Around the Web in Construction Law – April 23, 2010

These past two weeks, there  were some interesting Chinese Drywall posts, a great deal of Green Building issues in the news and a milestone in modern social networking.

• Chinese Drywall in Louisiana.  Timothy R. Hughes of the Virginia Real Estate Land Use & Construction Law Blog posted about the Economic Loss Rule as it relates to the recent Chinese Drywall verdict. The Home Builders’ Association of New Orleans asked the Louisiana Recovery Authority for $100M to cover Chinese Drywall repairs, and a prohibition of insurance companies dropping coverage of Chinese Drywall affected homes advanced in the Louisiana Senate.
• Green Building. First Chris Hogan of the South Jersey Commercial Real Estate Today Blog discussed the the “Green” Dilemma. The benefits (and ease) of a green roof are illuminated on The Journal of Light Construction Blog. The Seattle Daily Journal of Commerce’s Building Green Blog shared Frank Gehry’s opinions on LEED, and Intel achieved the first LEED Gold Certification given by the US Green Building Counsel.
• Lagniappe (or a little something extra). Finally, the Library of Congress announced it will archive every public tweet since Twitters March 2006 inception.

Washington Legislation Wants to Define “Green” Homes

My wife and I were looking for condominiums in the Seattle area a few years ago, and every place we inspected marketed themselves as “green built.”   Being a LEEP AP, I asked a few questions about what the label meant.   Most of the time, it meant nothing.

That’s precisely what a new bill in the Washington legislature is trying to prevent.

The practice of deceptive green marketing has a name.   Wikipedia defines Greenwashing as follows:

Greenwashing (green whitewash) is the practice of companies disingenuously spinning their products and policies as environmentally friendly, such as by presenting cost cuts as reductions in use of resources. It is a deceptive use of green PR or green marketing.

Greenwashing is so serious it has its own Greenwashing Index.

The new bill was introduced just this January 2010 by Senators Becker and Fraser, and requires the state building code council to adopt rules to define “green” home and “energy efficient” home for residential units and residential buildings.   It seeks to prohibit builders and developers from marketing or selling a home as “green” or “energy efficient” unless it meets the specifications.

As currently written, the code must be written by December 2012.  Thus far, the bill has strong support.

Builders and Developers should keep a close eye on this legislation, especially as they begin new projects in the coming years hoping to market the project to green-seeking buyers.

If the bill passes, it will be interesting to see how the definitions are drafted, and whether they will incorporate already existing certification programs, such as the U.S. Green Building Council’s LEED program (as a recent amendment to the bill suggests).   Follow the bill at Washington Votes here, or stay tuned to the Northwest Green Building Law Blog.

This article was originally posted on Wolfe Law Group’s topic-specific Northwest Green Building Law Blog.

University of Washington Aims to Make Roads Green

Guardian News ran an article last week about “Greenroads,” opening with these daunting statistics:

With 4m miles of highway, the USA has around 10% of the entire planet’s paved roads – and spends $85bn (£52bn) annually on rolling out tens of thousands more miles. Building and maintaining a single mile of freeway takes as much energy as 200 US homes use in a year, consumes as much raw material as 1,000 households get through in 365 days and generates more waste than 1,200 homes produce annually.

Wow.

The good folks at the University of Washington have been focused on the greening of roads, and have announced the development of a rating system for road construction.

The “Greenroads Sustainability Performance Metric” works a lot like the U.S. Green Building Council’s LEED program, awarding credits for approved sustainable practices.     The metric already has a bit of support from states according to the Guardian article and the Greenroads website, which states that Greenroads “already has the support of five US state departments of transport.”  Greenroads is following a few projects as “case studies,” one of which was the I-90 West of George paving project in Washington.

Interesting metric system creating that is worth following, as it may one day change the way states and the federal government pave all their roads.

This article was originally posted on Wolfe Law Group’s topic-specific Northwest Green Building Law Blog.

Green Building Regulations: Can the LEED Rating System become law?

There is a growing debate on whether or not legislatures should seek to codify and incorporate provisions of the LEED rating system into state and local law. The debate is now hitting the blogosphere.

One of our favorites, Chris Cheatham, over at the Green Building Law Update has theorized that there are three simple reasons why codification of the LEED rating system will not work: (the following section is take in direct quote from his site)

“1.  There are troubling antitrust issues associated with the LEED rating system.  These antitrust issues are significantly exacerbated by the incorporation of LEED into regulations or building codes.

2.  The LEED rating system was never intended to be codified.  In fact, the LEED rating system is meant to apply to only 25 percent of new construction starts.

3.  I believe the USGBC has recognized the problems associated with codification of the LEED rating system.  In response, the USGBC, along with other groups, is quickly pushing along publication of ASHRAE 189.1P, which codifies many of the elements of the LEED rating system.  This is just a hunch, but I anticipate that the USGBC will start urging jurisdictions to adopt ASHRAE 189.1P instead of the LEED rating system.”

I think Chris has some good points, as he seeks to illustrate why LEED codification is simply not practical. But please check out Chris’ comment board – he has plenty of detractors.

I, for one, agree that the 25% rule does limit the ability of governing agencies to effecively regulate new construction. As is posed in this dizzying display of what the LEED 25% rule is composed of, you will understand that it means that only 25% of new construction starts or ground-breakings are actually intended to meet LEED certification.

But, there are certainly problems with the allegations that there might be an antitrust problem. All building standards (and other standards) come from a single source at some point and time. So, its likely that this is not as big an issue as posed in the article.

In any event, Jim Broughton posted a nice counter-comment discussing support for codification of LEED ratings. Check it out here.

It remains to be seen whether or not codification is a possibility – but it certainly raises a good topic for discussion.

This article was originally posted on Wolfe Law Group’s topic-specific Northwest Construction Law Blog.

Uh-Oh: I Made A LEED Mistake And Don't Know What To Do

LEED projects are hotter than ever, especially with the amount of public works projects being funded by the Stimulus package. As more and more LEED projects get underway, more and more mistakes occur. Unfortunately, mistakes all too often lead to disputes and litigation.

I Don’t Get It? LEED What?

Here is the readers digest explanation of LEED projects.

A property owner or public entity wants to construct its project to be environmentally friendly. In doing so, it can seek a certification from one of many organizations – one of which is the U.S. Green Building Council, who certifies a project as a LEED project (Gold, Silver, Platinum, etc. – depending on how green it is).

Seeking certification carries certain benefits (i.e. PR, tax credits), and in some circumstances certifications are required.

Certification is achieved by meeting two types of goals.

On the one hand, the project meets the goal of saving energy in the construction process. This is done by purchasing materials manufactured locally (to prevent the environmental price of long-range delivery), recycling materials, creating a job site that meets debris and water run-off requirements, etc.

On the other hand, the project meets the goal of saving energy while in use post-construction. This is done by using energy efficient appliances and lighting, planting trees and reducing the “heat island effect,” enhancing the quality of life of those who will spend time in the building, etc.

The LEED certification is achieved by collecting points. For each sustainable goal met by the project, a point is awarded. A project must accumulate a number of points for certification, with the level of certification increasing with the collection of additional points.

Those administering LEED projects spend a great deal of time planning the construction project to ensure that the proper number of points are accumulated…and sometimes, it’s a close-call.

How One Contractor Can Hurt A Project’s Chance At Getting LEED Credits

After the planning phase, work on the project begins, and the property owner or architect will depend upon each supplier and subcontractor to performing its work or delivering its materials to qualify for LEED credit. Work performed or supplies delivered incorrectly can easily result in the loss of a LEED point.

Let’s take the example of concrete.

The LEED system requires concrete used in a parking lot or a rooftop to be a certain color to achieve LEED credit (LEED credit 7.1 requires concrete to meet certain color requirements to reduce the “heat island effect” for example).

Let’s say that the concrete subcontractor is a bit asleep at the wheel, and pours the wrong concrete. The concrete solidifies, and the owner/architect doesn’t notice for a few days (if not later!) that the concrete is incorrect.

That LEED point is lost.

The LEED Point is Lost….but Now What?

This is a very concerning question for the construction industry, and many legal experts are at a loss in predicting just how this will play out in the courts. The problem is more complex than it seems at first glance.

Let’s assume that a subcontractor or supplier actually was required to perform in a way that would qualify for LEED credit, and that it failed to do so for reasons that are 100% its fault.

The next question is tough: What are the damages? In answering this question, let’s look at two scenarios:

Scenario 1: The LEED Point is lost, but the LEED certification is still achieved.

This is entirely possible. While the construction planning often cuts LEED certification points close, there is usually at least some cushion between the points a project should get, and the points it is required to get. So, in theory, a subcontractor or supplier can completely mess up, the LEED point can be lost and the project may still get its certification.

If this happens, did the owner/architect sustain any damages? The answer is….possibly.

In some instances, the idea behind a LEED point is not just to get a certification…the owner may also be interested in energy savings. Let’s take our concrete example again – if the correct concrete was poured, this could theoretically cool off the project’s premises. This may result in lower energy bills during hotter months.

While the failure to gain the point may not have cost the owner certification, it may cost the owner thousands of dollars in energy savings over the coming years.

Other types of examples, however, may yield more complex results. There may not be any calculable damages for accidentally failing to buy locally manufactured materials, for example. If its the same materials – just manufactured somewhere else – there may not be any damages beyond the loss of a LEED point.

Scenario 2: The LEED point makes a difference

What if the LEED point costs the project’s LEED certification? What damage is sustained?

Calculating these damages may be more realistic in some circumstances versus others. If the property owner sought certification because it was required, or because of a desired tax break….the damages can at least be quantified. If, however, the owner was simply doing it to feel good, or for good PR, there will be much debate about just what – if any – monetary damages were sustained by the LEED failure.

Concluding

In the end, one issue that owners must remember is that they will have the burden at trial in proving their damages, and likely being required to prove it by a preponderance of evidence. Calculating the cost of losing a LEED point or the loss of theoretical energy savings can be quite tough. With that in mind, owners may want to consider liquidated damages provisions for these types of a defaults….and those signing contracts with owners or GCs may want to be weary of the same.

This article was originally posted on Wolfe Law Group’s topic-specific Louisiana Green Building Law Blog.

Green Building Council Publishes New Manual on Green Leases

The U.S. Green Building Council’s LEED® has recently released the newest in its line of guidebooks. LEED (Leadership in Energy and Environmental Design) is the foremost authority in green building construction, conservation and sustainability.

Then new guide book is entitled “Green Office Guide: Integrating LEED Into Your Leasing Process” It is a comprehensive guide on how to incorporate green building techniques into the landlord / tenant contractual relationship.

Previously LEED has published guidebooks covering green new construction, renovations and other construction areas. This is the first time they have ventured into the lease contract. This guidebook can be very beneficial for those landlords who want to require tenants uphold green standard when occupying a property.

Katie Rothenberg, of the Green Building Council comments on the guidebook: “It is written to provide critical background content as well as functional tools (including lease language and site selection checklists) that can be used throughout the transaction.”

So if you are a tenant, whether it be your home or business, or a landlord and sustainable, renewable, green practices are what you are looking for then this guide book can be found at the Council’s website.

This article was originally posted on Wolfe Law Group’s topic-specific Louisiana Green Building Law Blog.

Green Building Presents Legal Risks, But Shouldn't Stop Builders

GreenBuildingElements.com recently posted a blog titled “Are There Any Risks in Building Green?”   The post mentions a survey conducted by the Marsh Green Building Team finding two things that play into builders’ reluctance to construct green projects: financial concerns and legal concerns.

Examining the Legal Risks

We’ll talk about the legal concerns (& have in the past), which the post summarizes as follows:

The idea of jumping into a supposedly “green-built” project, and then failing to reach LEED certification levels expected by others, is unnerving to think about. There’s also the worry in many constructions that standards of operation and new design features – especially those not covered by the insurance market – will fall short because contractors won’t be willing to take on those things.

Let’s face it – ordinary construction projects present enough legal challenges.   Throwing in unfamiliar green certification process programs and novel green technologies increases risk.   Here are some of the risk factors mentioned by the Marsh Green Building Team report:

• Not obtaining the LEED certification expected;
• Determining the appropriate standard of care used by green builders and professionals;
• The competence of team members, subcontractors, laborers in green building technologies and requirements;
• Untested contract language;
• Concerns about contractors taking design responsibilities not covered by insurance.e

Managing Risk

The existence of risk should not stop owners, builders and designers from participating in a green building project.   As the Marsh Team analyzes and the Green Building Elements post discusses, there are many possible solutions for the legal risk factors identified.

Plus, as anyone in the construction industry knows, risk is absolutely everywhere.  A builder is in the business of managing and mitigating risk…and it’s possible to do this with green building.

• Address Concerns in the Contract:   “Green Contracts” are largely untested, but that is no reason to not draft green contract language.   Before a project begins, have a lawyer experienced in green building projects draft language regarding the roles and responsibilities of each party in a green certification process, and properly allocate risk and liability for green building tasks.
• Do Not Greenwash.  If you haven’t heard the term ‘Greenwashing,’ and you’re in the green business…it’s time to read up on it.   A builder or designer or supplier can avoid a lot of risk on a green building by simply avoiding vague and misleading advertising or labeling of services/products.
• Insure.   Finally, it all goes back to insurance.   Insurance is a familiar product in the construction industry, and while policies protecting builders and designers from green building exposure is new…it is out there.   Talk to an attorney and/or your insurance agent about these products.

Lessons about LEED from Hall Winery in California

Hall Vineyards in Napa Valley is one of our favorite wineries (and for you Krewe of Cork folks, they have participated in the NOWFE’s Royal Street Stroll the past few years).

They are building a new winery in St. Helena and just announced that they have obtained Gold LEED Certification.

I wouldn’t write about it here unless there was some applicability to green building in Louisiana, and there is.

In connection with the announcement, Hall Wines published a new website dedicated to educating its visitors about the LEED certification process, and what sustainable elements of its winery qualified for certification.

The website is noteworthy for two reasons:

First, you can watch videos of the construciton process and watch a live feed of the winery from the site.  Spending a bit of time on the webpage can help Louisiana builders learn more about the LEED process, and get some ideas they can incorporate into their Louisiana green building projects.

Second, it’s interesting that Hall Wines is turning its certification into an exhibit.   They offer LEED tours at the winery, and incorporate the sustainable site into its their brand.   Perhaps a launch like Hall Wines can justify the possible increased cost of green building.

This article was originally posted on Wolfe Law Group’s topic-specific Louisiana Green Building Law Blog.

Budgets, Changes Orders and A Green Building Project

If you were to survey green building critics, it’s safe to guess most will argue that the cost to build green do not outweigh the benefits.

Indeed, many have suggested that the cost of building green (especially gaining LEED certification) is significantly higher than building to ordinary standards.   Others argue that LEED certification can be achieved through an everyday budget.

Regardless of where you fall on this issue, everyone should agree that green building projects have certain specifications, and bidding contractors must project the construction costs responsibly.

And so, one of the most challenging components of a constructing a green building may be the process of bidding it.

Since green building work is just starting to take hold in the construction industry, many contractors and subcontractors are working on little-to-no experience on green projects.   And sometimes the data behind green building techniques and products are thin (see greenwashing).

On Wolfe Law Group’s Construction Law Monitor, we published a 2-part article on the Bidding Process and Change Orders:   Bidding Errors and Change Orders: Avoiding a Nightmare [Part One and Part Two].

How do we suggest you avoid Bidding Error nightmares?   Spend time with the Contract Documents pre-bid.

With green building projects, this is more true than usual.

When preparing your green bid, here are some example thoughts that should be considered:

• If the project is being certified with LEED or another standard, who will be responsible for the submittal process?   Who will be responsible for monitoring the construction process?
• Contact vendors who will be providing the project’s materials, and review the data they have to back-up their performance and environmental claims.   It would be a pity to plan on using one product, and being forced to later use a more expensive substitute.   See this article on how to shop for green building materials.
• If the builder is anticipating a tax credit, do you understand the requirements to qualify for the credit?   Will this increase your construction costs?

A successful green building project starts where successful ordinary projects begin:  during the bidding and contracting period.

Whether your green building project will increase costs, or not, understand the green building expenses associated with your project, and avoid bidding errors and change order nightmares.

This article was originally posted on Wolfe Law Group’s topic-specific Louisiana Green Building Law Blog.

More Evidence of Green Building Staying Power in Louisiana

Last week, the New Orleans’ Times Picayune ran an article about a green housing program being launched this month in Mandeville, Louisiana, providing more evidence that “green building” efforts in Louisiana are growing.

According to the article, Mandeville is the third Louisiana community to participate in the “EnviRenew” program from the Salvation Army, with the first and second communities being Broadmoor and Riverview.

On their website, EnviRenew defines its mission as follows:

Envirenew, is a comprehensive strategy for community renewal. It is doing the most good in our neighborhoods and for the future of our city.

The program will build 20-25 homes in the Mandeville area, with each costing approximately $200,000, and each qualifying for LEED certification.   It will be an excellent opportunity for contracts with green experience to work on LEED projects, and for inexperienced green builders to participate on a project undergoing the certification process.

This article was originally posted on Wolfe Law Group’s topic-specific Louisiana Green Building Law Blog.