According to a recent energy study that was prompted by an inquiry from the Charlotte Observer, Charlotte, North Carolina’s ImaginOn library building is using twice as much energy as predicted by the project’s LEED Version 2.0 for New Construction energy model.
Although the costs of auditing were raised by opponents to the plan earlier this year, mandatory energy audits are now required every ten years, though buildings certified under LEED 2009 for Existing Buildings: Operations & Maintenance or which receive EPA’s Energy Star label are exempt. It’s this exemption that’s of particular interest to us here at GRELJ.
If either the landlord or tenant breaches a green provision in a lease, what specific rights and remedies – if any – does the lease provide to the parties? The New South Wales Police Headquarters Building, just outside of Sydney, Australia, features a lease that gives the tenant a rent reduction if the landlord fails to maintain a certain level of third-party green building certification.
While California’s recent adoption of a state-wide green building code once again has green building legal practitioners focused on the legal issues surrounding green building legislation, the antitrust implications of incorporating LEED or other third-party green building rating systems into state- and local-level legislation has yet to be fully explored.
The ConsensusDOCS 310 Green Building Addendum is the second form contract exhibit to be released by a major North American A/E/C organization for use on green building projects, but the first to make a significant attempt at allocating green building-related risk amongst the project team.
According to an article that appeared last week in Eagle River, Wisconsin’s Vilas County News-Review, a group of local residents have filed a 125-page complaint with USGBC that challenges the award of LEED Gold certification to the Northland Pines High School.
USGBC’s Green Lease Guide does much more than just discuss the split incentive that’s a major barrier to implementing a truly green lease; it provides tenants with a form environmental impact questionnaire designed to assist them in vetting potential properties, as well as eleven pages of sample green lease provisions. The Guide is primarily written for commercial office tenants, but landlords will find its background information useful as well.
The Green Tragedy: LEED’s Lost Decade was released while I was away last month. Author and Community Solutions executive director Pat Murphy traces the historical argument promoting minimal green building cost premiums, reviews the ongoing marketing effort behind LEED, and concludes that policy makers should demand energy efficiency standards more akin to the German Passive House rather than “cheap quick ‘green’ solutions.”
Recent efforts by Atlanta’s restaurant industry to resist proposed green building legislation implicate the conclusions of NIBS’ report about state- and local-level green building policy which we noted last month here at GRELJ. The Atlanta Sustainable Building Draft Ordinance would require the city’s commercial buildings and residential dwellings three stories or higher to comply with either LEED or specifications drafted by the Sustainable Atlanta committee. What’s particularly interesting about the pushback is the extent to which it reflects the conclusions in the NIBS report; for example, Keisha Carter, director of public affairs of the Georgia Restaurant Association, stated in a recent piece in Nation’s Restaurant News that “[t]here needs to be more due diligence on this before the city council can even consider passing it. There is a lot of political play going on with this thing, but we’re trying to stay on top of it and be heard. There is major concern that it will pass, but the members of the city council must come to realize it’s not in any shape to be passed just yet.” This comment reminded me of language in the NIBS report which noted that “[a]t an increasing rate, state and local governments and their code/regulatory agencies are adopting building rating / certification systems, intended as voluntary systems, to be their code or regulatory requirements, often without fully understanding their benefits, tradeoffs, and costs.”
Back in June, a Winnipeg developer unveiled 1735 Corydon Avenue, a 2-story, 12,800-square-foot office building which is the first in Canada’s Manitoba province to require all potential tenants to sign a green lease.
In September of 2008, the Board of Directors of the National Institute of Building Sciences (“NIBS”) assembled a Task Group of design professionals, builders, and its own staff members to review third-party building performance rating systems and associated individual accreditation programs currently in use across the United States. The Task Group identified twenty systems and programs and interviewed representatives from AIA, ASHRAE, BOMA, GBI, NAHB, EPA, USGBC, and Victor O. Schinnerer & Co.. among others, in compiling its “Report on Building Rating and Certification in the U.S. Building Community,” which was released last month.
Back in 2007, the Energy Engineering Program at the University of Massachusetts Lowell completed a study of the actual energy performance of 19 green buildings across the Bay State. The study was funded by the Massachusetts Renewable Energy Trust and identified 13 schools which were certified under the LEED-based Massachusetts Collaborative for High Performance Schools Criteria, as well as 6 buildings that had earned LEED certification. The study compared energy consumption as predicted during the design phase and actual occupancy post-construction; buildings included in the study provided at least one year of occupancy data. The authors also interviewed individual project teams and energy modelers and conducted occupancy surveys in evaluating the effectiveness of various types of efficiency measures. All of the buildings received design or construction grants from the Massachusetts Technology Collaborative, which provided the prediction data that project teams had submitted in connection with their funding applications. Although the study concluded that these 19 green buildings were consuming (on average) 40 percent more energy than predicted, all of the buildings were consuming less than a building designed to Massachusetts baseline building codes. The disparity in predicted versus actual energy consumption is probably not surprising, but the study did identify a number of issues common across the buildings which resonate with many of the technical and operational provisions of documents like the Model Green Lease. I think it is therefore worthwhile to review the study both from a green leasing perspective, but also in terms of LEED, particularly because the Lowell study has not been referenced in many of the recent articles discussing the ongoing LEED performance gap.
Last Wednesday, I had the opportunity to join a panel discussion on green leasing at the Urban Green Expo here in New York City. The session, which was titled “Green Leases: Aligning the Incentives of Landlord and Tenant,” presented the results of four projects which aim to provide brokers, landlords, tenants, and their attorneys with guidance towards creating more sustainable leasing structures. The projects, which may be familiar to you, were the Real Property Association of Canada’s (REALpac) Green Office Lease, the BOMA Green Lease Guide, and the NRDC’s Green Lease Forum, which aimed to create a set of principles for lease negotiations and other recommendations for making existing leases more energy efficient. I presented the Model Green Lease Task Force’s Model Green Lease- an effort which, as you may know, was spearheaded by green leasing guru Alan Whitson (who has contributed here at GRELJ previously in an insightful response to an article that we wrote on environmental performance objective clauses). Unlike the BOMA Green Lease Guide (created by Jones Day partner Steve Teitelbaum, who also participated on the panel), the Model Green Lease is an extremely compact document, drafted from scratch, which is fundamentally based on the theory that, in order to make a more compelling business case for green buildings, leases must be crafted as gross (i.e., the landlord is responsible for building operating expenses, unlike in a net lease, where the tenant pays for its own share of those costs). The document, which also includes a corresponding reference guide, comprises just 17 pages plus exhibits and incorporates ten essential elements that aim to support a specific definition of a green building created by the Task Force for purposes of the project: “[a] building that is environmentally responsible, profitable and a healthy place to live or work.”
Green building consultant Jerry Yudelson delivered two keynote addresses earlier this month at an event sponsored by the Central Texas Green Building Council. According to a press release, during the course of his remarks Yudelson “presented clear evidence that high-level green outcomes add significant value to buildings. ‘What part of a 30 percent increase in value from LEED certification is hard to communicate?’ He challenged architects and engineers to do a better job of advocating for green building with their clients. ‘You are doing your clients a disservice by letting them build projects without LEED certification,’ he said. ‘It almost amounts to dereliction of your duty as professionals.’” As you likely know, this latter remark about the design professional’s responsibilities in the green building space is exactly the opposite of what many construction attorneys have been preaching over the past few years as best practices for architects and engineers. Putting aside for purposes of this article any analysis of Mr. Yudelson’s claims of 30 percent increases in value for LEED-certified buildings, I think his 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.
The San Francisco Chronicle has picked up on the recent flurry of commentary generated by Mireya Navarro’s piece in the New York Times about the LEED building performance gap. The article opens up by stating “[r]evelations that many buildings certified as green under a broadly accepted national standard for energy savings are not performing as well as predicted recently prompted changes to the [LEED] program and are forcing San Francisco officials to consider amending city rules that are tied to the older guidelines.” However, a closer look at the substance of the article suggests that city officials may actually be trying to expedite the application of the LEED 2009 system and its corresponding Minimum Program Requirements (“MPRs”) to large, private construction projects. (As you will recall, the new MPRs require that projects which pursue LEED certification to “commit to allow USGBC to access all available actual whole-project energy and water usage data in the future for research purpose” or risk decertification.) I also think the piece is noteworthy because it suggests an inextricable link between increased data reporting and increased building performance.
Mireya Navarro’s recent piece in the New York Times about the energy performance of LEED buildings does not really shed much new light on a topic that many of us have been paying close attention to for the past two years, particularly in the aftermath of the controversial New Buildings Institute study that claimed LEED buildings performed, on average, 25 percent better than the CBECS database. Nevertheless, Navarro’s piece seems timed to coincide with USGBC’s press release of August 25 that announced a new Building Performance Initiative which will complement the LEED Version 3.0 Minimum Program Requirements’ ongoing performance data reporting obligations in order for projects to maintain their LEED rating and avoid the unsavory potential consequences of decertification. Any commentary on this press release – at least in the blogosphere – appears to have been lost in the August doldrums, but I think it is worthwhile to consider an effort which could ultimately have major repercussions for the underpinnings of the LEED system itself. However, many building scientists will tell you that simply collecting more data does not necessarily translate into improved performance. Consider (after the jump) the following letter that was submitted to the New York Times by ASHRAE Fellow and Distinguished Lecturer Larry Spielvogel, P.E., in response to the USGBC press release announcing the Building Performance Initiative, which Mr. Spielvogel was kind enough to allow us to reprint here at GRELJ.
As you likely know by now, Atlanta-based Energy Ace, Inc. recently announced that it will offer what the company is calling the green building industry’s first LEED certification guarantee. According to Energy Ace CEO Wayne Robertson, the firm “can offer clients a certainty that their project is going to be certified and remove that anxiety.” The specifics of the guarantee are as follows: clients retain Energy Ace pursuant to a standard service contract under which the firm performs LEED administration, fundamental building commissioning, and energy modeling. It holds a LEED charette and, if everything is satisfactory, the contract will be amended to “guarantee” certification. That guarantee, though, actually reads in substance much more like a limitation on Energy Ace’s liability; if the project fails to earn its target level of certification (i.e. Gold or Silver) or is not certified at all, Energy Ace will refund its LEED administration fee to the owner (which is typically between 30 and 45 percent of its total fee). Although there are a number of additional facts that would be helpful in analyzing the implications of the Energy Ace initiative more comprehensively, I do think it provides us with a timely opportunity to review a number of important general construction contract and insurance coverage considerations, many of which we have considered here at GRELJ during the course of 2009.
Some interesting legislative developments are taking place right now in Nashville, Tennessee that implicate many of the green building policy issues that we’ve been wrestling with over the past few months here at GRELJ. Since 2007, metropolitan Nashville has required most new and major public projects to larger than 5000 square feet or costing more than $2 million to earn LEED certification. Recently, city councilman Duane Dominy of suburban Antioch introduced legislation that would “allow the Metropolitan Government to pursue an alternative sustainable development design standard to LEED certification based upon pre-determined energy reduction and efficiencies. If Metro chose to pursue an alternative to LEED, the contractor would be required to warrant for a three-year period that the annual energy use for the building will be less than similar buildings” or will earn a minimum score under EPA’s Energy Star program.
“LEEDing from Behind: The Rise and Fall of Green Building” is a survey piece by Community Solutions executive director Pat Murphy that reviews the significant body of critical commentary on the energy performance of LEED buildings that emerged beginning in 2005 with Randy Udall and Auden Schendler’s seminal “LEED Is Broken – Let’s Fix It” article. Mr. Murphy’s stated purpose in writing his piece was to “show the history of the dialogue about LEED energy performance.” Many of the articles cited will be familiar to you, but this is the first time that I have seen all of them organized chronologically with their key points about LEED-related building performance highlighted. I think that reviewing the piece is extremely instructive in terms of framing both green building policy-related issues, as well as corresponding risk management considerations, from a much broader perspective. Mr. Murphy concludes that “[t]here has been concern with the LEED rating system relative to energy and CO2 since its inception. . . . LEED has failed to lead in the important areas that are measurable. Initially, [USGBC] adopted a weak status relative to energy consumption. [It] did not recognize and incorporate accountability and verification, unfortunately wasting years that could have providing important feedback relative to energy use. [It] has also not clearly and honestly communicated that LEED is not an exemplary indication of energy performance.”
On July 1, new green building legislation applying to private development took effect in Baltimore. Council Bill 07-0602, which was signed in August of 2007, required that the city establish green building standards for new or substantially renovated commercial and multi-family residential buildings larger than 10,000 square feet. City-owned buildings were required to comply with the new legislation beginning January 1, 2008, city-subsidized buildings by January 1, 2009, and all other buildings this past July 1. While the city is developing its own Baltimore-specific green building standards that should be released by the end of 2009, in the interim, in order to obtain a building permit, all buildings applying must be “equivalent” to LEED Silver. The legislation does not require formal LEED certification, but owners must submit a checklist for the appropriate LEED rating system as part of the plans submittal for a new building permit. Checklists must set forth specific credits the project will pursue, briefly describe how each credit will be achieved, and (interesting to note from a legal perspective) the parties responsible for each credit. The checklist must also be signed by a LEED AP who is not an employee of the building owner at the time of submittal. Again, although certification is not required, in order to obtain a building occupancy permit from the city, at the time of occupancy permit application, project teams must submit a completed checklist indicating which credits the project met successfully, signed by a non-employee LEED AP. As we’ve discussed frequently here at GRELJ, all of these requirements could raise interesting- and novel- liability issues in the event that a project fails to receive a building permit or certificate of occupancy as originally contemplated. However, the city’s development community is calling for Baltimore’s City Council to reconsider the legislation based on perceived additional green building first costs and asking it to propose an incentive-based structure in its place.
