Green Building Intro and Legal Issues


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Introduction to sustainable building and rating systems. Summary review and discussion of legal issues and considerations in real estate development, design, construction, and leasing contracts. Discussion of sustainable building ordinances in the metro Atlanta area, including the sustainable building ordinance being considered by the City of Atlanta.

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Green Building Intro and Legal Issues

  1. 1. Robert C. Newcomer [email_address] The Lang Legal Group LLC 404.320.0990 <ul><li>Business, environmental and real estate litigation and counseling. </li></ul><ul><li>LEED-AP </li></ul><ul><li>Member, Sustainable Atlanta Green Building Taskforce. </li></ul><ul><li>Urban Land Institute </li></ul><ul><ul><li>Co-Chair, Sustainability - Community Assistance Sub-committee </li></ul></ul><ul><ul><li>Member, Technical Advisory Panel Committee </li></ul></ul><ul><li>Director, Green Chamber of the South. </li></ul>
  2. 2. Green (Sustainable) Building <ul><li>Sustainability </li></ul><ul><li>Green Building and Rating System </li></ul><ul><li>Legislation </li></ul><ul><li>Contract Issues </li></ul><ul><li>Claims and Litigation </li></ul>
  3. 3. Sustainability <ul><li>“ To meet the needs of the present without compromising the ability of future generations to meet their own needs.” </li></ul><ul><li>- Brundtland Commission </li></ul><ul><li>Green building is the practice of creating structures and using processes that are environmentally responsible and resource-efficient throughout a building's life-cycle from siting to design, construction, operation, maintenance, renovation and deconstruction.” </li></ul><ul><li>- EPA (Green Building Workgroup) </li></ul>
  4. 4. Buildings: Triple Bottom Line Sustainability <ul><li>Less environmental impact </li></ul><ul><li>Greater energy efficiency </li></ul><ul><li>Improved cap rates </li></ul><ul><li>Increased marketability </li></ul><ul><li>Higher lease rates </li></ul><ul><li>Improved productivity </li></ul><ul><li>Reduced absenteeism </li></ul><ul><li>Community connectivity </li></ul>
  5. 5. Population
  6. 6. Petroleum Resources
  7. 7. U.S. Building Impacts Test 12 % Water Use 30 % Greenhouse Gas Emissions 65 % Waste Output 70 % Electricity Consumption
  8. 8. GLOBAL CO 2 EMISSIONS ( BY SECTOR) <ul><li>#1 Buildings </li></ul><ul><li>#2 Transportation </li></ul><ul><li>#3 Industry </li></ul>
  9. 9. Global Warming?
  10. 10. Scientific Evidence
  11. 11. Carbon-based regulation . . . ? <ul><li>Massachusetts v EPA (2007) </li></ul><ul><li>EPA “Endangerment Finding” </li></ul><ul><ul><li>Six heat-trapping gases are pollutants that endanger public health and welfare. </li></ul></ul><ul><li>Proposed mandatory reporting of greenhouse gases emissions (April 2009) </li></ul><ul><li>Federal regulation . . . </li></ul><ul><ul><li>Cap & trade, carbon tax, ??? </li></ul></ul><ul><li>Implications for real estate . . . ??? </li></ul>
  12. 12. “ LEAP” to Zero Carbon: <ul><li>Energy efficiency (reaction to 1970s oil crises) </li></ul><ul><li>Green (environmentally responsive) </li></ul><ul><li>Sustainable (holistic) </li></ul><ul><li>High Performance (accountable) </li></ul><ul><li>Carbon Neutral </li></ul>
  13. 13. Green Building
  14. 15. LEED-NC Rating System <ul><li>Sustainable Sites </li></ul><ul><ul><li>14 total points (1 prerequisite + 14 credits) </li></ul></ul><ul><li>Water Efficiency </li></ul><ul><ul><li>5 total points (no prerequisites + 5 credits) </li></ul></ul><ul><li>Earth & Atmosphere </li></ul><ul><ul><li>17 total points (3 prerequisites + 6 credits) </li></ul></ul><ul><li>Materials & Resources </li></ul><ul><ul><li>13 total points (1 prerequisite + 13 credits) </li></ul></ul><ul><li>Indoor Environmental Air Quality </li></ul><ul><ul><li>15 total points (2 prerequisites + 15 credits) </li></ul></ul><ul><li>Innovation in Design </li></ul><ul><ul><li>5 total points (no prerequisites + 5 credits) </li></ul></ul><ul><li>_____________________________________ </li></ul><ul><ul><li>7 prerequisites + 58 credits (69 total points) </li></ul></ul>
  15. 16. LEED “Certification” <ul><li>Register project </li></ul><ul><li>Satisfy all prerequisites </li></ul><ul><li>Complete online submittals and documentation for credits to be sought </li></ul><ul><li>Respond to questions </li></ul><ul><li>Retain back up data and documentation. </li></ul>
  16. 17. Four Levels of LEED Ratings: Green Buildings worldwide are certified with a voluntary, consensus-based rating system. USGBC has four levels of LEED.
  17. 19. LEEDv3 Rollout
  18. 27. Projected LEED EBO&M Projects 2006 2007 2008 2009 2010 2011 2012 2013 <50 <100 <1,000 <5,000 10,000 22,000 30,000 50,000 50,000 - 45,000 - 40,000 - 30,000 - 25,000 - 20,000 - 15,000 - 10,000 - 5,000 - 1,000 -
  19. 30. By default, non-green buildings will be known as BROWN buildings <ul><ul><ul><li>Less demand </li></ul></ul></ul><ul><ul><ul><li>Lower rents </li></ul></ul></ul><ul><ul><ul><li>Higher operating cost </li></ul></ul></ul><ul><ul><ul><li>Decreased value </li></ul></ul></ul><ul><li>Go GREEN or go home </li></ul>
  20. 31. U.S. Office Rental Rates: “Green” v. “Brown” Performance <ul><li>Market Bifurcation Starts in 2009 </li></ul>Average Rents PSF 2009 | 2010 | 2011 | 2012 | 2013 | 2002 | 2003 | 2004 | 2005 | 2007 | 2008 | CLASS A CLASS B
  21. 32. Green Building Legislation <ul><li>Federal (growing support and incentives) </li></ul><ul><li>States </li></ul><ul><li>Cities </li></ul><ul><ul><li>Chamblee and Doraville </li></ul></ul><ul><ul><li>Conyers </li></ul></ul><ul><ul><li>Atlanta (proposed) </li></ul></ul>
  22. 33. Chamblee and Doraville <ul><li>Applies to: </li></ul><ul><ul><li>all municipal buildings </li></ul></ul><ul><ul><li>commercial buildings and “multiple residences” </li></ul></ul><ul><ul><li>> 20,000 sf. </li></ul></ul><ul><li>Must be LEED-Certified (Chamblee accepts GG) </li></ul><ul><li>No CO until certification </li></ul><ul><ul><li>temporary CO available </li></ul></ul><ul><li>Infeasibility exemption available </li></ul>
  23. 34. Conyers <ul><li>Applies to: </li></ul><ul><ul><li>residential and municipal buildings > 5,000 sf </li></ul></ul><ul><li>LEED NC or LEED Homes/EarthCraft </li></ul><ul><li>No CO until certification </li></ul><ul><ul><li>temporary CO available </li></ul></ul><ul><li>Infeasibility exemption available </li></ul>
  24. 35. City of Atlanta Sustainable Building Ordinance <ul><li>US Mayors Climate Protection Agreement </li></ul><ul><li>Architecture 2030 Challenge </li></ul><ul><li>Sustainable Atlanta </li></ul><ul><li>Sustainable Building Taskforce </li></ul><ul><ul><li>Lead Partners </li></ul></ul><ul><ul><li>Research </li></ul></ul><ul><ul><li>Engaged stakeholders </li></ul></ul><ul><ul><li>Incorporated feedback </li></ul></ul><ul><ul><li>Draft (4) presented to Mayor Franklin (April 27 th ) </li></ul></ul>
  25. 36. Sustainable Building Ordinance <ul><li>Applies to: </li></ul><ul><ul><li>Commercial projects > 20,000 sf </li></ul></ul><ul><ul><li>Applying for permit 1 year after adoption </li></ul></ul><ul><ul><li>All commercial projects 3 years after adoption </li></ul></ul>
  26. 37. Sustainable Building Ordinance <ul><li>Two years after adoption: </li></ul><ul><li>Sustainable Building Standards </li></ul><ul><li> LEED Silver </li></ul><ul><li> Green Globes, 2 Globes </li></ul><ul><li> EarthCraft Tier 2 </li></ul><ul><li>One year after adoption: </li></ul><ul><li>Sustainable Building Standards </li></ul><ul><li>LEED-Certified </li></ul><ul><li>Green Globes, 1 Globe </li></ul><ul><li>EarthCraft, Tier 1 </li></ul>
  27. 38. Sustainable Building Ordinance <ul><li>Does not affect: </li></ul><ul><ul><li>Single-family homes </li></ul></ul><ul><ul><li>Multi-family projects < 3 stories </li></ul></ul><ul><ul><li>Zoning or overlay districts </li></ul></ul><ul><li>Provides: </li></ul><ul><ul><li>Compliance options </li></ul></ul><ul><ul><li>Prescriptive and performance standards </li></ul></ul><ul><ul><li>Variances from specific standards </li></ul></ul>
  28. 39. Potential Impact for Atlanta Average Square Footage Report (1/1/2007 to 6/30/2008) Application Type # of Applications Processed Ave. Square Footage Total Square Footage BLC 1 – Plans Erect/Addition to Commercial Bldg 106 155,574 16,490,844 BLC3 – Plans Alteration/Repair to Commercial Bldg (Tenant Improvement) 1,586 6,846 10,857,756 BLM1-Plans Erect/Addition to Multi-family residence 119 196,446 23,377,074 BLR1 – Plans Erect/Addition 1-2 Family Residence 1,592 5,242 8,345,264
  29. 40. Green Building Legal Issues: <ul><li>Certified or “Certifiable”? </li></ul><ul><li>Development and construction </li></ul><ul><li>Permitting and incentives </li></ul><ul><li>Financing </li></ul><ul><li>Marketing green </li></ul><ul><li>Leasing </li></ul><ul><li>Buying and selling green buildings </li></ul>
  30. 41. Legal Issues: Certified? or “Certifiable”? <ul><li>Register project </li></ul><ul><li>Prerequisites </li></ul><ul><li>Online submittals and documentation for credits </li></ul><ul><li>Reviewer questions and requests </li></ul><ul><li>Retain back up data and all documentation. </li></ul><ul><li>DEFINE “certifiability” </li></ul><ul><li>Determine: </li></ul><ul><ul><li>Who decides? </li></ul></ul><ul><ul><li>How? </li></ul></ul><ul><ul><li>What data and documentation is expected? </li></ul></ul><ul><li>Retain back up data and all documentation. </li></ul>
  31. 42. Legal Issues: <ul><li>Certified or “Certifiable”? </li></ul><ul><li>Development and construction </li></ul>
  32. 43. Development and construction: Integrated Design <ul><li>Assumes that each system affects the functioning of another and that all systems must be harmonized to perform together effectively. </li></ul><ul><li>Optimizes performance while minimizing cost. </li></ul><ul><li>Integrated design teams meet early and often: </li></ul><ul><ul><li>Identify project goals </li></ul></ul><ul><ul><li>Allocate responsibility for tasks </li></ul></ul><ul><ul><li>Review and re-assess throughout design and construction. </li></ul></ul><ul><li>DOCUMENT responsibility for tasks and allocation </li></ul><ul><li>of risk among the key players </li></ul>
  33. 44. Development and construction: Contract issues <ul><li>Legal and financial incentives or requirements? </li></ul><ul><li>Contract conditions: </li></ul><ul><li>Green features must be verifiable and verified. </li></ul><ul><li>Sustainability goals for construction must be met. </li></ul><ul><li>Risk that green features will hinder building performance must be minimized. </li></ul><ul><li>Client must be protected if problems arise. </li></ul>
  34. 45. Managing Risk in Green Buildings: <ul><li>Assemble experienced green project team </li></ul><ul><li>Identify sustainability goals and green attributes </li></ul><ul><li>Document responsibility and allocate risk among key participants </li></ul><ul><li>For new green products or technologies: </li></ul><ul><ul><li>Review technical data and warranties </li></ul></ul><ul><ul><li>Research product manufacturer </li></ul></ul><ul><ul><li>Seek additional guarantees </li></ul></ul><ul><li>Certification consultant review/approval of change orders, material substitutions and construction practice changes </li></ul><ul><li>Request, collect and retain data and documentation. </li></ul>
  35. 46. Legal Issues: <ul><li>Certified or “Certifiable”? </li></ul><ul><li>Development and construction </li></ul><ul><li>Permitting and incentives </li></ul>
  36. 47. Permitting and Incentives <ul><li>Zoning, building and development codes </li></ul><ul><li>Homeowner/Community Associations </li></ul>
  37. 48. Legal Issues: <ul><li>Certified or “Certifiable”? </li></ul><ul><li>Development and construction </li></ul><ul><li>Permitting and incentives </li></ul><ul><li>Financing </li></ul>
  38. 49. Financing <ul><li>Appraisal </li></ul><ul><li>Lender initiatives and incentives </li></ul>
  39. 50. Legal Issues: <ul><li>Certified or “Certifiable”? </li></ul><ul><li>Development and construction </li></ul><ul><li>Permitting and incentives </li></ul><ul><li>Financing </li></ul><ul><li>Marketing green </li></ul>
  40. 51. Marketing Green <ul><li>Brokers, agents and marketing professionals </li></ul><ul><li>Determine proper message </li></ul><ul><li>Address marketing message in contracts. </li></ul><ul><li>FTC “Green Guides” </li></ul><ul><ul><li>Substantiated – “reasonable basis” </li></ul></ul><ul><ul><li>Clear and qualified </li></ul></ul><ul><ul><li>Do not overstate benefits. </li></ul></ul><ul><li>Common problems: </li></ul><ul><li>Registered – Pre-certified – Certified </li></ul><ul><li>Implying certification is guaranteed </li></ul><ul><li>Implying environmental or financial superiority. </li></ul>
  41. 52. Legal Issues: <ul><li>Certified or “Certifiable”? </li></ul><ul><li>Development and construction </li></ul><ul><li>Permitting and incentives </li></ul><ul><li>Financing </li></ul><ul><li>Marketing green </li></ul><ul><li>Green Leasing </li></ul>
  42. 53. Green Leasing <ul><li>Identify green features </li></ul><ul><li>Tenant (LL) acceptance of restrictions or limited regulation of its operations </li></ul><ul><li>Tenant (LL) compliance with requirements </li></ul><ul><li>Remedies and damages </li></ul><ul><li>Tenant (LL) payments to cover cost. </li></ul><ul><li>Tenant (LL) data collection and reporting </li></ul>
  43. 54. Green Leasing: Work letter <ul><li>Comply with LL requirements for construction waste management and recycling </li></ul><ul><li>Certify commissioning of all HVAC, lighting and energy systems and provide data to LL </li></ul><ul><li>Utilize: </li></ul><ul><ul><li>Energy-efficient lighting fixtures and occupancy-based controls </li></ul></ul><ul><ul><li>Low-flow toilets, waterless urinals and sensor-controlled faucets </li></ul></ul><ul><li>Wood shall be FSC-certified </li></ul><ul><li>Paints, stains, sealants and adhesives shall be water-based, low- or no-VOC </li></ul><ul><li>Carpet systems shall be Green Label Plus </li></ul>
  44. 55. Green Leasing: Sharing energy savings <ul><li>LL will install, at LL’s sole cost, energy efficient features to reduce electricity usage as more particular described in Exhibit A. </li></ul><ul><li>LL will deliver to T written certification from licensed engineer setting forth projected monthly energy savings (“Monthly Savings”). </li></ul><ul><li>On the day T is first obligated to pay rent and continuing throughout the term of the Lease, T shall pay to LL, as additional rent, __ percent (__%) of the Monthly Savings. </li></ul>
  45. 56. Green Leasing: Green Cleaning <ul><li>Products must be: </li></ul><ul><ul><li>Environmentally safe, phosphate-free, non-corrosive, non-flammable, low-VOC emitting, fully biodegradable </li></ul></ul><ul><ul><li>“ Green” (per Green Seal GS-37 Standard) </li></ul></ul><ul><ul><li>Packaged ecologically </li></ul></ul><ul><li>Paper products must be 100% recycled content </li></ul><ul><li>Garbage bags must be biodegradable or compostable </li></ul><ul><li>Vacuum cleaners must be capable of removing 99.97% of harmful particles, including dust, mold spores and most microscopic respiratory irritants and allergens. </li></ul><ul><li>Tenant will properly separate recycling material from trash </li></ul><ul><li>Tenant will provide MSDS to LL for all janitorial supplies provided by T </li></ul>
  46. 57. Green Leasing: Double-edged Sword? <ul><li>T may have additional claims against LL under quiet enjoyment provision </li></ul><ul><li>LL may be held to higher standard for the green features and building performance. </li></ul>
  47. 58. Legal Issues: <ul><li>Certified or “Certifiable”? </li></ul><ul><li>Development and construction </li></ul><ul><li>Permitting and incentives </li></ul><ul><li>Marketing green </li></ul><ul><li>Green Leasing </li></ul><ul><li>Buying and selling green buildings </li></ul>
  48. 59. Buying and Selling Green Buildings <ul><li>LEED-NC is no guarantee of performance </li></ul><ul><li>Buyers will demand information </li></ul>
  49. 60. Test
  50. 62. Green Claims and Litigation <ul><li>Claim scenarios </li></ul><ul><li>Litigation </li></ul><ul><ul><li>Shaw Dev. v. Southern Bldrs </li></ul></ul><ul><ul><li>AHRI v. City of Albuquerque </li></ul></ul>
  51. 63. Green Claims and Litigation <ul><li>Architect agreed that design would achieve LEED-Gold. Developer advertised that building would reduce operating costs and provide healthier indoor environment. Building failed to achieve Gold certification due to budget and scheduling problems. Developer sued claiming Architect had guaranteed the certification level. </li></ul>
  52. 64. Green Claims and Litigation <ul><li>Following installation of a green roof, structural instability resulted in water infiltration causing significant damage. Structural engineer claimed that he had not been provided the proper information related to the green roof. Contract with structural engineer limited its liability to an amount less than the cost to repair. </li></ul>
  53. 65. Green Claims and Litigation <ul><li>Law firm hired an architect to design sustainable office space. The architect, in reliance on information provided by manufacturers, incorporated products into the design. Local press investigated the products and claimed they were not as “green” as advertised. Law firm sued Architect claiming its reputation was damaged. </li></ul>
  54. 66. Green Claims and Litigation <ul><li>County government required recycling of construction materials. Architect agreed to monitor construction services. Construction contractor decided that recycling caused excessive delays and that declining price for recycled materials justified dumping construction waste in another state. County took action against Owner, and Owner sued Architect for failing to properly monitor construction services. </li></ul>
  55. 67. Green Claims and Litigation <ul><li>Shaw Dev. v. Southern Bldrs </li></ul><ul><li>AHRI v. City of Albuquerque </li></ul>
  56. 68. QUESTIONS?
  57. 69. Robert C. Newcomer The Lang Legal Group LLC <ul><li>[email_address] </li></ul><ul><li>404.320.0990 </li></ul>