Over the past two years, I have written extensively over at gbNYC about the potential for litigation arising out of green construction projects. The country’s first reported green building litigation – Shaw Development versus Southern Builders – is an excellent example of how hidden green building risks can present unconventional legal issues to construction industry stakeholders and their counsel. It is critical to note that the case does NOT discuss the contractor’s failure to achieve LEED certification on behalf of the owner (as many articles referencing my original post at gbNYC have incorrectly asserted). Rather, it suggests the importance of accurately translating green building regulatory requirements into construction documents.
Author Archive | Stephen Del Percio
In an article that we recently posted over at gbNYC, green building attorney Paul D’Arelli of the Greenberg Traurig law firm calls San Francisco’s new green building legislation “LEED on acid.” Mr. D’Arelli points out that San Francisco’s new legislation now penalizes developers who redevelop real property, holding them to a higher green standard than developers who are building on vacant parcels. For example, if a project involves demolition work, it must achieve an additional 10 percent in LEED points in order to comply with the ordinance. “There is no correlation required in terms of the extra points required to comply with the mandated 10 percent increase and the goals sought to be advanced in rehabilitating rather that redeveloping buildings, namely preserving embodied energy and materials in existing buildings and reducing the consumption of energy and materials in constructing new building,” D’Arelli writes.
I think it’s interesting to compare the treatment that green building risk management issues received at Greenbuild as compared to West Coast Green. We pointed out over at gbNYC earlier this fall that the latter included a panel discussion titled “Packing a Parachute: Practices that Minimize Risk and Prompt Best Use of Green Features,” while the legal issues associated with building green received very little attention at Greenbuild. As we have noted extensively at gbNYC, the West Coast Green panel similarly stressed that there is no such thing as a form green construction contract or “magic” green provision that can satisfactorily account for the risks associated with green construction. It’s important for stakeholders – or other organizations staging similar conferences – to recognize that attorneys in this space are attempting to assist the industry in mitigating emerging risks up front, in the transactional context, rather than through litigation.
Back in early October, Chief District Judge Martha Vazquez of United States District Court for the District of New Mexico granted a preliminary injunction in favor of a number of HVAC industry plaintiffs who are challenging the legality of certain Energy Conservation Codes in the city of Albuquerque. The suit alleges that applicable federal legislation already exists for the same equipment that the Codes purport to regulate, thereby preempting the proposed codes. Over at gbNYC, we frequently discuss the problems with green building regulatory schemes, many of which have been crafted quickly and without consideration of broader legal ramifications. Judge Vazquez’ opinion, in fact, noted this very issue, pointing out that “the drafters of the code were unaware of the long-standing federal statutes governing the energy efficiency of certain HVAC and water heating products and expressly preempting state regulation of these products when the code was drafted and, as a result, the code, as enacted, infringes on an area preempted by federal law.”
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.
In spite of facing massive budget shortfalls, New Jersey legislators will consider two different green building bills during their 2008-09 term. We reviewed both bills over at gbNYC earlier this fall; one would require affordable housing developers to include sustainable design features (though not formal third-party certification) while the second would offer low-interest loans to developers who achieve a LEED Silver level of certification. As the economy worsens, though, it will be a tough sell in Trenton to hand tax breaks to private interests. I expect that green building legislation across the country will face similar scrutiny- particular if litigations like the AHRI case in New Mexico cause legislators to more carefully consider how their regulatory schemes are crafted.
Green roofs may be pretty but they are a plaintiff construction lawyer’s dream come true. Many of them leak or contribute to indoor air quality issues and the growth of mold. Commercial insurers- including Zurich- are taking note, and advising their insureds to make sure that their green roofs are being properly maintained and were installed as required in the first place. Over at gbNYC, we pointed out an article in Property Week magazine that quoted a Zurich consultant noting these concerns. Part of the solution, as always, is to consider a comprehensive risk management program in advance of a green project designed to mitigate non-traditional sources of risk unanticipated by the project team.