PACE in Maryland is Not Keeping Pace

In 2008 I said Property Assessed Clean Energy (PACE) loans “could be bigger than anything in U.S. real estate since the invention of the glass window.”

But today, despite Maryland having enacted a PACE enabling law in 2014, only one PACE loan has closed in the State.

By any measure, one is not an overwhelming success.

Nationwide, only about a thousand PACE loans have closed. So, what is wrong?

The concept is sound. PACE state enabling statutes generally authorize local governments to engage private sector lenders to provide upfront low interest financing to commercial property owners for energy efficiency, water conservation and renewable energy projects (e.g., HVAC system upgrades, photovoltaic system installations, replacement cool roofs, etc.) collecting the repayment through annual assessments on the property’s real estate tax bill.

At this time of major changes in the national environmental agenda, PACE is an ideal means of voluntarily mitigating the negative environmental impacts that human activity has on the planet, not to mention providing the capital for renovating the nearly 4.9 million existing commercial buildings in the U.S.

But PACE loan programs are still very new. They are gaining acceptance nationally and 34 states have enacted enabling legislation with 15 states of those having active PACE programs.

PACE offers a host of benefits, including: removing the barrier of a large upfront cash outlay by the property owner; allowing 100% financing of improvements; in amounts over loan value ratios available in the marketplace; without disturbing existing mortgage financing; underwriting tied to the property and improvements and not individual creditworthiness; repayment over a long period of time (up to 20 years); low interest rates (resulting from high security of repayment); reduced utility bills that can offset the payments; the obligation to repay runs with the property and not the owner; the improved properties have an increased value, benefiting both the owner and the property taxing authority; the owner may be eligible to take advantage of federal, state and local tax incentives; cash flow advantage where many owners like the single tax bill payment in lieu of monthly; under most commercial leases the PACE payment (on a property tax bill) can be passed along to the tenant avoiding the ‘split incentive’ problem; local government can facilitate the program with no direct debt obligation; and, in fact at no cost to government (because the borrower pays all costs).

PACE could provide the funding to have the LEED Existing Building rating systems realize their potential.

In the event of a default, the amount in default (but not the entire principal of the PACE loan) is a liability that is a property tax lien collected by the local government with the priority associated with other real property tax liens, so existing mortgage holder acknowledgment of  a PACE loan is required.

Nationally, including in Maryland, “residential” PACE programs (as opposed to the commercial programs) were put on hold as a result of a directive in 2011 that Fannie Mae and Freddie Mac refrain from purchasing mortgage loans secured by single family properties with outstanding PACE obligations. However, as I wrote in this blog on July 24, 2016, HUD Jumpstarted Financing For Homes, reversing their previous position and now widely allowing residential PACE loans on top of FHA and VA loans (but still not on top of Fannie Mae and Freddie Mac loans).

I was asked recently to recommend how PACE in Maryland could be improved. The state statute is fine. The disconnect is that implementation by the local government programs is flawed. What follows is my top 10 list actions to make PACE a success in Maryland. And most of this compilation has direct application to make PACE programs a success across the country.

  1. More and additional PR explaining PACE to prospective borrowers and lenders
  2. Reduce cost of a PACE loan by eliminating the requirement that a PACE lien notice be recorded among the land records
  3. Lower cost of a PACE loan by not collecting recordation tax on a PACE lien notice recorded among the land records
  4. Modify the existing mortgage holder consent forms to be acknowledgments
  5. Standardize programs and documents across all counties in the State
  6. Local government programs should not limit the definition of what projects qualify as “energy efficiency, water conservation and renewable energy”
  7. Eliminate the requirement for a pre-improvement Energy Audit
  8. Standardize the effective date of a PACE lien to be first advance of funds, not when the project is completed
  9. Draft new and improved attorney prepared loan documents that work to ‘sell’ PACE
  10. Expressly authorize PACE for new construction (i.e., the top 10% of a building)

A PACE improved building is great for the planet. And PACE is also down right awesome for business.

You Need a Green Building Consultant (Who Speaks for the Trees)

The Lorax Partnerships Team

We are often asked “what is the best way to assure success in a green building project?”

Whether that query is from a Fortune 1000 businesses or an architect, the answer is the same, have the owner engage an experienced green building consultant as early as possible in the project.

Which often leads to a follow up question, “who do you recommend?”

My go to move is to recommend Lorax Partnerships based in Baltimore who are among the best of green building consultants we work with.

Those responses are not inconsistent with and, in fact, should be considered concomitantly with the conclusion, having worked on LEED projects since 2001, that the second best way to mitigate risk and avoid liability in sustainable building is a green building consultant working for the owner. (Okay, the single best way to mitigate risk in a green building project are properly drafted contract documents.)

Both other owner and architect are advantaged by the consultant contracting directly with the owner and not being a subcontractor of the architect or other design professional, .. including by example the owner avoiding having an architect specify a LEED credit for Green Power because it does not increase first costs that the architect is responsible for, and the architect mitigating risks from proposed credits not being achieved by the contractor during construction.

Sustainability and building green require skill and expertise beyond that in common stick built erection of a structure, to be successful. Owners may define success differently, .. achieving LEED certification, 25% less energy use than a comparable building, improved indoor air quality or the like, but a skilled green building consultant capable taking the project from craftsman to artist, is a key indicator of success.

By analogy, the Parthenon or for that matter the Taj Mahal and Borobudur would not have been built without skilled stone masons. Stone carvers have existed for thousands of years while green building consultants are a new trade, but the best of both cross the line from craft to art. Since 2003, the green building consultants at Lorax Partnerships have refined the art of sustainable building, including lowering first costs for construction driving reduced costs of operations and resultant higher effective rents that culminate in higher ROI.

There are more than 200,000 LEED professional credential holders and while many of them are very good at what they do, .. we work with a lot of good consultants; and, while I am pleased to recommend multiple consultants with particular skill sets in specific geographic areas for our clients to consider, I have focused on Lorax Partnerships in this blog post, without reservation, not only because they speak for the trees, but because as a corporate culture they find the sweet spot of saving the planet and having the owner prosper from its sustainability efforts.

Only the largest design firms have the knowledge and expertise required to competently specify EPDs and HPDs without exposing themselves to all but certain liability. Again, enter green building consultants who have expertise in specifying materials.

Yes, you can easily earn a LEED credit simply by including any one of the LEED accredited professionals as a member of the project team. In fact, 99% on LEED 2009 New Construction certified projects (6,881 of 6,939 projects) earned this credit.

And what I am describing is much more than only the LEED v4 Integrative Process credit, that you can also easily earn, with the project team taking an integrative approach to optimizing energy and water.

Today, green building is much more than only LEED, so consultants assist an owner in selecting the most efficacious green building standard, rating system or code for a particular project, with increasing numbers of projects pursuing the ICC 700 certification or no third party certification at all. They serve as the owner’s representative, working to satisfy that owner’s objectives while saving the planet.

But for skilled stone masons, the Parthenon would not be standing today. You may not be erecting a building to stand the test of time, but the best way to assure success with your green building project is to, early on, engage an experienced green building consultant working for the owner.

Attorney General’s End of Third Party Settlements is Good for the Environment

Attorney General Jeff Sessions issued a memo on June 5, 2017 to all Department of Justice components and 94 U.S. Attorney’s Offices prohibiting them from entering into any agreement in settlement of federal claims or charges that directs or provides for a settlement payment to non-governmental, third parties that were not directly harmed by the conduct.

When the federal government settles a case against a corporate wrongdoer, any settlement funds should go first to the victims and then to the American people – not to bankroll third-party special interest groups or the political friends of whoever is in power,

said Attorney General Jeff Sessions.

Unfortunately, in recent years the Department of Justice has sometimes required or encouraged defendants to make these payments to third parties as a condition of settlement.

Under the last Administration, the DOJ repeatedly required settling parties to pay settlement funds to third party community organizations that were not directly involved in the litigation or harmed by the alleged conduct.

This abuse of enforcement power was particularly prevalent during the last eight years in pursuant of alleged violations of environmental laws. By way of good example, I wrote in this blog in 2013 in a post First Ever Criminal Prosecution For Deaths Of Birds By Wind Turbine,

As part of the plea agreement, a $400,000 fine will be directed to the North American Wetlands Conservation Fund. The company will also pay $100,000 in restitution to the State of Wyoming, and perform community service by making a $160,000 payment to the congressionally chartered National Fish and Wildlife Foundation. Duke Energy is also required to contribute $340,000 to a conservation fund for the purchase of land, or conservation easements on land, in Wyoming containing high use golden eagle habitat.

Last year environmental enforcement by the DOJ resulted in more than $6 Billion in administrative, civil penalties and criminal fines; and that does not include the $14.7 Billion Volkswagen Clean Air Act violation settlement, and more than $1 Billion in commitments of responsible parties to clean up Superfund sites. So, we are talking about a lot of money.

Pursuant to the Attorney General’s memorandum,

With this directive, we are ending this practice and ensuring that settlement funds are only used to compensate victims, redress harm, and punish and deter unlawful conduct.

There are instances when it is in the best interests of the United States to settle a lawsuit or end a criminal prosecution. Settlements, including civil settlement agreements, deferred prosecution agreements, non-prosecution agreements, and plea agreements, are a useful tool for DOJ attorneys to achieve the ends of justice at a reasonable cost to the taxpayer. It is now again clear that the lawful and proper goals of any settlement are, first and foremost, to compensate victims, redress harm, or punish and deter unlawful conduct.

Effective immediately, DOJ attorneys may not enter into any agreement on behalf of the United States in settlement of federal claims or charges, including agreements settling civil litigation, accepting plea agreements, or deferring or declining prosecution in a criminal matter, that directs or provides for a payment or loan to any non-governmental person or entity that is not a party to the dispute.

Stopping the misuse of settlement dollars will level the playing field for responsible businesses, allowing for the orderly administration of justice, while protecting the natural environment in communities across the country.

Retailers Pay Millions for Hazardous Waste Violations

Retailers across the nation are buttressing their trash disposal practices after Dollar General Stores and Big Lots Stores paid Millions of dollars to settle civil suits for environmental violations for the unlawful disposal of hazardous waste, including customer returned merchandise and batteries.

Most businesses should have a solid waste management plan to provide staff with procedures for complying with laws (e.g., at a minimum, many businesses have batteries and mercury containing lamps, the disposal of which is regulated) and ideally aimed at reducing the amount of waste sent to landfills, a mainstay in environmental stewardship.

In the latest case on April 27, 2017, the Riverside County, California District Attorney along with 34 District Attorney’s Offices and two City Attorney’s Offices across California, announced in a press release that Superior Court Judge Bryan F. Foster ordered Ohio based Big Lots Stores, Inc., and its subsidiary corporations, to pay $3.5 Million in civil penalties and costs for environmental violations.

The judgement in the civil lawsuit filed in San Bernardino County Superior Court is the result of an investigation into the unlawful disposal of hazardous waste by Big Lots Stores at its distribution center and its 206 California stores over several years.

The lawsuit alleged that, instead of transporting hazardous waste to authorized hazardous waste facilities, Big Lots illegally disposed of the waste in the trash and illegally transported it to local landfills. The hazardous waste included ignitable and corrosive liquids, toxic materials, batteries, and waste from electronic devices. Some of the waste was the result of spills, damaged containers, or customer returns.

Big Lots cooperated during the subsequent investigation. Big Lots has now adopted and implemented new policies and procedures, as well as new training programs to properly manage and dispose of hazardous waste. Big Lots hazardous waste is now collected by state registered haulers to transport it to authorized disposal facilities and is now being properly documented.

In another case brought only days before, Yolo County District Attorney along with 31 other California District Attorneys announced on April 17, 2017 in a media release that Superior Court Judge Sidney P. Chapin ordered the Tennessee based company Dolgen California and its subsidiary corporations, to pay $1.125 Million as part of a settlement of a civil environmental prosecution.  Dolgen and its subsidiary corporations own and operate Dollar General stores and distribution center in California.

The consent judgment resolves allegations made in a civil enforcement lawsuit that alleged Dollar General retail stores throughout the state and its distribution center unlawfully handled and disposed of various hazardous wastes and materials over a five year period.  Those hazardous wastes and materials included automotive fluids, alkaline batteries, electronic waste, aerosol cans, expired over the counter medications and other toxic, ignitable and corrosive wastes.

This settlement holds Dolgen California and its subsidiary corporations responsible for years of unlawful management of hazardous waste,

said District Attorney Reisig.

The terms of this settlement will require these companies to improve the training of their staff and the monitoring and management of their hazardous waste.

This is not a California only issue. Media reports describe that in recent years many retailers, including single stores and national brands, from Whole Foods to Wal-Mart have been the subject of federal and state hazardous waste violation actions.

In the event products sold by retailers nationwide are returned, recalled, damaged in the store or expire on the shelves, which are every day occurrences, when discarded many of those products are a hazardous waste under federal and state laws.

As a practical matter, many if not most businesses should have a solid waste management plan to provide staff with procedures for complying with laws for waste from ongoing consumables, from durable goods, as well as from facility alterations and additions. Many items that appear to the unknowledgeable to be “trash” are regulated hazardous waste.

This law firm has provided hazardous waste management services for retailers, including in the pharmaceutical industry, as well as a host of other businesses from landscapers to medical offices, ranging from solid waste management plans (that can qualify for LEED credits), to waste characterization, training programs, and regulatory notifications.

Solar Powered Advertisement is Deceptive

Billboard in Italian Train Station

A business installs photo voltaic panels on its roof to generate power, and advertises that it is “solar powered.”  The business, however, sells the Renewable Energy Certificates (RECs) that are generated by the solar power. Even if the business is near net zero for electricity generated by the solar panels, according to guidance from the Federal Trade Commission; it has, by selling RECS, transferred the right to characterize that electricity as renewable. The businesses’ claim is therefore deceptive.

This law firm is regularly asked about advertising claims for environmental matters, including most often issues of renewable energy.

While no two situations are the same and legal queries are always fact specific, many of the answers to questions about environmental marketing claims are found in the FTC’s Green Guides. The Green Guides help marketers avoid making environmental marketing claims that are unfair or deceptive under Section 5 of the FTC Act, 15 U.S.C. § 45.  They do not operate to bind the FTC, other governments or the public, and are not legal advice, but they are characterized as the current thinking of the FTC.

So, with apologies to the FTC, but there is no better way to communicate the thinking of the federal government than to quote extensively from the Green Guides, including examples published in the Guides,

If a marketer generates renewable electricity but sells renewable energy certificates for all of that electricity, it would be deceptive for the marketer to represent, directly or by implication, that it uses renewable energy.

Example 1:  A marketer advertises its clothing line as “made with wind power.”  The marketer buys wind energy for 50% of the energy it uses to make the clothing in its line.  The marketer’s claim is deceptive because reasonable consumers likely interpret the claim to mean that the power was composed entirely of renewable energy.  If the marketer stated, “We purchase wind energy for half of our manufacturing facilities,” the claim would not be deceptive.

Example 2:  A company purchases renewable energy from a portfolio of sources that includes a mix of solar, wind, and other renewable energy sources in combinations and proportions that vary over time.  The company uses renewable energy from that portfolio to power all of the significant manufacturing processes involved in making its product.  The company advertises its product as “made with renewable energy.”  The claim would not be deceptive if the marketer clearly and prominently disclosed all renewable energy sources.  Alternatively, the claim would not be deceptive if the marketer clearly and prominently stated, “made from a mix of renewable energy sources,” and specified the renewable source that makes up the greatest percentage of the portfolio.  The company may calculate which renewable energy source makes up the greatest percentage of the portfolio on an annual basis.

Example 3:  An automobile company uses 100% non-renewable energy to produce its cars.  The company purchases renewable energy certificates to match the non-renewable energy that powers all of the significant manufacturing processes for the seats, but no other parts, of its cars.  If the company states, “The seats of our cars are made with renewable energy,” the claim would not be deceptive, as long as the company clearly and prominently qualifies the claim such as by specifying the renewable energy source.

Example 4:  A company uses 100% non-renewable energy to manufacturer all parts of its product, but powers the assembly process entirely with renewable energy.  If the marketer advertised its product as “assembled using renewable energy,” the claim would not be deceptive.

Example 5:  A toy manufacturer places solar panels on the roof of its plant to generate power, and advertises that its plant is “100% solar-powered.”  The manufacturer, however, sells renewable energy certificates based on the renewable attributes of all the power it generates.  Even if the manufacturer uses the electricity generated by the solar panels, it has, by selling renewable energy certificates, transferred the right to characterize that electricity as renewable.  The manufacturer’s claim is therefore deceptive.  It also would be deceptive for this manufacturer to advertise that it “hosts” a renewable power facility because reasonable consumers likely interpret this claim to mean that the manufacturer uses renewable energy.  It would not be deceptive, however, for the manufacturer to advertise, “We generate renewable energy, but sell all of it to others.”

Of note, with the very expansive FTC definition of who is a consumer, many of the environmental claims that this law firm reviews are within documents drafted for other businesses or for government; not what many think of as advertising to consumers.

The current Green Guides were revised in 2012. The guidance they provide does not rise to being the rule of law, but assist businesses, in concert with their legal counsel, avoid making environmental claims that mislead and expose businesses to jeopardy.

If this law firm can assist you in finding the words or correctly advertising an environmental project, to advantage that work while mitigating any risk associated with the claims, do not hesitate to give Stuart Kaplow a call.

Selling a House with Solar Panels is Not for the Faint of Heart

There are more than a Million houses in the U.S. with solar panels installed on the roof and that number is increasing. It can be difficult if not dangerous to fail to properly address rooftop solar panels at the time of sale of a house.

Among the most often made inquiries to this law firm arise from the failure to properly transfer installed solar panels.

We assist real estate owners and those acquiring property in positively leveraging the constraints and finding advantages in matters involving solar panels, often including new approaches and possibilities in this emergent arena.

But contract forms for the sale and purchase of a house are often provided by a local board of realtors and today those forms do not adequately address the new and only now evolving issues arising from a sale with rooftop solar panels.

There is no one homogenized solar panel ‘deal’ and the business terms including ‘who owns the panels’ varies from one transaction type to another, and in most instances these installations are governed by varying state laws. But commonly, residential solar panel leases provide language similar to, ..

You agree that the solar panel system is the Company’s personal property under the Uniform Commercial Code.  You understand and agree that this is a lease and not a sale agreement. The Company owns the solar panel system for all purposes.

Obviously this creates issues when selling a house with solar panels on the roof that belong to someone else. It is common that residential solar panel leases provide language similar to,

If you sell your home you can transfer this lease and the monthly payments.

The person buying your home can sign a transfer agreement assuming all of your rights and obligations under this lease by qualifying in one of three ways: (1) the home buyer has a FICO score of 650 or greater; (2) the home buyer is paying cash for your home; or (3) if the home buyer does not qualify under (1) or (2), if the home buyer qualifies for a mortgage to purchase your home and the home buyer pays us a $250 credit exception fee.

Or, if you are moving to a new home in the same utility district, then where permitted by the local utility, the system can be moved to your new home. You will need to pay all costs associated with relocating the system, ..

Timing also needs to be considered when entering into a contract to sell a house,

You agree to give the Company at least 15 days but not more than 90 days prior written notice if you want someone to assume your lease obligations.

Many of the companies engaged in this business (.. but not all) file a UCC-1 financing statement in the real estate records that puts third parties on notice to their rights in the system. That fixture filing is in most states a lien or encumbrance against the system. But because in many residential transactions, title companies do not search the UCC-1 indexes (.. that are primarily used for business purposes), solar leases are regularly missed.

However, the express language of solar system leases cannot be missed,


That accepted, as suggested by the solar lease language above, there are options and fertile, enabling and desirable business terms that can add significant value to the real estate. The solar lease, as well as any power purchase agreement need to be considered in light of federal and state law (including tax laws) that stimulate new possibilities including create profit.

Shockingly, this is not only a residential problem. This firm regularly receives inquiries arising from commercial real estate transactions that have not adequately addressed matters of solar panels, PPAs, tax credits and the like.

Selling a house with solar panels is not for the faint of heart. There can be real legal jeopardy and significant dollar liability for those failing to address the issues associated with solar panels. It we can assist you in positively leveraging the constraints and finding advantages in matters of transactions involving solar panels do not hesitate to give Stuart Kaplow a call.

Is the 2018 IgCC Doomed to Fail?

Last week the ICC and ASHRAE issued joint news releases on the status of the “unified green building code that could become the foundation for LEED certification” that will be published as the 2018 version of the International Green Construction Code.

This blog regularly advances the postulate that green building is the ideal means of mitigating the negative impacts that human activity has on the planet; and that green building can save mankind and our current way of life.

But the query that devolves from that theorem, is whether green building codes or other mandatory green laws can save our current way of life?

Ideally, green and for that matter other laws, promote innovation and create an environment rich for investment. The Patent Act of 1790, signed into law by President George Washington, gave inventors rights to their creations and laid the foundation upon which business would thrive in the new United States. In an example of the best and worst of laws on the same subject, on January 27, 1880, Thomas Edison received the patent for his incandescent lamp that paved the way for the universal domestic use of electric light (ultimately allowing mankind to work, study and play after sundown). But on December 19, 2007, President George W. Bush signed the EISA 2007 banning that Edison 100 watt incandescent lamp because it converts 90 percent of its energy into wasted heat, which we all noticed when we burned our fingers trying to remove a bulb before it cooled down. But should the federal government have made the manufacture and importing of a light bulb illegal?

Many believe that a voluntary, non mandatory approach to environmental protection is the best hope for stewardship of our planet; hence the broad brand and wide market share acceptance of LEED. Many also believe that burdening owners of terra firma with yet more and other government mandates is wrong and will not be efficacious.

The broad failure of the IgCC to be implemented as a mandatory green code, except in literally a handful of places across the country, suggests a building code that goes far beyond life safety is going too far. And that ASHRAE 189.1 has only be implemented by the U.S. military and by no one else, is equally damming. Additionally, attempting to mandate that a private land owner must build a LEED or Green Globes certified structure misuses the voluntary rating systems.

Imposing civil penalties or criminalizing the failure of a landowner constructing a building to obtain a green building certification (while obviously not in the same order of magnitude as the penalty of death imposed by the Code of Hammurabi for failure to construct a building properly) raises very real issues of how efficacious that sustainable project will be toward saving the planet when the owner is only pursuing a number of points to avoid legal jeopardy.

Last week the update announced “the IgCC powered by 189.1” will become the 2018 version of the IgCC, due to be published in summer 2018.Significantly, that update went on to say,

once the technical content of the 2018-IgCC are known (following the handoff from ASHRAE to ICC later this year), the USGBC will undertake an analysis of the measures from the model green code and compare them to LEED requirements. This process will begin while the 2018-IgCC is being codified.

However, at this time of major changes to the national environmental agenda, there is no will for new codes, green or otherwise. The powers that be at the federal government and elsewhere, are concerned with matters of rolling back EnergyStar, WaterSense and other programs that can be transferred to the private sector, and certainly not creating new regulatory schemes.

The ICC did not retain its IgCC committee after 2015, disbanding the small but vocal natural constituency for the next green code. Thus the very small number, but likely adopters of a 2018 IgCC will be the jurisdictions that today have an existing mandatory LEED law that will replace it with required IgCC compliance.

But even without any significant market penetration of the existing IgCC or other mandatory green laws, the marketplace shift in the U.S. to green building has been dramatic. Today, on the East and West coasts, not only does a ‘class A’ building require green building certification, but nearly half of all non-residential construction across the U.S. will be green. Green building will soon be the norm and anything else will be substandard. With its current brand acceptance and market share, much of that green building will be voluntarily third party LEED certified.

Green building can save the planet. Green building laws that promote innovation and create an environment rich for investment in real estate can save mankind and our current way of life. But the 2018 IgCC will simply not be widely adopted. And depending upon your definition that is failure.

New Sustainable Projects Exhibit in 2017 AIA Contract Documents

If you are regular reader of this blog you are aware there has been a hiatus in postings. I have been climbing in the Himalayas in Nepal for the past month and, in fact, am composing this blog post sitting in the lobby of the Yak and Yeti hotel in Kathmandu, as I begin to make way home.

Last week the American Institute of Architects released the 2017 edition of the A201 family of contract documents, including updated versions of the AIA’s documents developed for the design-bid-build delivery model.

And while each of the core sets of documents are updated every 10 years, what is most significant about this update is the new AIA Document E204™ – 2017, Sustainable Projects Exhibit.

The new Sustainable Projects Exhibit is a potential game changer that could revitalize the now sluggish if not moribund domestic green building industrial complex, that suffers from the lack of regular involvement of the legal profession, and as I recently wrote the resultant, Less than 20% of Green Building Contracts Properly Drafted.

The use of an exhibit for sustainable projects is new. AIA has previously published Sustainable Project versions of its core documents integrating specific green building text within each contract. The previous version of the design-bid-build contract documents included a Sustainable Project version.

And while this new Sustainable Projects Exhibit is released at this time with the updated design-bid-build contract documents, importantly, it can be used on any project and added to most AIA contracts to address the risks and responsibilities associated with sustainable design and construction services. This is a dramatic and significant evolution in the contracts for green building.

The new Sustainable Projects Exhibit is expressly drafted for use with third party certification on LEED, Green Globes and Energy Star projects, but it can also be easily adapted for use in other green building rating systems from the ICC 700 to ASHRAE 189.1, the IgCC and more.

The new Sustainable Projects Exhibit follows the AIA existing structure of defining a Sustainable Objective. Sustainable Measure, Sustainability Plan, Sustainability Certification, Sustainability Documentation and Certifying Authority. Key is the Sustainability Plan that describes and delineates the responsibilities of each party associated with sustainable design and construction of the project.

Unfortunately many, if not most, green building projects fail to utilize the Sustainable Project documents or other appropriate contracts incorporating provisions necessary and proper for sustainable projects. It is suggested that this new short six page exhibit will be more user friendly and remedy that problem.

The AIA Contract Documents are nearly 200 forms that define the relationships and terms involved in design and construction projects.  Prepared by the AIA with the consensus of owners, contractors, attorneys, architects, engineers, and others, the documents have been finely tuned during their 120 year history. This change, from an integrated sustainable project form to an exhibit, is a dramatic change in course that may result in a wider use of sustainable project contract terms in sustainable projects.

Without overstating its relative importance, the new Sustainable Projects Exhibit is a game changer. This contract form alters the strategy of contracting for a green building and conceives an entirely new business structure defining the business relationships of the parties. The exhibit effects a significant shift in the current manner of thinking about and contracting for green building.

The exhibit is currently available at

We have been working with clients to revise and update their form green building contracts to be consistent with the new Sustainable Projects Exhibit. If we can assist you in bringing your documents current, in an effort to mitigate risk or advantage you in bidding for work, do not hesitate to give me a call.

Prospering thru Green Building in a Changing Environment

I spoke to a gathering of construction industry attorneys the other day about changing environment of Federal government regulation portending huge business opportunities for green building. These were my prepared remarks for that talk.

While much of the mass media hyperbole is focused on the new Administration’s 2018 “skinny” budget request of $5.7 Billion for the Environmental Protection Agency,  the bigger story is for construction attorneys is how the changing environment of Federal government regulation portends huge business opportunities for green building, and especially for construction attorneys who advise the sustainable building industry.

This is a time of major changes to the national environmental agenda, and an ideal moment to articulate how green building is “the” ideal means of voluntarily mitigating the negative environmental impacts that human activity has on the planet.

Green building can save the planet

The construction of buildings provides countless benefits to human beings far beyond mere shelter, and voluntary stewardship of the environment through green building can save the planet, or, more precisely, green building can save mankind and our current way of life.

It is this belief, that green building will provide a safer, healthier, and more sustainable way of life, that has led to the broad brand and wide market share acceptance of the LEED green building rating system. [i]

In most business circles today, the debate about climate change has shifting away from a discussion of costs and risks, and towards the question of how to capitalize on the exciting opportunities in the green building space.

Prospering from voluntary sustainability is consistent with the current Federal government’s refocusing of the national environmental agenda. The 45th President of the United States is not a 1960s Barry Goldwater environmentalist who favored “federal intervention with regards to the environment.” To the contrary, President Donald J. Trump is a real estate developer who campaigned on dismantling much of the EPA (e.g., rolling back EnergyStar, WaterSense and other programs that can be transferred to the private sector) and repealing executive orders on climate change (e.g., including those associated with the Guiding Principles for Sustainable Federal Buildings), withdrawing from the Paris climate accord, and rolling back regulations (e.g., Clean Power Plan, non tidal wetland expansion, etc.).

Reduce energy use, water use, solid waste and GHG emissions

While there is no one homogenized building type, voluntary green building can significantly reduce energy use, water use, solid waste and greenhouse gas emissions.

By way of example, compared to the average commercial building, an oft quoted study found the LEED Gold buildings in the U.S. General Services Administration’s portfolio generally: consume 25% less energy, use 11% less potable water, have 19% lower maintenance costs, 27% higher occupant satisfaction, and emit 34% lower greenhouse gas emissions. [ii]

But at a time when many in society describe environmental matters apocalyptically, as if human existence on the planet is at risk, a real, and currently available, response is a built environment reducing energy use, water use, solid waste and greenhouse gas emissions.

And green buildings do all of that and so much more.

TRACI lead us to LEED

It is time to refresh our recollection that the first version of LEED allocated points based substantially upon the U.S. National Institute of Standards and Technology “Building for Environmental and Economic Sustainability” (BEES) environmental impacts in 1998. [iii] An updated version of BEES is expected in 2017.

Later, LEED version 2009 reweighted the solutions to environmental impacts using the U.S. EPA “Tool for the Reduction and Assessment of Chemical and other environmental Impacts” (TRACI). [iv]  Implementing TRACI standards was not a large leap from the previous standard because the previous BEES standard was based upon the existing TRACI standard. The current TRACI standard measures impacts based on: Ozone Depletion, Global Climate, Acidification, Eutrophication, Smog Formation, Human Health Particulate, Human Health Cancer, Human Health Noncancer and Ecotoxicity. The green building industrial complex will remain relevant in this changing environment only by effectively articulating the positive outcomes from those impacts to developers and owners. .

Driven by building owners in pursuit of those positive environmental externalities, green building has already exploded onto the scene with a 3200% growth in share of the U.S. non-residential construction activity since 2006. [v] That statistic, in and of itself, should cause every construction attorney to turn green.

The wellbeing of building occupants

Moreover, the wellbeing of building occupants is in 2017 increasingly being described as a key driver of sustainability. In the in the U.S. alone, there are more than 120 million employees who spend an average of 8.1 hours at work within a building each day. And staff costs broadly account for 90% of business operating costs, the health and wellbeing of those employees, and the resultant increased productivity of healthy and happy building occupants, makes this emergent trend in sustainability very real. [vi]

The aims for a sustainable building have shifted in the U.S. from green buildings that were “high performance” because they had a low carbon footprint to, now, occupant wellbeing and the resultant increased productivity. This dramatic shift may mean less demand for LEED buildings (although 1.85 million square feet being is being LEED certified every day) [vii] and more WELL projects and Fitwel building, two emerging building standards that center on considerations around protecting occupant health, wellness, and productivity.

That view, including the voluntary shift in priorities, is consistent with those that control the White House and Congress. It also meshes well with land owners who believe that a voluntary, non-mandatory approach to environmental protection is the best hope for stewardship of our planet. They believe that burdening land owners with yet more government mandates is wrong and is not efficacious.

The failure of green codes

The broad failure of the International Green Construction Code to be widely enacted suggests a mandatory green building code that goes far beyond life safety is going too far and will not be accepted by developers and owners. Further, the fact that ASHRAE 189.1 has only been implemented by the U.S. military is equally damning. Mandatory green codes and energy standards touted by the last Administration, when Congress would not enact hyperbolic responses to climate change at the risk of changing our way of life, are not popular with the current thought leaders in control of the Federal government.

Additionally, attempting to mandate that a private land owner must build a LEED or Green Globes certified structure misuses the voluntary rating systems. David Gottfried, the U.S. Green Building Council co-founder who unabashedly believes “all building should be green” said in a 2014 interview, “LEED was designed as a voluntary standard” acknowledging that “some governments have grabbed onto it.” And Jerry Yudelson, the former President of GBI (the Green Globes folks), makes clear he does not advocate mandatory green building laws for private building and he sees “a benefit of allowing the freedom of the marketplace to control this rapidly changing field, where performance counts.”

Making a profit while saving the planet

But not only is green building a cost effective engineered solution for many of the environmental impacts arising from human activity, from an economic perspective, it is clear that green building is profitable. There is nothing wrong with making a profit on innovations developed in response to those environmental impacts while saving the planet, whether it needs to be saved or not.

George Carlin famously quipped in one of his oft repeated comedy routines, “The planet is fine. People are fucked.” [viii] But his observation that Earth is 4.5 billion years old, so “The planet isn’t going anywhere. We are,” belies the comedic wisdom of this very real fact.

Once the dust settles from the ideological Armageddon over the 2018 Federal budget and with a push from the President when the U.S. withdraws from the Paris accord, it will become clear that green building policies that promote growth and innovation creating an environment rich for investment in real estate can save both mankind and our current way of life; and we all can get wealthy from building green






[vi] See, Fitwel may be the Future of Building Sustainability,


[viii] Watch a YouTube video of “George Carlin – Saving the Planet” (1976)

FITWEL may be the Future of Building Sustainability

FITWEL, a cost effective, high impact, health promoting building certification, may be the best thing since sliced bread.

The well being of building occupants is increasingly being described as the number one driver of sustainability. In the in the U.S. alone there are more than 120 million employees who spend an average of 8.1 hours at work within a building each day. And that staff costs typically account for 90% of business operating costs, the health and wellbeing of those employees and the resultant increased productivity of the building occupants makes this emergent field very real.

The aims for a sustainable buildings have shifted in the U.S. from green buildings that were “high performance” because they had a low carbon footprint to, now, occupant well being and the resultant increased productivity. This dramatic shift is even found in the federal government’s recently updated Guiding Principles for Sustainable Federal Buildings, which now include considerations around protecting occupant health, wellness, and productivity.

FITWEL Certification articulates a vision for the future where every building is enhanced to support the well being of its occupants, and surrounding communities. It is a new and emergent building certification that positively impacts occupant health and productivity through workplace design and operations. FITWEL’s development was led by the U.S. Centers for Disease Control and Prevention and the General Services Administration. Today, still in beta, the Center for Active Design, a nonprofit established by then New York City Mayor Michael Bloomberg in 2013, is the operator of FITWEL.

The FITWEL service marks (word and logos) are owned by the U.S. Department of Health and Human Services.

As a recent article in Fast Company describes,

There is no expensive third-party certification, like the existing Well Building Standard or the well-known LEED Green Building certification, and it tries to avoid creating extra paperwork or costs. Building managers submit their questionnaire answers, with photographic evidence where applicable, to receive a FITWEL rating.

Despite its government roots, it is the market and not some mandate from government that is driving the meteoric interest in FITWEL. 49% of building owners are willing to pay more for buildings demonstrated to have a positive impact on health. There is significant and growing interest in real estate that responds to health factors. Companies that use FITWEL respond to the growing market demand for healthier workplaces.

The scale of potential impact can not be overstated. There are more than 5.6 million commercial buildings in the U.S., with 120 million employees who spend an average of 8.1 hours at work each day. By applying incremental changes over time, these buildings can be optimized to promote occupant health. FITWEL has a goal of impacting individual health within all buildings, regardless of budget, size, year built, or location.

Research by the CDC has shown that health promotion through programs, policies and environmental changes can improve employee health and productivity, with potential savings in healthcare costs. The FITWEL scorecard was developed by the CDC over a five year process completed in 2015. The GSA led the pilot test of the certification on a randomly selected portion of its portfolio of buildings. These buildings included rural, suburban and urban locations, as well as a diverse mix of uses including, courthouses, laboratories, and office buildings. FITWEL strategies are supported by over 3,000 research studies reviewed by the CDC and was piloted nationwide by the GSA prior to its launch.

FITWEL was tested by facility managers across the country on 89 existing buildings to ensure the system is practical and widely applicable. FITWEL is cost effective, with no pre-requisites and a user friendly web-based interface.

The FITWEL certification process is simple. First register a building on FITWEL’s Digital Scorecard. Once a building is registered, users can complete the scorecard and garner an immediate benchmark for the building. When the building is ready to be certified, users are asked to upload verification documents and submit for review. After a review is completed, a FITWEL rating is designated for the building.

Each strategy within the scorecard is linked by scientific evidence to at least one of FITWEL’s seven Health Impact Categories: impacts community health, instills feelings of well-being, increases physical activity, reduces morbidity and absenteeism, provides healthy food options, supports social quality for vulnerable populations, and promotes occupant safety.

The FITWEL Scorecard measures health within 12 overarching sections that impact the design and operations of a site and building interior. The sections are:

Location, where credit is given for locating in neighborhoods that are more pedestrian and bike friendly to foster improved health outcomes.

Building Access supporting multi-modal access to buildings, increases opportunities for engaging in regular physical activity (like carpools and bikes).

Outdoor spaces providing onsite or nearby outdoor spaces assists in supporting mental and physical health.

Entrances and ground floors can be optimized to promote improved air quality and access to health promoting amenities. Indoor environment providing healthier food and beverage options can reverse the negative health impacts of traditional vending machines (and can include strategies for pricing incentives for healthy snacks).

Vending machines and snack bars providing healthier food and beverage options can reverse the negative health impacts of traditional vending machines.

Health supportive workspaces can assist in reducing absenteeism, while also instilling feelings of well-being (sample strategies include daylight, views, and operable shading at workspaces)

Onsite shared spaces can promote health outside of the individual workspace, by providing areas for physical activity and mental rejuvenation (this could include provision for a lactation and exercise room).

Providing access to fresh water reduces consumption of less healthy alternatives.

Stairwells present a convenient way for building occupants to add physical activity to their day.

Cafeterias and food retail can have a positive impact by elevating healthy food and beverage options onsite.

Emergency preparedness can improve coordination and timeliness of emergency response, increasing safety during emergency situations (think an Automated External Defibrillator).

Each strategy within FITWEL has a unique point value, based on the strength of evidence and its associated impact on one, or more, of the Health Impact Categories. Those strategies with stronger, multi-faceted impacts receive more points.

All registered buildings will receive an automatic FITWEL score within the digital tool as a means to benchmark the building overtime. A FITWEL rating of 1, 2, or 3 stars may be obtained once the building is submitted for certification.

The Center for Active Design will roll out FITWEL to initial selected partners this year and have a broader launch in mid 2017.

If LEED is going the way of the floppy disk, as is an increasingly consensus opinion, thought leaders in the environmental industrial complex commend that FITWEL may be the future of building sustainability.