As an increasing number of Canadian governments are considering the merits of LEED-driven legislation, Canada’s contractors are speaking out about the increased costs and associated red tape on projects that pursue third-party green building certification. A recent article in Western Canada’s Journal of Commerce reports that – in particular – LEED certification is “burdensome for some trades people,” and notes that the time and expense from identifying the amount of recycled content in certain building materials, the manufacturing proximity of those materials, their transportation details, and other facts are “adding up for contractors who barely have enough of the books to keep their crews working.”

The article starts out by hinting at the potential for trades to underbid LEED projects because they fail to understand the necessary paperwork and administrative components of the certification process. For example, according to Kitchener, Ontario-based Kirlen Construction project manager Stephen Harris, “[a] lot of trades bid the job and then don’t really have the resources to do it [the third-party certification process] properly.” Low bids, of course, can lead to change orders, impact a project’s schedule, and ultimately result in claims or even litigation.

With respect to contractor and subcontractor education about green building practices and processes, Harris also describes the importance of an integrated approach for project teams, particularly where the LEED application is targeting credits related to recycling materials and managing construction debris. “It’s not just a regular building where everyone just shows up and does their job,” he tells the Journal of Commerce.

At the same time, Canadian contractors are also concerned that the costs of third-party certification are eroding their bottom line in a business model where profit margins are already incredibly tight. For example, Ken Turner, principal of Vancouver-based wall and ceiling contractor Turner Brothers, believes that third-party certification is “too time consuming, trying to put together everything about recycled content, where the material comes from, where it was manufactured. We are the end-user. All the technical information is online. I don’t know why they are coming to us.”

Interestingly, Turner suggests that the fragmented nature of green building regulation is responsible – at least in part – for increasing contractors’ costs of doing business.

“If all buildings were going to be [LEED-certified] that would be one thing, but when only half the players are playing and we are trying to fight for information, with no extra money to administer it, it’s harder. Jobs are so cheap right now, the extra work just comes right off the bottom line. It would be a lot easier if we could just give our suppliers a list of our materials and they could provide the information.”

The Journal of Commerce article is important because it emphasizes one of the consistent themes here at GRELJ: that green building regulations – notwithstanding their decidedly non-uniform implementation – have outpaced industry’s own adoption of green building practices and corresponding knowledge base. Last summer’s Marsh report (Green Building: Assessing the Risks, Feedback from the Construction Industry, 2009) echoes this conclusion; for example, the risks arising from consultants and subcontractors with inadequate training and expertise were specifically identified as one of the top 5 green building risks during Marsh’s forums with A/E/C executives in New York City and Washington, D.C.

In any event, as the economy slowly turns around and new construction starts increase, I expect that we will see similar remarks from an increasing number of contractors on both sides of the border with respect to these perceived additional burdens. Of course, as more contractors and subs participate on green building projects, and more suppliers provide building materials to green building projects, many of the concerns raised in the piece should – in theory – diminish.

To date, the potential for increased risks of bodily injury to the construction workers who prosecute green building projects has been generally unremarked upon by commentators, but a recent article that was forwarded to me by my colleague (and frequent GRELJ commenter) Brian Anderson, as well as some recent client work related to the subject, has me thinking about the intersection of green construction practices with these types of actions.

In addition to the additional learning curve which certain types of green building installations may present to workers, some specific green building-related risks that project teams should consider and address in their site safety plans are as follows:

• Demands – driven by owners and third-party rating systems – for designs that provide increased interior natural daylight and translate into additional skylight penetrations or other openings may increase the risk that workers will fall on the job. (For example, consider IEQ Credit 8.1: Daylight and Views: Daylight under LEED Version 3.0 for New Construction). This risk is particularly critical here in New York, where our Labor Law Section 240(1) makes liability for any gravity-related fall absolute. (For a number of reasons, the Scaffold Law, as it is called, is one of the most frequently litigated topics in all of New York construction law.) The duty that Labor Law 240(1) imposes on owners and contractors “is non-delegable . . . and an owner or contractor who breaches that duty may be held liable in damages regardless of whether it has actually exercised supervision or control over the work.” (i.e., even if the contractor or owner is only 1 percent at fault for the injury, and the worker is 99 percent at fault, the contractor or owner will be completely liable for all of the worker’s injuries).

• Construction management plans that call for reduced temporary lighting may create darker work spaces, decrease workers’ visibility, and increase the risk of construction-related hazards causing site safety issues.

• Reductions in the amount of temporary heating and cooling which may be provided at the project site may also heighten the risk of injuries to workers (by creating ice conditions in the winter and overheating – to equipment and workers – during the summer months).

• Air quality management plans may require certain building materials and products to be unpacked and unloaded off-site, increasing the risk of injury to workers who may be responsible for bringing those same materials to the project site.

It is also worth nothing that, in terms of site safety generally in New York, Labor Law Section 241(6) provides the same type of absolute liability against owners and contractors when a worker’s injuries are caused by a violation of certain statutory site safety regulations, even if neither owner nor contractor exercised supervision or control over the project site and was therefore not negligent in causing the condition that led to the alleged injuries.

Although the foregoing risks are of the class that any project team must manage in connection with a construction project, green building practices do have the potential to add an additional layer of risk to site safety practices. In New York, where courts will seek to fold these types of claims within the ambit of the applicable statute and preserve a plaintiff’s ability to recover – particularly under Labor Law 240(1) – it is critical that project teams directly confront green building-related risks that may impact site safety. Accordingly, in their construction agreements, owners should consider the specific risks that may be created by their green goals and require contractors and construction managers to incorporate a green building-related site safety plan in order to reduce the risks of injury to workers and the corresponding risk of claims. Doing so is of particular import given the increase in regulatory activity that continues to take place at the state and local levels.

In addition to the brief list above, are there any additional construction-related green building risks that you would identify? Have any of you seen claims arising out of these types of situations in your practice?

Once again, my thanks to Brian Anderson of Whyte Hirschboeck Dudek S.C. for forwarding along an article authored by Frank Keres, President of Construction Risk Associates, on which these remarks are based (and which I was unable to find available online).

• The stimulus package contained numerous green building-related provisions, including significant funds for state and local governments to implement energy efficiency codes. However, most of these funds have yet to be distributed, so it will be interesting to track legislative implementation during the course of 2010. Some municipalities are beginning to look more closely at the logistics of  implementing third-party-driven legislation, including in our own backyard here in New York. This will be a critical and ongoing issue to monitor.

• USGBC acknowledged the legal risks implicit with building green, but its white paper on the subject dubbed them “old wine in new bottles.” We reviewed the white paper here at GRELJ and concluded that it seemed “to be an effort to sweep many of the thornier legal issues that may indeed ferment into ‘new wine’ under the rug.” My reasons for disagreeing with the paper’s conclusions stemmed (and continue to stem) from the pace of regulatory activity, the lack of input from the insurance industry on green building risks, the uncertainty over the prevailing standard of care for design professionals practicing in the green building space, and the questionable body of green building performance data.

• Critiques of LEED building performance moved into the mainstream; USGBC mobilized in response. The ongoing debate about the energy performance was picked up on in media outlets that included the New York Times after Henry Gifford and USGBC’s Brendan Owens debated the merits of LEED at the NESEA forum last March. LEED Version 3.0 was released with the obligation for owners and landlords to report data on building performance to USGBC, though many of you wondered what USGBC would actually do with that data upon its compilation. USGBC’s Building Performance Initiative, which was launched in advance of Greenbuild in Phoenix, is ongoing; we’re likely to start seeing results and further studies and critiques of LEED building performance throughout 2010.

• The National Institute of Building Sciences convened a Task Group to review various third-party building performance rating systems, which identified associated risk and policy problems for the A/E/C community to contemplate. The Task Group’s recommendations to NIBS’ Board of Directors included the development of various white papers analyzing risk and policy issues in greater detail; we emphasized the import of this effort in the context of NIBS’ political backing and the scope of the report’s conclusions.

• The potential for decertification of LEED Version 3.0 projects that (1) fail to report building performance data or (2) provide a legal mechanism for the reporting requirement to carry forward after a sale or sublease caused a firestorm of blogosphere commentary. Interestingly, though, the first publicly reported decertification proceeding- the Northland Pines High School complaint, which USGBC is currently reviewing – received comparably little attention.

In my opinion, these last two items were clearly the most important green building legal stories of 2009. Although the Northland Pines proceeding is not the full-blown green building litigation that many have predicted, it implicates all of the legal issues associated with decertification that were discussed last year. It is also the type of scenario out of which green building litigation could arise in the event USGBC/GBCI revokes the school’s LEED Gold status. For all of these reasons, and regardless of the outcome, the Northland Pines proceeding will be the first major green building legal story of 2010, particularly because we are (publicly) witnessing USGBC/GBCI follow the procedures of its Certification Challenge Policy for the first time.

If there are any other noteworthy issues we missed, please feel free to note them in the comments below. Happy New Year, everyone!

For those of you reading this article in a reader or by email, we recently gave GRELJ a makeover and encourage you to visit the site in your browser. Hopefully the new design is easier to read and better organized. One new feature is threaded comments, which allow you to reply specifically to a given comment in each thread. I look forward to any feedback on our new look.

The much more practical research that I turned up was the following except from an article by Kelly Luckett, the self-proclaimed “Green Roof Guy” who writes a column for greenroofs.com. In a column from the very end of 2008, Mr. Luckett describes how uneducated project teams may unwittingly expose themselves to unanticipated risks stemming from the maintenance requirements of green roof installations. His remarks also reflect a number of key points we’ve made consistently both here at GRELJ and over at gbNYC with respect to the additional risk management strategies demanded by new green building technologies and third-party certification programs.

It is also interesting to note that, for the particular project that he describes below, LEED certification requirements resulted in the green roof’s irrigation system being disconnected after the initial green roof establishment period, which resulted in a roof that did not appear as anticipated by the owner. One last important thought- Mr. Luckett hints that this project was located in Toronto, which, as you’ll recall, recently passed a green roof mandate. I think this is a great example of how legislation is fueling the types of liabilities that we grapple with here at GRELJ, and why, as always, contract language will remain paramount for green building project teams.

I would like to turn the focus now to an issue that continues to plague the green roof industry: the maintenance-free green roof myth.  Some in the media continue to espouse this nonexistent characteristic of green roofs resulting in many of our customers being painfully uneducated about realities of critical green roof maintenance!

Pretty strong language, I know, but the problem doesn’t seem to be getting better.  Let me tell you a story about my company’s largest project.  It’s a government owned project in the city that has become the nation’s green roof capitol; you know the place.  I sat in on a meeting where the general contractor, the architect, and the roofing contractor removed all mention of maintenance guidelines and the Plant Health Alert System from my submittal package!

For those of you outside the construction industry, a submittal package is a gathering of documents and drawings the subcontractor submits to the architect and owner to demonstrate compliance with the specifications for products or portions of the construction project.  When I questioned why they were removing critical pages of information from my submittals, I was told that they eliminated the irrigation system for this 96,000 square foot green roof based on a tour a green roof provider took the owner on during the preceding spring.  I asked if they had told them about the drought that killed green roof plants all over the region the summer before, to which I only received blank stares.  I practically had to threaten to hold my breath until I turned blue, or at least threaten to walk away from the project to get them to issue a change order to put the irrigation system back in.

The green roof was planted in June and July, 2007, and required routine irrigation throughout the establishment period, a task that could not be accomplished over 96,000 square feet using a garden hose.  After alleviating concerns over the irrigation system conflicting with LEED certification requirements by agreeing to disconnect the system after the establishment period, the change order was issued.  However, I insisted that the irrigation system remain in place as insurance should drought conditions require its activation to keep the $250,000 worth of plants alive.

Now fast forward two years. The phone rings; it’s the roofing contractor.  The ownership is requesting a walkthrough to discuss the condition of the green roof.  I asked our horticulturist to accompany me to the autumn meeting on the rooftop. We were greeted by the general contractor, the architect, the roofing contractor, and a clearly unhappy owner’s representative.  The condition of the green roof?  Starving sedums due to absence of the fertilizer that was supposed to have been applied the previous spring, per the maintenance guidelines that the ownership never got to see.

Also, since the plants did not receive the food required to grow and cover the surface of the growth media, the weeds moved in.  The good news –  the weeds will die over the winter and an application of fertilizer next spring will allow the plants to thrive.  The bad news – the project lost the opportunity for the plants to grow in one of the wettest growing seasons on record.  As you can imagine, there was a round of discussion about who was supposed to have provided the maintenance, a discussion that may wind up being continued in a court room.

However, the owner’s representative asked why the irrigation system was still there.  When the general contractor started to speak he was stopped by the owner’s representative who said the question was directed to me.  Before I could answer, another question was posed, “Do you tell your customers that they need to provide irrigation for their green roof?”  To which I replied, “Absolutely yes, every single one of them.”

The owner’s representative, clearly not expecting this answer, became even more agitated.  That’s when I began to appreciate how serious this problem has gotten for the green roof industry.  The owner’s representative placed in charge of one the city’s largest green roofs, in arguably the most green roof educated city in the nation, was utterly surprised by the fact that plants need food and water.  The building code issue evoked an urgent call to arms that brought about action by many and opened lines of communication among perceived adversaries, while lack of proper green roof maintenance poses far more serious threat to the green roof concept yet the green roof industry remains largely quiet.

Admittedly, nobody uses discussing maintenance during the green roof sale as their go-to closing strategy, but it’s a lot healthier for a green roof business in the long run to address this issue upfront rather than standing in the middle of a problem on a green roof facing an unhappy and uneducated customer the following season.  I’ll keep working on the code issues on behalf of the industry, but it’s time the industry start working on this much larger problem.

• The Green Roof Guy (greenroofs.com)
• Green Roof Archive (GRELJ)

Green building design, construction and operation practices have gained widespread popularity in the healthcare industry in recent years, even considering the current challenging economic climate. This trend is likely to continue because green building practices result in both decreased overall life cycle costs and healthier building occupants. This article will briefly examine the background of building green in the healthcare sector, discuss the unique needs of healthcare facilities in relation to green building practices, and finally examine the choices and challenges faced by healthcare facilities in determining whether to design, construct and/or operate a green building facility, with a specific emphasis on the legal issues therein.

Introduction

According to the United States Environmental Protection Agency (“EPA”), green building is the practice of creating healthier and more resource-efficient models of construction, renovation, operation, maintenance and demolition. The leading vehicles for green building implementation in the healthcare industry are the Green Guide for Healthcare (“GGHC”), a healthcare industry driven system that was created by the American Society for Healthcare Engineering in 2002 and the Leadership in Energy and Environmental Design (“LEED”) rating system administered by the U.S. Green Building Council (USGBC).

Adapting Green Building to the Unique Needs of Healthcare Facilities

There are a number of unique challenges in accomplishing standard green building practices in healthcare facilities, including, among others:

• The need for hospitals and other healthcare facilities to be open with all systems functioning 24/7;
• The high level of dangerous waste produced by healthcare facilities;
• Patients’ increased sensitivities to chemicals and pollutants (along with related air circulation issues);
• The need for healthcare facilities to meet stringent regulatory standards which are not applicable to typical commercial developments; and
• The fact that healthcare facilities have different transportation expectations than some other places of business (e.g. very few patients can be expected to ride bicycles to the hospital).

As a result of these differences, green building standards for the healthcare industry have taken longer to develop than other uses. Until recently, the healthcare industry generally relied on GGHC in designing, constructing and operating a green building. The GGHC is a voluntary self-certifying program that borrows from, but is not formally connected to the LEED rating system. In a manner similar to the LEED system, GGHC gives a certain number of “credits” for each environmentally-friendly and energy-efficient characteristic incorporated into a building. GGHC includes metrics for both construction and operations, which allows it to be used for existing facilities as well as new construction. Because GGHC is a self-certifying system, healthcare entities who wish to use it must vouch for their own compliance with the program.

The USGBC’s LEED system is the most established green building rating system. It is also a third-party certification system, so in contrast to GGHC, it more rigorously scrutinizes a project’s green building features. Some healthcare facilities have elected to invest the extra time, money, and effort required for LEED certification. For example, the Dell Children’s Medical Center (“DCMC”) in Austin, Texas is one of the most dynamic green building healthcare facilities, as evidenced by recently becoming the world’s first LEED Platinum-certified hospital. DCMC has succeeded in accomplishing some amazing results, including, an onsite natural gas power plant providing 100% of the facility’s electricity; recycling 75% of the waste produced during construction; and ensuring that no location in the building is ever more than 32 feet away from a source of sunlight. Various challenges, such as the hospital’s 24/7 operation schedule, required DCMC to overcompensate in other areas in order to reach Platinum certification. The project’s architect admits that the challenges in obtaining certification under a system not designed for healthcare were “enormous,” but apparently worth the cost for the hospital, which predicts that its energy efficiency investments will pay for themselves within six years. There are currently less than 40 other LEED-certified healthcare facilities of any type across the country (including, for example, the
Boulder Community Hospital in Boulder, Colorado, which was the first-ever hospital to be LEED-certified, and the Jewish Hospital Medical Center South in the Louisville, Kentucky area). However, approximately 350 hospitals that are currently under construction are LEED-registered, indicating a desire to achieve LEED certification upon completion. Luckily, for those looking for something more rigorous than the GGHC, but more tailored to healthcare than general LEED certification, the USGBC will soon issue a new LEED for Healthcarerating system. The new certification system will incorporate feedback from pilot projects that used GGHC and will be open to a public comment period before being officially implemented.

Choices and Challenges

Those who are beginning the planning process for green healthcare facilities have three possible paths to choose from at this point: they can wait until LEED for Healthcare is rolled out, use traditional LEED, or use GGHC. All of these choices have positives and negatives: LEED for Healthcare will likely become the new industry standard, but its exact requirements are not yet clear, so healthcare entities might have to delay their projects or could be taking a risk by committing themselves to a program under which they may not be able to obtain certification. Traditional LEED is rigorous and well-recognized, but could impose unnecessary costs and difficulties when applied to the healthcare sector. GGHC has clear metrics that are already tailored to healthcare construction and operations, but does not carry the same weight as LEED since it is a voluntary, self-certifying system.

There are certain actions, no matter what green building rating system decision makers elect to utilize, that healthcare facility decision makers must take in order to limit unforeseen cost, risk and liability. It is important to make green building goals clear and specific early in the planning process. A team of experienced professionals, including architects, construction managers, contractors, lawyers and others, with quantifiable experience on past GGHC or LEED-certified projects is also highly recommended. These experts will be able to properly guide property owners with the unique issues that arise in connection with green building and thus help mitigate further risk.

There are multiple legal risks that green healthcare facility project teams should consider, some of which may include:

• Whether there any potential governmental incentives or other awards that might help supplement the costs of green construction;
• The proper detailing of liability for failure to achieve certain green standards;
• The evolution of labor laws regarding the classification of the construction tasks for new green building work, such as green roofs;
• Lease drafting that requires all tenants at the property satisfy certain green building operational requirements; and
• Avoidance of greenwashing, or misleading the environmental benefits of the facility or services being provided.

There are innumerable other legal issues associated with green building and leasing. As this is an emerging area, it is important to work with professionals in order to avoid unnecessary liabilities when implementing green design features or pursuing any form of third-party certification.

Conclusion

Green building design, construction and operation practices are likely to continue at an exponential growth pattern in the healthcare industry in the years ahead. It is critical for facility owners, managers and stakeholders to fully understand the unique issues that arise for green building in the healthcare arena and work with a team of professionals that can help advise and minimize the risks associated therewith.

However, what got me thinking a bit more seriously about the intersection of green building and labor law was an article discussing the California Labor Federation’s two-day conference held earlier this month in San Francisco, where topics across a number of workshops included green real estate development and the creation of green collar jobs. One of the plenary speakers, Greg LeRoy, whose topic was “the emerging green economy,” noted in his remarks that “there are only two reliabile predictors of job quality, unionization and job quality standards. [W]hile some green employers are open to collaboration, others pay poorly and fight unions.” Mr. LeRoy also pointed out that “there are no labor standards in the U.S. Green Building Council’s LEED system.” Is it possible that future versions of LEED might require some type of labor standard for the trades, perhaps by requring that owners who pursue LEED ratings enter into some sort of project labor agreement with local unions or pay prevailing wage rates? Could USGBC itself integrate certain labor requirements into LEED itself? I am not a labor lawyer, but it seems to me that with increasing emphasis, particularly here in New York City, for example, on educating the trades about green construction practices, these types of labor law issues will become increasingly common in the green building context. Any thoughts?

• Green Roof Installers at Target Center Raise Safety, Wage Issues (Star Tribune)
• California Labor Federation’s Rousing Conference (BeyondChron)

First, in the MPR preamble, the LEED v3 program expressly provides GBCI with the ability to revoke LEED certification “upon gaining knowledge of non-compliance with any applicable MPRs.” It is thus crucial that project teams consider and comply with each MPR, particularly if the project seeks to take advantage of a state- or local-level LEED-driven incentive program that is keyed to the receipt of formal certification. While we have yet to see LEED-certified project have its certification revoked, an interesting question could arise here if a state or local government that had provided a project with an incentive upon certification sough to recoup those incentives if the project was de-certified by GBCI. Even thornier would be the scenario where a project that was required to earn certification under a legislative mandate loses certification. The corresponding liability-related issues would of course flow downstream and impact each member of the project team. MPR 1 actually obligates every LEED-hopeful project to “be designed to comply with all applicable USA federal, state and local environmental laws and regulations in place where the project is located and at the time of design and construction.” Comprehensive legislative surveys and strong contract language emphasizing regulatory compliance will thus be a priority for project teams under the LEED v3 regime.

From a legal perspective, MPR 7 is perhaps the most important to consider: “all certified projects must commit to allow USGBC to access all available actual whole-project energy and water usage data in the future for research purposes.” Moreover, “[t]his commitment must carry forward if the building changes ownership.” For attorneys, it will be an interesting challenge to draft such a covenant that will bind subsequent purchases of real property (or, in the context of LEED-CS and LEED-CI 2009 MPRs, subsequent tenants). For owners and project teams, it will be imperative to recognize that such language must be translated into purchase agreements or leasing documents such that GBCI cannot revoke a project’s LEED certification. More generally, it will be interesting to see if any private owners balk at granting USGBC access to such data, and whether there are any local legal obstacles (in terms of building codes, utility regulations, etc.) that may make it difficult for owners to provide the data as required by LEED v3.

Applicable MPRs are set forth below as printed in the text of the New Construction and Major Renovations rating system. Note that I have also set forth MPR 6 below, which lays out certain timeframes that project teams should remain aware of. I anticipate that there will be much more analysis of these and other provisions in LEED v3 as more project teams become familiar with the terms and scope of the program; please feel free to suggest any additional legal issues that we may have missed in the comments below.

Minimum Program Requirements (“MPRs”) – LEED 2009 – New Construction and Major Renovations

• LEED Version 3 (USGBC)

The paper is essentially divided into five sections: (1) general points about whether risk exists for real estate stakeholders in connection with green building projects; (2) a brief overview of some emerging regulatory concerns; (3) whether increasing concerns about achieving LEED certification are valid; (4) a discussion of new products and technologies as risk concerns; and (5) how knowledge, experience, and contracts can help green building project stakeholders mitigate green building risk. The paper unquestionably provides a good legal primer with respect to each of these issues but injects a tone of commentary into the discussion that unnecessarily trivializes many of the legal issues that the green construction bar continues to grapple with. For example, the paper starts out by stating that “[a]ccording to insurance professionals . . . there have been very few claims reported arising out of sustainable design to date, despite concerns to the contrary. The risks to architects in ‘building green’ are essentially the same as the risks on other projects.” Standard of care and insurance coverage issues, for example, have many design professionals, their insurers, and even owners concerned about the availability of coverage in event of a claim that arises out of disputed green design services. While general principles of construction law will always apply to every project, calling their application in novel contexts to be simply “old bottles” suggests that there is no additional risk for project teams to consider or attorneys to address in contract documents.

One specific point made in the paper that’s also worth noting relates to the factual posture of the Shaw Development case. The paper incorrectly states that Maryland’s green building tax credit program which was at issue in the lawsuit was “limited to qualifying LEED projects and restricted to a set window of time. The project did not have LEED qualification within the window of time and Shaw sued for damages for the loss of the tax credits.” As you’ll recall, the issue in Shaw was the parties’ failure to understand the applicable tax credit program, which required a certificate of occupancy by a certain fixed date in order for a LEED-hopeful project to take advantage of tax credits; formal LEED certification was not required. Shaw emphasizes that legislative schemes are among the fundamental drivers of green building risk and must be clearly understood and accurately reflected by controlling contract documents.

Additionally, on page 5, the paper states that “[w]hile some commentators recommend avoiding guarantees, a precise contract can appropriately define the guarantee and mitigate risk.” However, there is no detailed discussion of exactly how stakeholders might begin to craft such provisions. More critically, the paper fails to discuss why even the appearance of the equivalent of a warranty or a guarantee or an elevated standard of care may be problematic from the perspective of a professional liability policy (i.e., these are form exclusions to the standard policy which most architects and engineers are required to procure on every project by contract). The Marsh end-of-year report from 2008 makes it clear that professional liability insurers are keenly monitoring this area of activity with heightened scrutiny. While standard exclusions to a professional liability policy are indeed traditional components of construction law, it is also clear that the rapidly moving standard of care for design professionals is unprecedented, and its implications should not be understated by attorneys who represent architects and engineers.

I want to emphasize that I am not criticizing USGBC’s effort to foster discussion about these important issues; rather, I think it’s extremely positive that the organization has taken this initial step towards engaging the legal industry in refining the parameters of green building risk management. As I noted last November over at gbNYC, this was a major shortcoming at last year’s Greenbuild and it’s encouraging that USGBC has started to move in a different direction. However, I think it is troubling that the paper chose to characterize green building law as “new wine in old bottles.” In my opinion, the reasons why many of the issues noted in the paper are creating a new paradigm meriting the attention of both legal scholars and practitioners are four-pronged: regulatory activity at the federal, state, and local levels is moving more rapidly than anyone can track in sufficient detail; the insurance coverage implications for claims arising out of green design have been largely unremarked upon; the insurance industry itself has acknowledged that the standard of care for design professionals is changing more quickly than at any time in history thanks to the proliferation of the LEED AP and green design obligations in the new AIA construction documents; and preliminary data suggesting that green buildings may not perform at the higher level generally anticipated by most project teams may have significant consequences both in terms of litigation and future policymaking. These are a set of completely new and emerging legal issues that will have a major impact on how attorneys create risk management strategies for their clients as green construction practices continue to proliferate. Suggesting otherwise will likely damage the long-term prospects of the green building movement, particularly if it encourages stakeholders not to take these emerging risks seriously and engage counsel capable of assisting them in navigating unchartered waters.

The paper is a quick read and I hope you will print it, review it, and share your thoughts in the comments below.

• The Legal Risk in Building Green (USGBC)

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.

• Increase in Dubious Claims of LEED Certification Seen in Marketplace (CoStar)

DePaul’s Susanne Cannon and Ujjval Vyas of the Alberti Group, who spearheaded the production of the issue, note the following in their introduction:

Most would probably agree that sustainability is a truly laudable and challenging goal to set for ourselves, and fully worthy of our best efforts. As importantly, our efforts must be guided by serious engagement with the many complexities of realizing this goal. The articles included in this issue of Real Estate Issues illustrate the importance of introducing risk into the sustainability equation so that decision-makers can proactively manage it. By recognizing and managing the risks, we can achieve a positive outcome while hopefully minimizing our post-decision regrets.

This issue is designed to be a resource for professionals and stakeholders involved in the decision-making process for the delivery of sustainable buildings: real estate professionals; insurance and surety professionals; risk managers; government representatives; design professionals; contractors and project managers; pension fund managers; lenders and financial institution executives; attorneys; and consultants.

I encourage you to download a copy of the issue by clicking here and review it at your leisure. Please feel free to contact me if you have any difficulties with the .pdf or require assistance in tracking down contact information for any of the authors. Again, many thanks to Carol Scherf, the DePaul University Real Estate Center, and the Counselors of Real Estate for allowing me to upload this important work into GRELJ. A list of the authors and papers that constitute the issue are listed below for your reference.

• Shifting the Sustainability Paradigm: From Advocacy to Good Business (Ujjval K. Vyas & Susanne E. Cannon)
• Weather-Related Losses in the Built Environment: Societal Change and Climate Change (Roger Pielke, Jr.)
• Selling and Governing the Green Project: Owner Risks in Marketing, Entitlement and Project Governance (Paul D’Arelli, Esq.)
• Greening the Standard of Care: Evolving Legal Standards of Practice for the Architect in a Sustainable World (Frederick F. Butters, FAIA, Esq.)
• Trust, but Verify: Building Enclosure Commissioning in Sustainable Design (Daniel J. Lemieux, AIA)
• Expanding the Principles of Performance to Sustainable Buildings (James E. Woods, Ph.D., P.E.)
• Sustainable Buildings and the Surety (Bryan M. Seifert, Esq.)
• Legal Issues Arising Out Of Green Building Legislation (Stephen T. Del Percio, Esq.)
• Energy Performance in Residential Green Developments: A Florida Case Study (Pierce Jones, Ph.D., & Ujjval K. Vyas, Ph.D., J.D.)
• Green Building Representations and the Emerging Potential for Securities Fraud Liability (Brian D. Anderson, Esq.)
• Blinded by the (Green) Light: The Rise of Environmentalism and a New Vocabulary- Four Perspectives (Richard Shields)

What happens if the ultimate rating that is conferred by USGBC is not Gold but Silver? It is not difficult to imagine a scenario where a tenant sues everyone in the chain- the owner, design professionals, consultants, contractors, and even lenders- if the project fails to reach the level of certification that was advertised. Significantly, we have already heard of claims where tenants sued owners when office space did not perform at the level that the tenant anticipated with respect to indoor air quality and energy efficiency. Owners must therefore be careful about elevating the expectations of potential tenants with respect to a building’s puported green features by accurately presenting a project’s sustainable elements in promotional materials. This obligation should, of course, extend to the project’s construction documents, which should clearly reflect the green design services for which the parties are contracting. Transactional risk management in advance of construction will assist stakeholders in mitigating risk and ensuring that the project achieves specific, targeted measures of green performance- whether it be under a third-party rating system or some other objective as defined by the parties in their contract.

• Top 5 Legal Issues to Consider on Green Construction Projects (gbNYC)
• Green Building Liability (gbNYC category)
• Contract Language Remains Key (gbNYC)
• Need for Green Counsel as Claims Brought Against Designers (gbNYC)