A/E/C Must Take Green Building

Risk Management Serioulsy

By Stephen Del Percio, ESQ, LEED-AP

As we move through the first quarter mark in 2007, the green building movement only seems to be gaining increased momentum with each passing week. All over the country, municipalities either greeted the New Year by ushering green building legislation into effect or opening up debates in state and local assemblies with respect to potential new initiatives. In New York City, for example, Local 86 became effective on January 1, 2007, requiring many municipally-owned projects in the Five Boroughs to meet LEED Silver. Starting in December, the Town of Babylon on Long Island will require both public and private development of at least 4,000 square feet to reach a LEED Certified level. What many in the industry initially perceived as a fad just a few short years ago is undeniably with us for good. While green building undoubtedly can offer both bottom line benefits to owners, as well as (more importantly) significantly ameliorate the environmental impact of buildings, it does present implications for project teams which traditional projects do not. Accordingly, each stakeholder in a given green project from a municipal owner to each design professional or contractor- should educate itself (and indeed will be forced to educate itself) with respect to the potential risks that its role in the project may present.

To date, very little has been written about risk in the green building context. In fact, in its 2006 Green Building White Paper, Building Design + Construction magazine called on the legal profession to produce some scholarly research on the topic. Many of the legal implications are obvious. With respect to projects seeking LEED certification, construction contracts need to be drafted in order to reflect the responsibilities of the various project team members in terms of documenting LEED credit compliance. This issue will become increasingly salient as more municipalities either mandate LEED as part of a local building code or require proof of certification from USGBC prior to handing out any particular incentive.

Spelling out these responsibilities up front is imperative. Suppose, for example, that an architect’s LEED Silver building,
designed to such a level for the purpose of securing some type of state or local tax incentive, only received LEED Certified because of a credit rejection from USGBC due to insufficient documentation? It is not difficult to imagine the owner looking to the architect or engineer responsible for that particular part of the design for some sort of redress, particularly if documentation responsibilities were not clearly identified by contract. It is therefore imperative that design professionals- and their attorneys- understand the LEED documentation process and appropriately allocate such responsibilities within agreements for green design and construction services.

Industry players in the New York City area, as well as across the country, are also concerned that green building rating systems may be adding additional layers of transaction costs to the already high costs of construction. Richard Anderson, President of the New York Building Congress, made this very point in an interview with Crain’s New York Business last month regarding Mayor Bloomberg’s proposed energy initiatives in connection with his PlaNYC 2030 program. “Everything is adding cost to development, whether it’s adding a component of affordable housing or a green component,” Anderson told Crain’s. “It’s getting to the point where new residential and commercial development is very expensive.”

If a public owner chooses to comply with a certain level of LEED certification or mandates any other green design should mandate that private development comply with a green building standard. How will such municipalities enforce these standards? Could an owner that’s denied a building permit or certificate of occupancy turn to its project team for some sort of recovery? Will municipalities end up discouraging development by pushing developers to other locales where green standards exist as incentives rather than the law? How the private sector responds to municipal green building mandates will help determine whether future green legislation is enacted as a carrot (tax credits, expedited building permits, or other incentives) or a stick (LEED-driven building codes).

Other implications are at this point more nebulous. For example, new technologies that the construction industry
is starting to embrace could present pitfalls for green project stakeholders. At last November’s Greenbuild conference in Denver, USGBC and Autodesk announced a partnership to integrate the company’s Building Information Modeling (“BIM”) software with LEED. BIM offers design professionals the ability to assemble project drawings into one central database from which a variety of sophisticated project analyses can be performed. In connection with announcing its partnership with USGBC, Autodesk surveyed architects about their expectations for using such technology. Forty-three percent expected to evaluate solar heating (up from twelve percent today) while fifty-three percent expected to conduct energy modeling and baseline analysis (up from twenty-five percent today). From a green building perspective, BIM software becomes an extremely powerful tool. It offers design professionals the ability to perform these types of analyses far more cost-effectively. However, it also leaves many legal questions unresolved. How, for example, will BIM impact a design professional’s ownership over its drawings that are plugged into the project database? Moreover, BIM may result in design professionals being held to a higher standard of care thanks to the technology’s ability to provide an unprecedented level of detail on project drawings. These questions are in their infancy and industry professionals must monitor them as technology continues to rapidly change the construction landscape.

Green building is undoubtedly here for the long haul and contractors and design professionals must consider the legal implications of both new technologies and rating systems like LEED. Sustainable design promises higher returns for every project stakeholder along with tangible benefits for the natural environment. However, in order for it to reach its fullest potential, owners and project teams need to make sure that they understand the risks involved and insist on strong contract language in order to protect themselves from the uncertainties and potential liabilities that may be lurking just below the green surface.