What are the legal implications?
Green building development presents significant legal risks, since it is a relatively new industry and there is little legal precedent. All participants are vulnerable, including developers and landlords, who market buildings to prospective buyers and tenants as achieving green certification; architects and engineers, who formulate plans and specifications to satisfy green certification requirements; contractors and subcontractors, who build in accordance with plans and specifications containing green concepts; green consultants, who assist in the certification process; management companies, who maintain and operate green buildings; and material suppliers and vendors, who market and sell green products. Litigation is more likely due to the lack of appropriate qualifications and experience of many designers, contractors and sub-contractors and the use of new and untested products, materials and processes.
Claims have been filed, and will continue to be filed, as a result of buildings failing to achieve certification, especially with more state and local governments moving toward requiring green compliance. For example, in Shaw Development v. Southern Builders, an owner claimed that it lost tax credits under a Maryland green building program since the contractor failed to construct the building in conformance with the LEED rating system.
Such claims may also include improper design and construction delays, as well as claims based on green products failing, such as mold claims based on water infiltration from green roofs and water retention as a result of using cork flooring.
Also, claims of negligent or fraudulent misrepresentation, deceptive trade practices, breach of warranties and other claims may arise as a result of unmet promises and expectations, as owners, builders and sales representatives aggressively market green buildings and products to prospective customers to obtain a competitive edge, especially if certification, energy performance and/or cost savings is guaranteed. This is often referred to as ‘greenwashing.’
For example, a tenant or buyer who has been persuaded to pay more for a green building because of what he or she expects to save on operating costs may file a claim based upon unmet expectations. However, unless a building’s performance has been measured over a period of several years after it has been occupied, such savings are only theoretical. According to a March 2008 study by the U.S. Green Building Council, of the energy use of 121 LEED-certified buildings nationwide, 25 percent performed significantly worse than design projections.
What does a company need to consider before it starts a green building project?
Before undertaking a green project, it is important to know and understand the green certification requirements, the procedures to attain green certification, and the requirements or incentives provided by a particular state or municipality. Also, it is crucial for green building participants to define their scope of services, with clear and unambiguous language, in contractual documents and marketing material, such that they have adequately limited their legal exposure.
MATT JACOB, Esq., is an attorney at Katz Barron Squitero Faust. Reach him at (305) 856-2444 or [email protected].
