Green Building Law Update

Environmental Law and Sustainability for Business

Tenants Order Phase l to Avoid Hazardous Substance Liability

By Stuart Kaplow on March 31, 2019 Posted in Environmental, Federal

It has been a year since the omnibus spending bill signed on March 23, 2018 amended the Superfund law, for first time making clear that tenants can qualify as bona fide prospective purchasers, protected from cleanup costs from the presence of hazardous substances on a property; but tenants are only now beginning to order Phase l Environmental Site Assessments taking advantage of the liability protections in the new law.

Buried in the Consolidated Appropriations Act last year was 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 to 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 acknowledged uncertainty regarding the potential liability of tenants under CERCLA including because a tenant may be an operator of the property as well as a responsible person, but tenants had previously lacked any express protection in the federal law. 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 simply to ensure 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 provided that the tenant could only 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 macro effect of increasing the value of many properties making reuse viable, obviating one of the longstanding criticisms of CERCLA, that the law limits urban redevelopment across America, allowing a tenant to avoid CERCLA liability by any of the following three means:

One, establishing the landlord is a BFPP because that landlord completed the “all appropriate inquiries” as required by federal law; or two, establishing that the landlord completed all appropriate inquiries, but later failed either with compliance or to complete additional requirements; or three, 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 are now becoming 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.

Prospective tenants of commercial and industrial properties must now consider ordering a Phase I Environmental Site Assessment.

LEED Credit is Designed to Eliminate Illegal Wood in Buildings

By Stuart Kaplow on March 24, 2019 Posted in Green Building, LEED

The U.S. Green Building Council is being applauded for the release last week of the new pilot credit intended “to reduce the risk that illegally sourced, harvested or traded wood products are used in building.”

The LEED BD+C: New Construction v4 MRpc127 – Timber Traceability pilot credit “is designed to up efforts to eliminate the use of illegal wood in buildings.”

There may be no single subject matter more discussed with over the more than 20 year history of LEED than forest product certification. That this new pilot credit continues the discussion of trees is positive.

But make no mistake, this new alternative compliance path credit does not alter the existing LEED credit, NC-v4 MRc3: Building product disclosure and optimization – sourcing of raw material, that requires,

Wood products must be certified by the Forest Stewardship Council or USGBC-approved equivalent.

This new pilot credit also leaves in place the 2016 pilot credit MRpc102 Legal Wood, that despite all the discussion has not been a market mover. The vast majority of LEED buildings have not pursued wood related credits.

The requirements for the new pilot credit are complex and include,

Project teams shall identify the country of harvest and wood species (scientific name) for all wood products that are not reclaimed, salvaged or reused.

.. wood products must constitute at least 5%, by cost, of the total value of permanently installed building products in the project or be valued at a minimum of $100,000.

At least 50%, by cost, of the permanently installed wood products must meet one of the following traceability/transparency requirements.

Low threshold: Samples of the product shall be tested using wood identification technology .. Samples shall be accompanied by a map, or maps, of the “supply area(s)” of origin. Products that meet the low threshold are worth 100% of their base contributing cost.

Medium threshold: Samples of the product shall be tested .. Samples shall be accompanied by a map of the Forest Management Unit of origin. Products that meet the medium threshold are worth 150% of their base contributing cost.

High threshold: In addition to meeting the requirements of one of the preceding thresholds, the product shall be tested and the test results shall corroborate both the declared species as well as the origin of the product. Products that meet the high threshold are worth 200% of their base contributing cost.

Samples of wood products or components that originate in countries with elevated risk of illegal logging and/or trade .. shall be tested and the results shall not contradict the declared species and origin. In addition, each product and/or component must be backed by one of the following requirements:

Certified to FSC, SFI or PEFC standards.

Certified by a third-party legality verification program (see Annex 3).

Documentary proof that the products are backed by a FLEGT license accepted under the European Union Timber Regulation.

A Convention on Trade in Endangered Species permit shall be provided for all wood products containing or composed of species listed ..

The entire credit can be accessed from this link. And there is a USGBC issued guidance. Among the knocks on LEED v4 is that credits are too complex and require time, effort and cost to comply with that exceed the efficacy of the credit; and many will conclude this is such a credit.

In the announcement of this pilot credit, Mahesh Ramanujam, president & CEO of USGBC, said, “The Timber Traceability pilot credit continues USGBC’s work to leverage LEED’s market transformation potential in areas critically important to the quality of life of all people on earth.” Admittedly, this pilot credit cannot yet [reasonably] be achieved, the underlying science has not yet been deployed. USGBC is out in front and creating the market.

And despite what you think you read in this pilot credit language USGBC has not approved an “equivalent” to FSC certified wood [.. although USGBC has apparently given tacit approval to PEFC, as equivalent]. What USGBC apparently did was include a new temporary alternative compliance path for the purpose of this credit.

The failure to act boldly in the face of the vestiges of the FSC only wood practices of USGBC, is significant in that this new pilot credit will not end the “wood wars” nor result in repeal of Maryland’s longstanding statute, Maryland Tax Property Article, Section 9-242, not permitting any LEED wood credit to be pursued in government projects or other projects seeking LEED based tax incentives; and this will not repeal similar statues and executive orders in Maine, Georgia and elsewhere. So, as written, this pilot credit is a huge missed opportunity in increasing LEED market share.

However, the real concern over this new illegal wood pilot credit is that it is not actually about “illegal wood” but rather is about a small subset of wood from trees managed under some forest certification system.

Wood that is not certified as managed is not illegal. It is simply not from a managed tree.

That distinction is huge because the relevant ASTM D7612 – 2015 standard makes clear that “forest certification is still a small fraction of total forest acreage” going on to describe that only 10% of forests are certified. Again, that does not mean that wood from the other 90% of forests is illegal or somehow not legal nor good wood, but rather only that it is not from a certified forest.

The same will be true in the future. Trees not in a tree DNA database (that is owned by wealthy North American interests) will not be illegal, they will simply not be in some proprietary database.

It is suggested this new pilot credit is really today about competing business interests and their forest management practices and tomorrow about USGBC choosing winners and losers in who will own and monetize futuristic tree DNA databases. Forests can be managed across a broad spectrum of philosophies from high-yield “crop style” plantations at one extreme to parks and preserves at the other. The Weyerhaeuser Company has planted far more than one billion trees in the past 10 years and that it is forests like those where most U.S. certified wood comes from (100% of their North American timberland is SFI certified).

Again, this is really today about certified versus not certified outside of the U.S. and in the future about trees tracked DNA databases that today do not even exist and may never exist. There are existing U.S. laws including the Lacey Act to prohibit illegal forest products. Section 8204 of that Act as amended in 2008 is titled “Prevention of Illegal Logging Practices.” That Act provides the legal authority to take action when products stemming from the practice of illegal logging enter the U.S. Declaration forms are required for all forest products imported into the U.S. including that specify the country of origin. The European Union has similar timber regulation.

But the same may not be true elsewhere and this is problematic as USGBC tries to craft one LEED rating system for the entire planet. This pilot credit may be efficacious elsewhere, for example in India. Russia has the second largest quantity of FSC certified wood in the world (after Canada), but 25% of Russia’s timber exports have been characterized as originating from illegal logging, including that the Russiapedia of Russian origin Taiga (an area of more than 20% of the planet’s forested land) and the FSC logo are being misused; although this pilot credit will have no measurable impact on that.

Across the globe, an estimated more than 2.8 billion residents, mostly from poor and developing countries gather and burn wood “illegally” (.. really?) for fuel to keep warm and cook food. Subsistence wood simply does not find its way into LEED buildings in the U.S.

Which makes the statement released in conjunction with this pilot credit, “If you want good wood, you need to start with honest wood,” by Alexander von Bismarck, executive director of the Environmental Investigation Agency, sound elitist at best and silly at worst.

So, is an illegal wood credit a misnomer? USGBC should be acknowledged for this pilot credit that will promote the growth of responsible forest management. But there is a real concern if any marketing claims related to this credit are accurate, verifiable, relevant and not misleading, including that marketing this credit has been achieved is in compliance with the Federal Trade Commission’s Guides for the Use of Environmental Marketing Claims and other state consumer protection laws.

Additionally, recall that the U.S. Green Building Council was originally named the U.S. Green Manufacturers Council reflecting that the target members were building product manufacturers. Given the increased emphasis, some more than 20 years later, on building materials, that name change provides very real insight into why this credit, now, and the future of the organization. But it portends transparency that does not exist. Who paid for this pilot credit to be developed? What agreements exist with the many other trade groups and standards associations related to this pilot credit? How much money has and will pass hands between this coterie?

All of that observed, the Timber Traceability pilot credit is a positive step forward in 2019, much like this year’s boot-cut jeans versus last year’s edited baby genes.

USGBC should be applauded. Voluntary forest certification systems have become important in promoting sustainable forestry. The forest management standards in use are highly variable, however. Even within a family of standards with a common label there is the potential for wide variations in practices, especially from country to country which prevents erectors of buildings and other consumers from specifying a certification label to characterize products according to a specific set of qualities or values. This pilot credit creates a framework to differentiate products based on a set of qualities and values identified as important in the market for wood products.

Resilience is the Future of Real Estate and USGBC Spells it RELi

By Stuart Kaplow on March 17, 2019 Posted in Green Building, resilience

Last Friday, Hudson Yards, the largest private real estate development in the country opened, but what the $25 Billion project may become best known for is that is designed for resilience from its giant “submarine doors” underground that can be closed to keep out storm surges to its own power plant that can keep the lights on even if New York City’s power grid goes down.

The day before, the City of New York released the Lower Manhattan Climate Resilience Study, identifying more than $10 Billion of capital projects for the resilience of Lower Manhattan, including floodproofing by extending the shoreline into the East River.

So what is resilience? There are a lot of definitions of the word resilience. Susan Dorn, the General Counsel of USGBC and GBCI has proposed a definition that is at once spiritual while yet very grounded, when she offers a quote from Krista Tippett, the National Humanities Medal winning journalist who authored, Becoming Wise: An Inquiry into the Mystery and Art of Living,

Resilience is a successor to mere progress, a companion to sustainability. It acknowledges from the outset that things will go wrong .. This is the drama of being alive. To nurture a resilient human being, or a resilient city, is to build in an expectation of adversity, a capacity for inevitable vulnerability .. It’s a shift from wish-based optimism to reality-based hope.

In a conspicuous example of resilience becoming mainstream, 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 take resilience into account, responding to sea level rise and flooding by constructing new mission critical buildings 3 feet above the base flood 100 year elevation.

Accepting that we construct buildings to provide shelter, how do you build resilience features into your next project?

GBCI’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 rising water, RELi 2.0 criteria include acute hazard preparation and adaptation strategies along with chronic risk mitigation at the building and neighborhood scale.

Susan Dorn, 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.

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. In 2018, the LEED Steering Committee also synthesized 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 its 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.”

By way of example, 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 ..”

While some are surprised there is a requirement that “residential facilities with overnight occupancy, provide 96 hours (4 days) of emergency supplies including water + food ..” to accommodate all occupants, food can consist of compressed food bars.

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, including stocking 4 days of food and water, 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.

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.

RELi (.. by the way, pronounced ri’lai like rely), is open for registration. To be eligible, a project must also register for LEED (note, at least 25% of RELi are based on LEED credits) and at this point ought to be new construction. For more information, and to pursue RELi certification, email reli@usgbc.org

On the 25th Anniversary of Lead Based Paint Disclosures

By Stuart Kaplow on March 10, 2019 Posted in Environmental, Federal

Use of lead is not new. Lead was one of the first metals discovered by man and was in use before 3000 BC.

Beginning in 753 BC, the ancient Romans used lead for making water pipes and kitchen cookware. Today many believe lead poisoning was the culprit for the infertility of Julius Caesar (.. who did manage to father one child despite that he enjoyed women as much as he enjoyed wine) and his successor, Caesar Augustus (.. who was sterile), and was a contributing factor in the fall of the Roman empire.

Modern appreciation of the perils of lead resulted in the federal government banning the use of lead based paint in dwellings in 1978, as well as federal, state and local laws, including federal regulations that have at least since 1994 mandated certain disclosures in real estate transactions.

More than three quarters of the U.S. housing stock was built before 1978 and contains some lead based paint (i.e., more than 64 million dwellings).

It is beyond dispute that paint that has chipped or is pealing, or on surfaces that rub together such as windows and doors, creates lead dust which can pose a serious health hazard to occupants and visitors, especially young children and pregnant women.

In 2018 there were 2,049 children in Maryland alone, reported to have at lease 5 micrograms of lead per deciliter of blood. No level of lead exposure is considered safe.

Federal law requires that before being obligated under a contract to buy housing built prior to 1978 (.. and there are few exceptions, for dormitories, vacation rentals, housing for the elderly and the like), each of the more than 3 million home buyers each year must receive the following from the seller:

An EPA approved information pamphlet on identifying and controlling lead-based paint hazards titled Protect Your Family From Lead In Your Home (PDF).

Any known information concerning the presence of lead-based paint or lead-based paint hazards in the home or building.

For multi-unit buildings (e.g., the sale of a condominium unit), this requirement includes records and reports concerning common areas and other units when such information was obtained as a result of a building wide evaluation.

An attachment to the contract of sale, or language inserted in the contract, that includes a “Lead Warning Statement” and confirms that the seller has complied with all notification requirements. EPA provides a Sample Seller’s Disclosure of Lead.

A 10 day period to conduct a paint inspection or risk assessment for lead based paint or lead based paint hazards. And while other provisions of this federal law may not be waived, the parties may mutually agree, in writing, to lengthen or shorten the time period for inspection or may waive this inspection opportunity.

As noted there are, additionally, state and local laws in many jurisdictions that make compulsory more and additional disclosures at the time of contracting.

Similarly, federal law also commands that before signing a lease for housing built before 1978, the more than 9 million renters signing a lease each year must receive substantially the same disclosures, including EPA has provided a Sample Landlord’s Disclosure of Lead.

Moreover, a real estate agent is responsible if the seller or landlord fails to comply.

But despite that tomorrow is the 25th anniversary of the federal regulations requiring disclosure, a surprising number of real estate transactional documents do not satisfy the command, including failure to include the warning language (i.e., a recent study extrapolates that as many as half a million contracts, last year alone, failed to comply).

This is not about removal or abatement of lead based paint; this is simply about providing the minimum disclosure required by federal law at the time of a real estate transaction.

Julius Caesar did not know that lead poisoning may produce permanent neurological damage, including learning disabilities, reduced intelligence quotient, behavioral problems, and impaired memory; but we do. Lead poisoning may be the biggest environmental human health hazard in the U.S. today, and it is all preventable. So beyond matters of legal jeopardy, think justice, do the right thing and provide the required contract language and disclosures in real estate contracts.

LEED Prerequisite Now Prohibits Smoking Cannabis

By Stuart Kaplow on February 3, 2019 Posted in LEED

The U.S. Green Building Council issued a LEED Interpretation in 2018 ruling, “smoking of cannabis is considered a form of smoking for the purposes of both the interior and exterior smoking provisions of the LEED Prerequisite Environmental Tobacco Smoke Control.”

The LEED prerequisite prohibits smoking outside the building except in designated smoking areas located at least 25 feet from all entries and operable windows.

But the dramatic impact is that the prerequisite additionally requires one of two alternative means of compliance, the first of which simply prohibits smoking inside the entire building. The second option for residential uses is the compartmentalization of smoking areas, prohibiting smoking inside all common areas and minimizing “uncontrolled pathways for the transfer of smoke and other indoor air pollutants between residential units by sealing penetrations in the walls, ceilings, and floors and by sealing vertical chases (including utility chases, garbage chutes, mail drops, and elevator shafts) adjacent to the units.” Additionally a weather strip is required of all exterior doors and operable windows in the residential units “to minimize leakage from outdoors.” Which second option will result in significant additional first costs.

Increasing numbers of commentators on green building have questioned the 2018 Interpretation that conflates cannabis with “Tobacco.”

It is not only that thirty three states and the District of Columbia have passed laws legalizing cannabis in some form, including that the District of Columbia and ten states have adopted the most expansive laws legalizing cannabis for recreational use, but four of those ten are among the top for LEED certifications, the District of Columbia, California, Colorado, and Massachusetts.

At a time when a review of the LEED project database reveals that LEED project registrations, in all rating systems, continues to decline and decline dramatically, alienating those would be cannabis users in those top LEED jurisdictions seems unsound as a business model if there is any hope of righting LEED registration.

Moreover, it is suggested that there is a strong positive correlation between the progressive individuals interested in LEED building and those interested in smoking cannabis.

Many have questioned why USGBC would announce such an interpretation that has been likened to this year’s trend of redefining motherhood versus last year’s redefining masculinity? Does it promote sustainability focused practices in the building industry?

The only justification offered by the trade group is “secondhand cannabis smoke has been shown to contain many of the same chemicals and carcinogens as secondhand tobacco smoke” citing to a single, more than 10 year old study, “A Comparison of Mainstream and Sidestream Marijuana and Tobacco Cigarette Smoke Produced under Two Machine Smoking Conditions” by Moir, et al., that admits, “There have been only limited examinations of marijuana smoke, including for cannabinoid content and for tar generation. There have not been extensive studies of the chemistry of marijuana smoke ..” which study has been criticized as junk science when misappropriated for this purpose, having not involved people or even animals, but rather was of burning leaves on a tray; and certainly not taking into account vaping or electronic cigarettes.

And yes, in a separate LEED Interpretation, USGBC ruled all “electronic cigarettes are considered a form of smoking for the purposes of both the interior and exterior smoking provisions of the LEED Prerequisite Environmental Tobacco Smoke Control” (.. whether or not there is an tobacco involved).

LEED Interpretation ID#10474 dated July 2, 2018 is difficult to appreciate from a market and implementation perspective. Supporters of LEED suggest if this substantive expansion of a prerequisite, that inexplicably defined “tobacco smoke” to include cannabis smoke, had been the subject of public review and balloting such would have allowed for a broader consideration of whether or not it was supported by good science, while also allowing a reasonable period for the market to phase the change in. The procedure and process of this substantive expansion of a prerequisite, not as an Addenda nor an Update nor during consideration of a Next Version of LEED, is the larger concern to many.

Note, the now being piloted but not yet balloted among the members, LEED v4.1 continues the cannabis ban for projects now registering.

In accordance with the GBCI Certification Agreement because “.. Your Project will be held to the Rating System Requirements that exist at the time Your Project is registered” this Interpretation does not apply to any LEED project registered before July 2, 2018. So, occupants in those LEED buildings may smoke cannabis (assuming laws allow such).

Significantly, for those considering new green building the 2018 IgCC, with no similar cannabis prohibition (.. despite being the product of the same ASHRAE Standard 189.1 that is to be used in the future development of LEED?), may present a good alternative for those not wanting to limit occupant behavior in the face of evolving widespread public sentiment.

“Federal and state laws [should] be changed to no longer make it a crime to possess marijuana for private use.” – Richard M. Nixon, 1972. Despite that statement, be aware that possessing, using, distributing and selling marijuana are all federal crimes and may be state crimes. Beyond the general disclaimer below about the purposes of the blog, this blog post is not intended to give you criminal law advice or for that matter, any legal advice.

St. Petersburg is Bold in Mandating Envision

By Stuart Kaplow on January 27, 2019 Posted in Codes and Regulations, LEED, Local Government

The City of St. Petersburg, Florida passed a progressive ordinance last week mandating that City infrastructure projects and newly constructed and renovated City building be third party certified as green.

The new Ordinance 359-H, passed by the St. Petersburg City Council on January 17, 2019 and awaiting the Mayor’s signature, supersedes the prior Executive Order 2017-01 Sustainable St. Petersburg, that laid the groundwork for these sustainable building practices.

The City Council Ordinance articulated “that the City has a responsibility to lead by example in its goals to become a more sustainable and resilient,” when it determined not to touch the third rail of mandating green building requirements on private sector building.

What is particularly noteworthy about this enactment is that it not only regulates the City’s green building (.. other governments have obviously self imposed LEED standards), but that St. Petersburg may be the first jurisdiction in the nation to also so regulate the City’s infrastructure, “It is the objective of the City that any new qualified City infrastructure project shall be designed and constructed to achieve the current Envision gold standard.” We know of no other government has gone as far in mandating Envision certification.

Envision is a LEED style framework that provides the guidance to initiate the planning, design and delivery of sustainable and resilient infrastructure. Envision provides sustainability metrics for all types and sizes of infrastructure to help measure the extent to which a project contributes to conditions of sustainability across a wide range of social, economic, and environmental indicators.

Of course other governments, from Los Angeles County to Miami-Dade County, have used Envision, in some capacity, most often as a guide. Today, there are 67 “verified” Envision infrastructure projects. There are 20 projects currently being verified and more than 100 registered.

So, the move by St. Petersburg is bold in mandating Envision certification. This is a 2019 wine flavored water moment versus last year’s Aperol spritz. That is, it portends a significant sector of future sustainability efforts.

Not to be lost is, at a time when green building has lost a bit of its viridescent luster, St. Petersburg is one of the few jurisdictions passing a new LEED mandate. “It is the objective of the City that any new qualified municipal building and the substantial modification of any existing qualified municipal building shall be designed and constructed to achieve the current LEED gold standard under the applicable LEED category.”

And lest there be any question about the level of commitment, the Ordinance further provides, “Any new City construction project that is not a qualified municipal building [.. new construction or a renovation of less than 5,000 sq. ft.] or qualified public infrastructure project [.. a project less than $2 M] shall, to the extent practicable, utilize LEED or Envision principles as guidance during the design and construction process.”

Also significant is that the Ordinance further provides the Mayor may approve a request that a municipal building or infrastructure project “be designed and constructed or substantially modified to achieve an alternative sustainable development certification that maintains the overall intent of this division.” And alternative sustainable development certification means any accredited certification system designed to rate green building criteria, including, but not limited to WELL Communities, WELL Buildings, Living Building Challenge, Florida Green Building Coalition, and Green Globes.

St. Petersburg is leading by example in its goal to become a more sustainable and resilient with this lodestar ordinance. It is an example other governments might wish to emulate.

Blockchain has come to U.S. Real Estate

By Stuart Kaplow on December 16, 2018 Posted in Codes and Regulations

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

By Stuart Kaplow on December 9, 2018 Posted in Energy, Solar Panel

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

By Stuart Kaplow on December 2, 2018 Posted in Environmental, Federal

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 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.

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,

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.

2018 IgCC – A Fast Paced Deep Dive

By Stuart Kaplow on November 25, 2018 Posted in Green Building, IgCC

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.”