The "greening of America” is taking on a different meaning than in 1970, when Charles Reich first published his book of that title. Jurisdictions throughout the country are grappling with efforts to reduce negative impacts of our built environment. Membership in the U.S. Green Building Council is skyrocketing.
In addition, end-users and owners of buildings are interested in the potential benefits of owning and occupying green buildings. In the economic stimulus package, there are significant elements of funding for green-related projects, improving energy efficiency for existing structures. Some government agencies are mandating that their newly designed and constructed projects achieve specific levels of certification within the Leadership in Energy and Environmental Design (LEED) green building rating system.
These accelerating changes bring with them significant risks that have yet to reverberate through the construction industry or the court system. There are virtually no currently reported cases nationally addressing liability risks on green building projects. Now is the time to gain an understanding before you have a problem on a project.
From specifications of types of equipment, to design and installation of control systems, to actual operational and performance criteria, electrical design and installation is an integral part of green building and certification. Given the prevalence of green-related issues, you and your employees need to understand the issues and risks inherent in green building.
As jurisdictions, owners and end--users move toward insisting on specific LEED ratings for projects, the potential for litigation and liability increases dramatically. An owner who contracts for a structure that is to meet a specific LEED rating will not be happy if that requirement is not satisfied. That owner may claim the project is not worth what he or she contracted for, and that claim would likely have some weight in court.
Some jurisdictions are discussing requiring that a project owner or developer file a significant bond, letter of credit or cash to guarantee the project’s compliance with a specific rating requirement. If the project fails to meet that specific rating, the bond may be forfeited to the locality. The owner or developer then would look to potentially responsible parties for compensation. Because the bond forfeited would be in a clear and pre--established amount, the damages portion of such cases may be more difficult for defendants to attack.
Another ripe avenue for litigation centers on delay claims. Meeting the standards and installation requirements may be attainable but may translate to significant delays in construction or issuance of certificates of occupancy. While delay damages are traditional in construction litigation, the liability trigger of green building issues presents a new source of exposure.
The courts have said little to nothing. An owner in Maryland filed a case in which a contractor filed a lien claim against a project. The owner filed a counterclaim and argued it lost certain tax credits due to the contractor’s failure to timely obtain LEED Silver certification for the structure. The case apparently was settled, and there are no reported opinions offering guidance on how these issues will play out in court.
There is another case where the city of Albuquerque attempted to enact code requirements regarding energy efficiency that allegedly exceeded federal standards. Various national trade and contracting organizations filed a successful challenge and convinced a federal district court to grant an injunction barring application of the code. While there are rumors of other liability claims on green building issues floating through the construction industry, in particular involving design professionals, there is little in the way of hard data for interpreting and applying these issues and concepts.
If you are handling projects involving green building standards, educate yourself about the design and construction requirements applicable to your project as well as the rating requirements. You should not assume your typical contract or subcontracts are sufficient to address green building issues. Base form contracts often are completely or virtually silent on these topics. You should review your contracts and subcontracts thoroughly with your legal counsel to evaluate your risks and potential exposure.
These projects may be a lucrative source of business, particularly in today’s business environment; however, failing to assess and mitigate risk may be detrimental to your company’s interests.
This article is not intended to provide specific legal advice but instead is general commentary regarding legal matters. You should consult with an attorney regarding your legal issues, as the advice you may receive will depend on your facts and the laws of your jurisdiction.
HUGHES is counsel to the law firm of Bean, Kinney & Korman in Arlington, Va. He can be reached at email@example.com and 703.525.4000.