investors in real estate and in response to a string of weather related disasters in 2017, this year resilience was such an issue. This motivated GRESB to introduce a new Resilience Module for both property and infrastructure thus providing nearly 150 resilience related data elements about each company for those investors now interested in resilience.

This law firm works with businesses interests to assess ESG matters including those that can best advantage them with capital markets.

There is no doubt that increasing numbers of investors are taking ESG data into account in their investment decisions, with governance being the most common dataset they consider, and GRESB is the best at  offering ESG data transparency in real estate assets through its data scorecards, benchmark reports and portfolio analysis tools.

GRESB B.V., formerly known as the Global Real Estate Sustainability Benchmark, is a private limited company incorporated in the Netherlands that is a wholly owned subsidiary of Green Business Certification Inc., the Washington DC based non-profit entity related to the U.S. Green Building Council, Inc. In concert with USGBC, GRESB B.V. undertakes the day-to-day management of GRESB’s activities. The 30,000 foot view is what USGBC LEED certifies on a building basis, GRESB assesses on a portfolio basis.

You should begin to take advantage of GRESB’s incredibly valuable data.

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