Editor’s note: Going Green is a new monthly feature offering professional advice on financially effective sustainability strategies.
Business owners are “going green” because of people (their employees and clients), the planet and profits (cost savings). Properly designed and constructed green buildings make workers more productive and save energy expense. For example, the owner of Taiwan’s Taipei 101, touted as the world’s tallest green building, is spending $1.8 million in energy-efficiency upgrades but expects them to yield $20 million in annual energy savings.
The U.S. Green Building Council created the Leadership in Energy and Environmental Design (LEED) Green Building Rating System in 1998, and it is the most recognized third-party certification system in the commercial world. “LEED certified” guarantees a building or community was designed and built using strategies that improve performance across all the metrics that matter most: energy savings, water efficiency, CO2 emissions, indoor environmental quality, stewardship of resources, and sensitivity to impacts.
Using a highly defined scoring system, structures can be LEED accredited at four levels: Certified (40-49 points), Silver (50-69 points), Gold (60-79 points) and Platinum (80 points and above). There are 100 possible base points, plus additional points for design, innovation and regional priority credits. There are benefits for redeveloping previously used property, especially near public transit, and smart vegetation use; for cutting water usage and runoff; for energy efficiency, especially energy generation; for reusing materials, using materials produced easily nearby and cutting waste; for natural and well-controlled lighting, avoiding later indoor emissions, and maintaining temperate workspaces.
Projects require upfront application since LEED assessment begins even during design. Sustainable design and construction raises unique legal issues for all parties who touch the project. Here, however, are some strategies to minimize the potential legal risks.
• Don’t promise more than you can deliver – If you or your marketing materials promise or guarantee benefits that are not realized or disputed, the result can be a clash alleging fraud, false advertising, breach of an express or implied warranty, or other claims. The key is to monitor your marketing activities. Only promise what you can measurably deliver, and include clauses in your contracts that limit all warranties to those expressly provided in the contract. Do not guarantee the level of certification on a project unless required by law.
• Identify participants, roles and responsibilities – Many disciplines are involved in achieving a project’s green goals (whether LEED Certification or following Green Globes rating system guidelines). On most green projects, no one party is in control of obtaining all the points or goals. The parties must work together, but most importantly everyone must understand who is responsible for each aspect or goal. For example, if an owner wants a building with LEED Silver Certification, the parties should create a version of the LEED 2009 scorecard that clearly identifies which parties will be responsible (i.e., architect, general contractor, subcontractor) for achieving the various points. Make this document an addendum to each of the contracts on the project. Select an experienced green building team and consider clauses in their contracts affirming the contractor and/or subcontractor has read, understands and will comply with the LEED or green requirements.
• Include a mutual waiver of consequential damages – Although many construction contracts include mutual waivers of consequential damages, it is unclear whether courts would consider lost tax incentives and/or credits, decreased energy savings, decreased water bill savings, green grants or future development rights as consequential damages. They should be expressly included in the clauses waiving consequential damages.
• Don’t tie payments to achievement of certification – GBCI is a third party that decides whether various points and levels of LEED Certification are achieved, and final determination can take up to a year after substantial completion. Don’t tie payments to achieving certification. Consider a clause stating attainment of certification shall not be a condition precedent to progress payments or the final payment on the project.
• Include a notice and opportunity to cure – Green projects tend to use new materials and technologies that do not have a long track record. Specify who will bear responsibility for maintenance of building components, and who will bear the risk if a manufacturer goes out of business or the component malfunctions. Also incorporate a clause that the owner must give contractors notice and an opportunity to cure or correct any alleged defects prior to withholding payments or hiring another contractor to redo the work.
These are only a few of the steps you can take to minimize the risks of green design and construction. To learn more about ways you can maximize the impact of your green project while minimizing risks, contact a construction attorney with certified green expertise.