Back in January here at GRELJ, I critiqued Andrew Burr of CoStar’s list of the top ten green building stories from 2008 by noting his lack of any reference to the green building litigation and associated risk management issues that began to emerge during the course of last year. Accordingly, I was pleased to see his recent column in Midas Letter Stock News, acknowledging some of the risks inherent with marketing green buildings, both in project-specific materials as well as securities disclosures in the stock market. In Mr. Burr’s piece, both Paul D’Arelli of Greenberg Traurig and Brian Anderson of Whyte Hirschboeck Dudek (who describes the securities issue in detail in his Understanding the Business of Green article, available via the links below), among others, note the importance of educating owners about the terminology associated with the LEED certification process and the potential legal dangers of misrepresenting a property’s green design features in terms of ultimate building performance.
Lest anyone suggest that these not practical concerns for every green construction project, I’ve compiled a series of images below of project sites here in Manhattan at various stages of completion over the course of the past six months. From left to right, I think the images speak for themselves; the first project, though pre-certified at the time under the LEED for Core and Shell system, had not formally received a LEED Gold rating from USGBC as the sidewalk bridging suggested. The second, which is currently plastered over construction fencing that covers future ground floor retail space at what will be a LEED Gold retrofit in Midtown, simply states that the space is “green” without any detail regarding exactly what “green” means. Finally, I think the third photograph demonstrates a partial best practice for green building owners: be straightforward about the project and what is attempting to accomplish – “pursuing LEED Gold certification”- without making exaggerated claims or guarantees about final certification level or how the building will perform down the line.
As Kim Ford of CresaPartners notes in the CoStar piece, “[o]ften, the people marketing LEED-registered buildings like to use the word LEED, but they’re very naive about the terminology.” Anderson also makes the excellent point that “[w]hen it’s a statement of environmental good, there’s a presumption that it might not need to be examined carefully.” Beyond terminology, Mr. Burr points out that, according to a recent study by Green World Media, between 25 and 30 percent of LEED-registered projects drop out of the process and never proceed to final certification, in part due to the expense, but also the average two-year lag between registration and formal certification. For the owner that sticks “LEED Gold Certified” on project marketing materials, in quarterly reports or other disclosures to the SEC, or in a lease term sheet with a tenant who has a corporate mandate to occupy office space in LEED Gold buildings only, the potential liability for a LEED-registered project that drops out of USGBC’s queue could be enormous.
One of the major reasons why I launched this site was to foster a “more robust,” as I called it, discussion of the liability aspects of building green amongst industry stakeholders and, again, I’m happy to see CoStar presenting some of these issues so early on in 2009. Nevertheless, I do think these issues are real and serious for every owner to consider, particularly in the type of down economy where litigation is always more pervasive.