Today is the day to revise your contracts for sustainable projects.
With the U.S. Green Building Council’s recent announcement that all new projects registering for LEED 2009 beginning later this week, on April 8, 2016, will need to satisfy increased minimum energy performance thresholds, everyone involved with LEED projects should promptly review their contract documents to determine the implications of this significant change in LEED, and accordingly what amendments to contracts may be necessary and proper.
Moreover, owners will only be able to register projects under the LEED 2009 rating system until October 31, 2016 and thereafter all projects must register under LEED v4.
These two dramatic changes to LEED have very real potential for increasing risk in green building, but updates are also underway to Green Globes and ASHRAE 189.1 as well as to a host of green codes. And many of both the recent and contemplated changes are significant not only substantively and potentially dramatically increasing first costs, but also in terms of process (e.g., LEED has added Integrative Process).
Beyond changing green building standards, rating systems and codes, we have the recent Federal court judgment and multi Million dollar resolution of the disputes over the first LEED Platinum building involving specifying new or untried materials and products (that are often the keystone of sustainable building).
And that litigation predated the increased liability associated with materials including the new largely untested EPDs and HPDs.
Additionally, more lenders, including in green bond financings, are requiring opinions of counsel as part of closing due diligence both in green construction financing and permanent loans.
It is beyond dispute that the best way to mitigate risk in a sustainable project is a properly drafted contract. And while this law firm makes a business of drafting and revising contact documents, there are very good contracts available in the marketplace. The American Institute of Architects released “sustainable project” versions of key AIA Contract Documents in 2012 and those documents have been expanded and updated. Today, those AIA Sustainable Project Contract Documents are among the most used in the industry (.. and yes, we spend a great deal of time recommending project specific modifications to those form documents to make certain the contracts reflect the expectations of all the parties and mitigate risk for our clients).
There is also the Associated General Contractors of America ConsensusDocs “Green Building Addendum” where the parties designate a Green Building Facilitator to coordinate or implement identified objectives, which can be a project participant or consultant. And while this structure has not been as widely adopted as the mechanism contemplated in the AIA Sustainable Project documents, the addendum is ideal in identifying unique and additional services necessitated by sustainable projects.
The single best resource for drafting contracts on green building projects is the AIA Document D503 Guide for Sustainable Projects available for free from this link.
Surprisingly, in an unscientific but comprehensive review of the last 50 sustainable project construction industry contracts forwarded to this law firm in a potential construction dispute, less than 10% had properly drafted provisions governing the disputed green building matte. Just over 50% of those contracts had any meaningful sustainable project specific language.
It is now the time to revise your contracts for sustainable projects.