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What Counsel Should Know About Green Building

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  • 1. What
Counsel
Should
Know
 About
Green
Building
 April
22,
2009
 Chris
Cheatham,
LEED
AP,
Esq.
 www.greenbuildinglawupdate.com

  • 2. What
Counsel
Should
Know
 1. Performance bond not proper 2. Remove security requirement 3. LEEDigation from certification or energy efficiency Copyright
©
2009,
Chris
Cheatham.
All
Rights
Reserved.

  • 3. What
Counsel
Should
Know
 •  Agenda • Suretyship 101 • DC GBA “Performance Bond” • DC GBA Best Worst Case Scenarios • Green Regulatory Alternatives • LEEDigation Copyright
©
2009,
Chris
Cheatham.
All
Rights
Reserved.

  • 4. [TITLE
OF
 Suretyship
101
 PRESENTATION]
 Mandatory, unintelligible definition: Suretyship is a “contractual relationship whereby one person engages to be answerable for the debt or default of another.” -Sterns, The Law of Suretyship 1 (1951) Copyright
©
2009,
Chris
Cheatham.
All
Rights
Reserved.

  • 5. Suretyship
101
 •  Three parties - tripartite agreement: Creditor! Debtor! Surety! Copyright
©
2009,
Chris
Cheatham.
All
Rights
Reserved.

  • 6. Two key surety rules: (1) Debtor is responsible to satisfy obligation to pay or perform Creditor! Debtor! Surety!
  • 7. [TITLE
OF
 Suretyship
101
 PRESENTATION]
 •  ut what if Debtor fails to pay or B perform? Creditor! Debtor! Surety! Copyright
©
2009,
Chris
Cheatham.
All
Rights
Reserved.

  • 8. Two key surety rule: (2) Debtor fails, Surety performs, Surety reimbursed by Debtor Creditor! Debtor! Surety!
  • 9. Suretyship
101
 What does surety get? 1.  Premium paid by debtor 2.  Debtor’s duty of reimbursement (indemnification agreement) Copyright
©
2009,
Chris
Cheatham.
All
Rights
Reserved.

  • 10. Bonds
in
Construction
 Suretyship
101
 Performance Bond: Surety Guy promises Developer Guy! Developer Guy that Contractor Guy will build according to plans and specs. Contractor Guy! Surety Guy! Copyright
©
2009,
Chris
Cheatham.
All
Rights
Reserved.

  • 11. 1. Green Roof Leaks! 3. Surety Pays ! 2. Contractor Developer or Defaults! Rebuilds!
  • 12. Suretyship
101
 •  Fact: Sureties are already bonding green building projects •  Fact: Sureties are just now assessing inherent green building project risks •  Fact: No major surety has specific green building bond Copyright
©
2009,
Chris
Cheatham.
All
Rights
Reserved.

  • 13. [TITLE
OF
 D.C.
Green
Building
Act
of
2006
 DC
GBA
“Performance
Bond”
 PRESENTATION]
 January
1,
2012

 •  Washington, D.C. - Green Building Act of 2006 Section 4 - starting January 1, 2012, private projects •  greater than 50,000 square feet must be LEED certified Copyright
©
2009,
Chris
Cheatham.
All
Rights
Reserved.

  • 14. [TITLE
OF
 DC
GBA
“Performance
Bond”
 PRESENTATION]
 Green building regulations require enforcement mechanisms “(b) On or before January 1, 2012, all applicants for •  construction governed by section 4 shall provide a performance bond” “(g) All or part of the performance bond shall be •  forfeited to the District and deposited in the Green Building Fund if the building fails to meet the verification requirements described in sections 3 and 4.” Copyright
©
2009,
Chris
Cheatham.
All
Rights
Reserved.

  • 15. [TITLE
OF
 DC
GBA
“Performance
Bond”
 PRESENTATION]
 Surety and Fidelity Association of America and Surety Bond Producers: Letter to Government of D.C., August 13, 2007 •  “The new law incorrectly uses the term ‘performance bond.’ In •  short, the performance bond assures that the construction contract, and therefore, the project will be completed.” The bond in the Green Building Act “seems to function more in •  the manner of a license or compliance bond, which typically guarantees compliance with a law or code.” Copyright
©
2009,
Chris
Cheatham.
All
Rights
Reserved.

  • 16. DC
GBA
“Performance
Bond”
 Arlington County - Bonus Density Program •  If developer declares intent for LEED – get FAR variance •  Enforcement Mechanism: Bond •  Key differences Copyright
©
2009,
Chris
Cheatham.
All
Rights
Reserved.

  • 17. DC
GBA
Best
Case
Scenario:
 Best/Worst
Case
Scenario
 more
green
buildings
 Surety Guy creates the bond but
also…
 Copyright
©
2009,
Chris
Cheatham.
All
Rights
Reserved.

  • 18. DC
GBA
Best
Case
Scenario:
 Best/Worst
Case
Scenario
 LEEDigation™
 more
green
buildings
 Surety Guy creates the bond But…
 Green
Mandates

 +
Enforcement
Mechanism
 =
LEEDigation™
 Copyright
©
2009,
Chris
Cheatham.
All
Rights
Reserved.

  • 19. DC
GBA
Worst
Case
Scenario
 But…
 The Vancouver Green
Mandates

 +
Enforcement
Mechanism
 =
™
 Copyright
©
2009,
Chris
Cheatham.
All
Rights
Reserved.

  • 20. Vancouver

 DC
GBA
Worst
Case
Scenario
 Mandated

 Green
Roofs
 And

 Insurance
 But…
 Green
Mandates

 +
Enforcement
Mechanism
 Insurers
Refused
To
Issue
Insurance
 =
™
 Copyright
©
2009,
Chris
Cheatham.
All
Rights
Reserved.

  • 21. DC
GBA
Worst
Case
Scenario
 But…
 “No coverage means no new residential developments. This has left developers caught between the possibility of being mandated by Green
Mandates

 city governments on one hand and shut out by insurers on the other.” +
Enforcement
Mechanism
 =
™
 Copyright
©
2009,
Chris
Cheatham.
All
Rights
Reserved.

  • 22. Green
Regulatory
Alternatives
 Enforcement
 Mechanism
 But…
 1.

Financial
 




Security
 2.

Feebate:
 Copyright
©
2009,
Chris
Cheatham.
All
Rights
Reserved.

  • 23. For
Green
Regulations
 Green
Regulatory
Alternatives
 Look
to
Arlington
County

 But…
 “No coverage means no new residential developments. This has left developers caught between the possibility of being mandated by Green
Mandates

 city governments on one hand and shut out by insurers on the other.” +
Enforcement
Mechanism
 Specific
LEED
Proffers
 =
™
 Bonus
Density
Program
 Copyright
©
2009,
Chris
Cheatham.
All
Rights
Reserved.

  • 24. LEEDigation™
 Shaw Development v. Southern Builders Copyright
©
2009,
Chris
Cheatham.
All
Rights
Reserved.

  • 25. LEEDigation™
 Energy Efficiency “Architects and consulting engineers signed contract that stated that projects would ‘reduce operating costs by 50 percent’ over schools of similar size. Energy usage is comparable to other schools recently designed and constructed. School system is publicly embarrassed, disappointed and blamed as being ‘hoodwinked’ by architect and engineers. School system brings claim.” “Don’t Let Green Design Cause Red Ink,” Frank Musica Copyright
©
2009,
Chris
Cheatham.
All
Rights
Reserved.

  • 26. What
Counsel
Should
Now
Know
 1. Performance bond not proper 2. Remove security requirement 3. LEEDigation from certification or energy efficiency Copyright
©
2009,
Chris
Cheatham.
All
Rights
Reserved.

  • 27. What
Counsel
Should
Know
 Want to learn more? www.greenbuildinglawupdate.com ccheatha@wthf.com Copyright
©
2009,
Chris
Cheatham.
All
Rights
Reserved.


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