By Stuart D. Kaplow, P.A.
Green building presents huge opportunities for architects, developers, and builders, but, at the same time, presents new and different potential liability for construction industry professionals.
More schools, offices, libraries, churches, hospitals, etc. are being designed and constructed as green buildings than ever before.
Just as there is not one homogenized building type, there is not one single widely-accepted definition of green building (also known as sustainable construction). Most green buildings share the characteristics of such things as reduced energy use, water use, solid waste, CO2 emissions, to name a few. The job of construction industry professionals is increasingly more complicated in building green because there are a myriad of green-building standards, codes, and rating systems.
Standards are developed and published to define minimum values of acceptable performance. Among the most widely applied green standards, the ASHRAE Standard 90.1 provides minimum requirements for the energy efficient design of buildings. The ASHRAE Standard 189.1 provides a “total building sustainability package” to design, build, and operate green buildings.
Significantly, the United States Department of Defense, the largest owner of green buildings in North America, uses a variant of ASHRAE 189.1-2009 in its Unified Facilities Criteria.
Modern building codes are the law. The International Green Construction Code is a significant leap from the life safety-based traditional building codes. And the ICC 700 National Green Building Standard for residential buildings and lots is also a far cry in scope from traditional building codes.
The ICC 700 is a uniquely-drafted code in that it can be used by any builder for their individual project as a rating system (including third-party approval). It can also be the basis for a local government residential green building code. There are also several geographically local green codes, most notably California’s CalGreen.
And while not strictly a “green” code, the International Energy Conservation Code is now widely adopted across the country, encouraging energy conservation through efficiency in design, mechanical systems, and lighting systems.
Green Rating Systems
There are a host of third-party green building rating systems, and each provides a set of metrics to establish priorities. Among the most commonly used green building rating systems in the U.S. are Energy Star, Green Globes, the Living Building Challenge, and LEED®.
Today, the U.S. Green Building Council’s LEED, with a more than 90 percent market share among green building, is the nationally accepted benchmark for the design, construction, and operation of high-performance green buildings.
Adding to the complexity of specifying, the standards, codes, and rating systems are updated from time to time. By way of significant example, given LEED’s market share, owners will only be able to register projects under the LEED 2009 rating system (LEED v3) until October 31, 2016. Thereafter, all projects must register under LEED v4.
Construction industry professionals advising owners about green building alternatives must pay particular attention to the emergent body of green building law across the country. Increasingly, governments require that government owned and leased buildings be constructed to an articulated green-building requirement.
In a widely-admired regulatory scheme, governments offer voluntary incentives to private developers, such as tax breaks, direct grants or loans, or advantages in processing approvals for green buildings. And with growing acceptance, governments are mandating by law that all new construction or major renovations which exceed a certain square footage – whether public or private – must meet green-building requirements.
While, so far, there has been relatively little litigation over green building; construction industry professionals should be cognizant of the Federal court judgment last year (and associated multi- million dollar settlement) of the disputes over the first LEED Platinum building. This suit involved specifying new or untried materials and products (that are often the keystone of green building).
The most significant take away from Chesapeake Bay Foundation et al v. Weyerhaeuser et al, is that properly-drafted contract documents are the best sword and shield for mitigating risk in the green building realm.
The key parties to the litigation were the Chesapeake Bay Foundation, the owner of the project; SmithGroup, the architect; Clark Construction, the general contractor; Weyerhaeuser, the subcontractor that supplied Parallams (i.e., a then new, environmentally-friendly fabricated wood product made by gluing strands of second-growth trees together) to Clark Construction; and Permapost, a subcontractor applying pressure-treated PolyClear 2000 preservative to the Parallams.
According to the pleadings, one of SmithGroup's design elements was the use of external Parallams. SmithGroup approved PolyClear 2000 as the preservative for the Parallams. Permapost treated the Parallams with PolyClear 2000; however, Permapost did not properly treat the Parallams as required.
The Chesapeake Bay Foundation discovered that exterior Parallams suffered from deterioration. The Foundation demanded that SmithGroup and Clark remedy the rot and deterioration by removing and replacing all of the exposed Parallams.
The trial court judge (in a court proceeding more than 15 years after substantial completion of the building), after determining there were “design defects which exposed the end of each and every exterior use Parallam in that entire project” because they were cut and had holes drilled in them after being treated, concluded, in this telling quote, that “these beams would have failed if the PolyClear 2000 had been properly applied a year or two later, they would have failed well before they got around to doing any remedial measures at all.” The judge said, “I find as a matter of law that causation has not been established. They have not shown that the breach of contract ... that what Permapost did caused the damages that led to the replacement.”
Whereupon the court denied the Weyerhaeuser third-party claims entering “judgment in favor of Permapost on all counts.”
At its core, this was a case arising from improperly-specified material. The case instructs there is no more liability arising from green building versus any other construction, but that the liability is different.
Specifying new or untried materials and products come with unique risks. In this case, the risks arose even before the current emerging era of expanding liability arising from environmental product declarations (EPDs) and their cousin, health product declarations.
EPDs are a method of quantifying the environmental impacts of a product. They are analogous to the nutritional label on a box of cereal. In the context of green building, EPDs will provide a way to describe the environmental impact, including the conclusions of a life-cycle assessment, of a building material or product.
EPDs are among the hottest topics in green building. But all of this is cutting edge, in particular in the U.S. where EPDs are soon to be crucial in green building because LEED v4, Green Globes®, the IgCC, and ASHRAE 189.1 each recognize EPDs. But all should beware of potential liability from the unknown and lack of conformity among EPDs. This lack of conformity in EPDs may represent the greatest new and upcoming risk in green construction.
How You Can Mitigate Risk
The best way to mitigate risk in a sustainable project is a properly-drafted contract. And, while this law firm makes a business of drafting and revising contact documents, there are already very good contracts currently available in the marketplace.
There is the ConsensusDocs “Green Building Addendum,” where the parties designate a Green Building Facilitator to coordinate or implement identified objectives. This “facilitator” can also be a project participant or consultant.
This structure is ideal in identifying what are termed Elected Physical Green Measures (unique and other additional services necessitated by sustainable projects).
The ConsensusDocs Addendum also includes an express Risk Allocation provision that limits liability for failure to achieve Green Measures, and further contains a waiver of consequential damages.
Readers can register at http://www.ConsensusDocs.org to download a sample of the ConsensusDocs Green Building Addendum.
Surprisingly, in an unscientific (but comprehensive) review of the last 100 sustainable construction industry contracts forwarded to this law firm in a potential construction dispute, less than 10% had properly-drafted provisions addressing the disputed green building matter. Just over 50% of those contracts had any meaningful sustainable project specific language at all.
Now is the time to revise your contracts for green building projects, to include appropriate sustainable project provisions.
About the author: Stuart Kaplow is a sustainability and green building attorney based in Maryland at the law firm that bears his name, Stuart D. Kaplow, P.A. He publishes the http://www.greenbuildinglawupdate.com blog, which is widely read by the entire environmental industrial complex (not just for lawyers). He can be reached at firstname.lastname@example.org.