Legal Issues with LEED and Green Building: A New Frontier?

Sustainable or “green” construction is here to stay. Future energy requirements, environmental issues and government mandates either require or will soon require that construction professionals and their attorneys deal with a brave new world of building.

The LEED rating system has become the leading method to determine the “greenness” of a building or neighborhood. Owners are requiring more energy efficiency from engineers and other construction professionals. In short, construction professionals need to learn how to meet this growing regulatory and marketplace requirement for sustainable construction.

We as attorneys need to learn to “speak green” along with our clients in order to properly advise construction professionals in both the business growth and risk management arenas. Our clients in the construction arena will need to be able to set themselves apart by showing their ability to adapt to the new construction world coming down the pike. They must learn new technologies and terms such as “Green Globes” and “LEED” in order to compete for the smaller number of dollars presently out there.

Our clients know this, so we must be ready to properly advise them on the risks that go along with the potential rewards that go with any new use of technology. We must also be attuned to potential pitfalls along the way.

While the move to sustainable building is a laudable one, this new paradigm brings with it new legal risks that have yet to be explored. New technologies are being created and old methods are being used in new ways. This alone creates liability risks for the simple reason that we do not have years (or even decades) of engineering data.

Insurance companies continue to struggle with comprehensive general liability and errors and omissions coverage relating to these issues as well as the design and construction related issues.

Questions abound relating to how insurance carriers will insure (if at all) for potential failure of certification or for the specter of de-certification or failed energy performance benchmarks (discussed below).

As with any new area of potential liability, underwriting lags behind technology. We as attorneys need to make sure our clients in the construction world are working closely with their insurers to assure that coverages are adequate to the task.

Issues of third-party action relating to energy efficiency and appeals of or challenges to the certification of a building under LEED require that contracts be drafted in such a way as to protect the parties from unforeseen liability well beyond the time frame of any warranties. The United States Green Building Counsel (USGBC) requires energy reporting at certain intervals and also allows for challenges to the LEED certification of a project by third parties after the fact and possibly well after the project is complete.

These last two points create the possibility that a contractor could be held responsible for the energy efficiency or state of LEED certification of a building long after it leaves the project. On the energy efficiency front, USGBC does not require that buildings meet certain energy benchmarks to maintain a certain LEED rating. However, the energy reporting requirements create a pool of information that a smart owner could use to create a longer term specification to be met by the design and construction team.

Because of the potential that a contractor may not be through when the building is complete and built to the specifications presented by the architect and owner, those of us who represent contractors and subcontractors must be clear in our advice that any construction contract assures that any contractual liability for the builder ends when the project is complete. Potential “fixes” for this problem are to use certification or energy efficiency goals as opposed to specifications that must be met or even to explicitly state that the contractor or design professional has met the requirements of the contract when certification is obtained and the project is complete.

Integrated Project Delivery

Another area with which construction professionals and their attorneys must become familiar is in Integrated Project Delivery (“IPD”) and Building Information Modeling (“BIM”). Both the AIA and the ConsensusDOCS form document sets include IPD among their number.

The advantage of IPD, and the reason that attorneys must be familiar with it, is in the initial phases of the project. When performed correctly, the owner, design professional and general contractor (and possibly a LEED AP) get together and plan out the project ahead of time, hopefully with the ability to use BIM to avoid conflicts on the front end.

How does IPD enter into the sustainable building discussion? Most rating systems, including LEED, require that the parties to the project get together to discuss how the various parts of the project and how each credit is going to be achieved. Additionally, in order to achieve the best results from an energy efficiency standpoint (regardless of rating system) the parties must know how things will work together.

For example, the lighting must fit with the HVAC and the building orientation in order for the optimal rating or energy efficiency to be met. If each of these items was designed in a vacuum, issues could occur down the road, from a simple problem with compressor placement to a failure to achieve the required energy performance. As you can see, IPD (in concert with the three dimensional modeling of BIM), is a great tool to use in achieving the “green” project goals when properly applied by parties willing to use them.

In sum, the new world of sustainable or “green” construction presents both great opportunities for construction attorneys and their clients. Those in the construction world who master this new construction paradigm will flourish in this new environment. This opportunity comes with risks (some new, others old but in new packages). Form contracts, insurance and technology have yet to catch up with the desire to build a more sustainable future.

Questions abound (some of which are outlined above) that have yet to be answered. We as construction attorneys would be wise to ask the questions and discuss the answers before the courts answer the questions for us.

Christopher G. Hill is a construction lawyer in Richmond, and a LEED AP.