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Jerry Yudelson: “Dereliction” of Duty by Architects & Engineers Who Fail to Advocate for LEED Certification

Green building consultant Jerry Yudelson’s recent remarks provide a good opportunity to review the risk management implications of the design professional’s representations to his or her clients about the possibilities and potential pitfalls of green building, including the LEED certification process.

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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.

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USGBC: Legal Risk in Building Green Is “New Wine in Old Bottles”

In early March, USGBC released a white paper titled “The Legal Risk in Building Green: New Wine in Old Bottles?” The eight-page paper, which was presented as a panel discussion between four attorneys, concluded that “[p]erhaps surprisingly, in light of the increased attention in seminars and workshops . . . much of the discussion among the attorneys [in the paper] suggests that many of the legal theories advanced in those venues to suggest novel liability associated with building green are, instead, simply new wine in old bottles.” While the paper does not appear on the USGBC’s web site, it was circulated by individual chapters; I accessed a copy through our New York chapter’s weekly email blast and have included a link to download the paper from the USGBC-NY homepage below. I applaud USGBC for taking a critical step towards acknowledging the liability implications of green real estate development and construction, but do think it is important for attorneys practicing in this space to digest the paper’s conclusions. Although the paper does identify and discuss many important legal issues, I think that it ultimately falls short of elevating the analysis of such issues to the level necessary for legislators and stakeholders to make completely informed policy- and project-related decisions. Specifically, by suggesting that “[c]onjecture, anecdote, and even rumor swirl around recent presentations, workshops and discussions circling the question of what legal claims may be based on the design, development, and construction of sustainable buildings,” the paper seems to be an effort to sweep many of the thornier legal issues that may indeed ferment into “new wine” under the rug.

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Shaw Development, LLC Files for Chapter 11 Bankruptcy Protection

Shaw Development, LLC – the developer of the Captain’s Galley condominium project in Crisfield, Maryland that was the subject of the Shaw Development v. Southern Builders litigation that I have discussed extensively both here at GRELJ and over at gbNYC – recently filed for Chapter 11 bankruptcy protection. Since the development was completed back in 2006, only 3 of the 17 units available had proceeded to contract. In late December, a foreclosure auction was to take place for the remaining units, but Shaw filed for bankruptcy protection in order to restructure and allow the pending sales to ultimately proceed. Asking prices now start at $250,000.00 for the remaining units (apparently Shaw expects to close on a number of additional contracts by the spring), though all prices are off 50 percent from when the project came on line back in 2006. When I saw the article detailing Shaw’s Chapter 11 filing, I was curious to very generally consider whether the specter of a bankruptcy filing might allow us to add an additional twist to the discussion of the Shaw Development litigation.

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Green Building Liability Pictorial

I am consistently amazed at the disparities in how green building projects are promoted. Some projects make it very clear that they are simply “aiming for” or “registered” in pursuit of LEED certification, while others brand themselves as “green” without any real discussion with respect to what (if any) those sustainable design features might be. You can see a good example of how these inconsistencies may wind up exposing green construction project stakeholders to unanticipated liability in this photo that I took over the summer. It shows sidewalk bridging at one of Manhattan’s highest profile green construction projects. The building in question is seeking a LEED Gold rating from USGBC (it is pre-certified under LEED for Core and Shell, but by no means is it “LEED Gold Certified” yet as claimed by the bridging). What happens if the ultimate rating that is conferred by USGBC is not Gold but Silver?

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Professional Liability Insurance Policy Endorsement for LEED Projects May be Imminent

Both Marsh- in its recent report reviewing the current state of the insurance marketplace with respect to green construction issues – and representatives of the Fireman’s Fund at Greenbuild have indicated that we will likely see a new insurance product on the market sometime in 2009 for professionals participating on green building projects. The product would likely be crafted as an endorsement to an existing professional liability policy and cover design professionals or other consultants against the possibility that, by signing credit submittal templates or other documentation in connection with a green rating system, they will trigger the standard exclusion to their professional liability policy that excludes coverage for claims arising out of an express warranty or guarantee. This is a critical issue for professionals and suggests the type of heightened vigilance with which green construction contracts must be vetted.

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