Featured Article
Section 201 of Waxman-Markey Could Impose Energy Efficiency Mandates as Decried by NAIOP
As the Waxman-Markey climate change legislation heads to the Senate, I think it’s important to note that, as currently drafted, the bill includes provisions that could impose the types of energy efficiency mandates which NAIOP argued against in its controversial report that was released earlier this year. Section 201 of the American Clean Energy and Security Act (H.R. 2454) would first set baseline standards for all commercial (ASHRAE 90.1-2004) and residential buildings (the 2006 IECC code) and dates for certain percentage reduction targets in energy consumption over those baselines. The Act would require an immediate 30 percent reduction over those baselines once enacted (likely in 2011 or 2012 if the bill proceeds through the Senate and is implemented as drafted), followed closely by a 50 percent reduction by 2014 for residential buildings and 2015 for commercial buildings. The reduction mandate would increase by 5 percent every 3 years through 2029/2030 for a total reduction of 75 percent over the baselines. However, the Department of Energy would have the ability to increase or decrease the reduction targets based on technological feasibility. Section 201 further obligates state and local governments to adopt the codes, or their own codes that meet or exceed the established targets; the federal government itself will enforce the national codes if state and local governments fail to comply. If you recall the comments from NAIOP President Thomas Bisacquino in the aftermath of the uproar created by the NAIOP study, Waxman-Markey may ultimately create the precise scenario that NAIOP and its constituents feared: 30 to 50 percent reductions over ASHRAE 90.1-2004 in the short-term.
Green Building Performance
Lessons on Predicting Building Performance from New Yankee Stadium
During the first homestand of the season at $1.6 billion New Yankee Stadium, baseballs flew out of the ballpark at an unprecedented rate; the 20 dingers that were clocked during last weekend’s series against the Cleveland Indians were the most ever in a four-game set to open a new stadium in baseball history. Last season, Old Yankee Stadium saw 160 home runs; the current pace would yield a mind-boggling 351 round-trippers for the entire 2009 season. The Yankees did not anticipate that their new ballpark would turn into a Little League bandbox; dimensions at the new park are the same as they were across the street and engineers performed a wind study in advance of construction that did not suggest any major changes in currents or speeds. So, after witnessing several routine fly balls to right field land halfway into the lower deck last Saturday, it struck me that there are some parallels between what’s been happening thus far at the new ballpark in the Bronx and some of the building performance issues that we frequently discuss here at GRELJ.
Green Construction Contracts
Victor Schinnerer: New LEED AP Program Raising Standards of Care, Changing Risk Profiles
Victor Schinnerer’s most recent quarterly report has some interesting commentary on the increased risk that the new LEED Accredited Professional (”LEED AP”) program may be creating for professionals that participate on LEED projects. Specifically, on page 4, the report notes that the new LEED AP program, which divides LEED APs into three tiers of increasing expertise, from LEED Green Associate, to LEED AP with specialization, and up to LEED AP Fellow, “has significantly changed the value of the program and the risks to [the] program’s participants.” However, although the report acknowledges that “[m]embers of the upgraded LEED AP [Fellow] program now will face a higher standard of care for their services,” it also states that “[c]urrently this increased exposure is a manageable risk. Current claims information does not indicate a need for additional insurance premiums to cover the exposure created by the higher standard of care.” I think that this latter point is critical- as I wrote previously here at GRELJ, most professional liability insurance policies contain an exclusion for assumptions of liability that are not imposed by law (i.e., because the LEED AP Fellow designation implies that the design professional will perform at a higher level than the prevailing common law standard, the design professional may not be covered for any resulting claims of negligent design services arising out of disputed green design services). It seems to me that if the LEED AP fellow designation implies a higher standard of care than is prevalent in the industry, this type of form exclusion would come into play. Accordingly, I am very curious to see if there is any reaction from insurance industry professionals on this crucial issue.
Green Real Estate Finance
RICS Study: No Premium for LEED-Certified Commercial Office Buildings
Last week, the Royal Institution of Chartered Surveyors (”RICS”) released the results of a study authored by Piet Eichholtz and Nils Kok of Maastricht University and John Quigley of Berkeley. Titled “Doing Well By Doing Good? An Analysis of the Financial Performance of Green Office Buildings in the USA,” the purpose of the study was to determine whether investors are currently willing to pay any premium for green (Energy Star- and LEED-certified) commercial office buildings and, if so, what that premium is. The authors identified 1360 buildings- 286 LEED-certified, 1045 Energy Star-certified, and 29 certified under both systems- and were able to obtain complete building characteristics and monthly rents from CoStar for 649 of them, as well as sales data for 199 buildings that swapped hands between 2004 and 2007. To create a pool of peer buildings, the authors used the CoStar database to identify all other office buildings within a quarter mile radius of the subject green building to create a “cluster” of buildings for each of the 893 subject buildings. The study concluded that “the type of label matters. We find consistent and statistically significant effects in the marketplace for the Energy Star-labeled buildings. We find no significant market effects associated with the LEED label. Energy Star concentrates on energy use, while the LEED label is much broader in scope. Our results suggest that tenants and investors are willing to pay more for an energy-efficient building, but not for a building advertised as ’sustainable’ in a broader sense.”
Green Leases
Green Leasing Series: Environmental Performance Objective Clauses in Green Leases
Many commentators suggest that, as a threshold issue, a green lease include an “environmental performance objective,” or a clause that requires both landlord and tenant to operate the demised premises pursuant to a set of very general, aspirational green building objectives. Upon reading a sample environmental performance objective clause, you may be reminded of the form language in the 2007 version of the AIA’s B101 Owner Architect Agreement, which obligates the architect to make a set of very vague and non-specific green building-related recommendations to the owner with respect to certain aspects of its proposed design for the project. While provisions in a lease that set forth a roadmap for landlord and tenant to operate demised premises in a sustainable manner should by no means be discouraged, it is important for landlords to carefully consider the specific language that they may choose to insert into a green lease as part of such clauses.
Green Building Litigation
“Whither the Lawsuits?” A Mid-2009 Assessment of the State of Green Building Litigation
In a piece that appeared both on her blog and at Greener Buildings, my colleague Shari Shapiro opines on why, as we rapidly approach the midpoint of 2009, there remains a dearth of reported lawsuits arising out of green building projects, despite much commentary suggesting the contrary to be imminent. Ms. Shapiro suggests four reasons: (1) a relative lack of green building practices generally as compared to overall construction; (2) owners who are “too afraid” to measure building performance and are thus unable (or unwilling) to assert a claim arising out of violated green building expectations; (3) a general reluctance to engage in costly litigation given the economic downturn; and (4) the green building movement’s relative infancy. However, over the course of 2009, and notwithstanding the lack of lawsuits filed to date, there has been an explosion in commentary on green building litigation across the legal community. Accordingly, I thought Ms. Shapiro’s piece was particularly timely and worthy of some additional discussion here at GRELJ.
Legislation & Other Regulatory Issues
Toronto to Mandate Green Roofs for Most New Construction
Notwithstanding many of the persistent- and still emerging- concerns over the increased risks from their installation, Toronto is on the verge of becoming the first city in North America to mandate green roofs for most types of new construction. By a vote of 36-2 which, according to the National Post, “was adopted after remarkably little debate on the floor of council,” the sweeping legislation requires green roofs on all residential buildings over 6 stories, schools, affordable housing developments, commercial, and industrial buildings. The legislation is slated to take effect on January 31, 2010 for new residential and commercial construction; industrial buildings are not impacted until January 31, 2011. The development community in Toronto opposed the legislation on the basis of increased costs, while green roof advocates believe the legislation is not broad enough, and actually successfully fought to increase its purview over a previous iteration of the bill. Toronto’s mandate is interesting to consider in light of the risks that we have pointed out previously both here at GRELJ and over at gbNYC with respect to green roofs generally.
Green Building Insurance
Initial Legal Thoughts on the LEED 2009 Minimum Program Requirements
As you may know, USGBC’s LEED v3 program launched this past Monday, April 27. Project teams currently pursuing LEED certification under any of the Version 2 programs can opt into LEED v3 for no additional registration fee through the end of the year. The Version 2 programs will be available to project teams for registration until June 26; after that date, all projects must proceed with registration under LEED v3. LEED v3 is comprised of what USGBC calls “LEED 2009″ revisions to the suite of LEED rating systems (other than Homes and Neighborhood Development, which are not changing under v3), a new online interface for project teams, and a shift in the administration of the LEED certification process to the Green Building Certification Institute (”GBCI”). USGBC calls the LEED 2009 credit revisions “a reorganization of the existing commercial and institutional LEED rating systems along with several key advancements.” The revisions contemplate harmonization (i.e., credits and prerequisites are consistent across all LEED 2009 rating systems), credit weighting (i.e., greater emphasis on energy efficiency), and regionalization (up to four bonus credits for projects that address a local environmental issue of import). Although they are important to review for background purposes, the thrust of this article is not to detail the mechanics of the LEED v3 program. Rather, a number of the new minimum program requirements (”MPRs”) present some novel legal issues for project teams- and their attorneys- to consider in connection with drafting construction agreements or leasing documents in connection with LEED v3 projects.
