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LEEDigation: The Impact of LEED 3.0, Litigation & Building Regulation

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Presentation at the 2010 Green Matters Conference in New Orleans, LA, scheduled for Friday, October 15th. Scott Wolfe is co-presenting this topic with Chris Hill, focusing on Litigation caused by or associated with the LEED Certification Process. This is the powerpoint presentation that will be used.

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LEEDigation: The Impact of LEED 3.0, Litigation & Building Regulation

  1. 1. LEEDigation The Impact of LEED on the Practice of Law Christopher Hill Scott Wolfe The Law Office of Wolfe Law Group Christopher G Hill, P.C. Louisiana | Washington Virginia wolfelaw.com christopherhill-law.com constructionlawmonitor.com constructionlawva.com LEED AP LEED AP
  2. 2. What is Construction Litigation?
  3. 3. Unmet Expectations
  4. 4. Unmet Expectations • Cost: The project cost more than expected
  5. 5. Unmet Expectations • Cost: The project cost more than expected • Scope: The project’s scope was more expansive than anticipated
  6. 6. Unmet Expectations • Cost: The project cost more than expected • Scope: The project’s scope was more expansive than anticipated • Schedule: Completion took longer than planned
  7. 7. Unmet Expectations • Cost: The project cost more than expected • Scope: The project’s scope was more expansive than anticipated • Schedule: Completion took longer than planned • Quality: The workmanship quality was inferior to expectations.
  8. 8. What is LEED?
  9. 9. http://www.usgbc.org
  10. 10. http://www.nahbgreen.org
  11. 11. http://www.energystar.gov
  12. 12. What is Green Building? also known as green construction or sustainable 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. This practice expands and complements the classical building design concerns of economy, utility, durability, and comfort. http://en.wikipedia.org/wiki/Green_building
  13. 13. LEEDigation What is LEEDigation?
  14. 14. LEEDigation Is it Different Than Ordinary Litigation?
  15. 15. Law Ark Building Blog “ The bad news is that attorneys, especially those already practicing in construction law, will soon realize that aside from green design and construction’s sometimes specialized and occasionally ill-defined vernacular, there’s no real novelty in the types of claims that might arise. No new frontiers of jurisprudence need be explored–a leaky green roof is still a leaky roof–whether it also requires regular mowing and landscape maintenance changes little from a legal perspective. http://www.lawarkbuilding.com/?p=104
  16. 16. Best Practices Construction Blog “ Cole may be right that there is no novelty to the traditional types of claims (contract, tort, statutory, etc.) that may arise in green construction disputes. However, the novelty in the green building industry is the new set of standards that will inevitably become part of the legal dispute. In other words, while “a leaky green roof is still a leaky roof” … there will be new risks to be allocated, different types of damages lost, additional players involved, varied proof required and, yes, perhaps a novel cause of action alleged because that leaky green roof system failed.  http://bit.ly/diszmS
  17. 17. Still... Unmet Expectations
  18. 18. Still... Unmet Expectations • Energy Performance: Is the building’s energy systems performing as expected (or promised)?
  19. 19. Still... Unmet Expectations • Energy Performance: Is the building’s energy systems performing as expected (or promised)? • Rating: Did the building achieve the planned LEED rating or other certification?
  20. 20. Still... Unmet Expectations • Energy Performance: Is the building’s energy systems performing as expected (or promised)? • Rating: Did the building achieve the planned LEED rating or other certification? • Long-Term Sustainability: What is the project’s impact on the environment, and is this as expected?
  21. 21. Is Litigation Probable?
  22. 22. “ Green Growth is phenomenal across the globe. Harvey M. Bernstein, McGraw-Hill Construction
  23. 23. 2005 - 2008 Green Building Construction Grows 5x ($10b to $49b) 2009 - 2013 Could Triple, reaching $140b Green Outlook 2009: McGraw-Hill Trends Driving Change Report
  24. 24. How’s It Going to End?
  25. 25. Shaw Development v. Southern Builders
  26. 26. Shaw Development v. Southern Builders • Problem: Contract required building to meet Silver Certification. It didn’t.
  27. 27. Shaw Development v. Southern Builders • Problem: Contract required building to meet Silver Certification. It didn’t. • Whose Fault?: Developer sued builder, but there was no clear allocation in contract of who was responsible for certification
  28. 28. Shaw Development v. Southern Builders • Problem: Contract required building to meet Silver Certification. It didn’t. • Whose Fault?: Developer sued builder, but there was no clear allocation in contract of who was responsible for certification • Damages: $700k+ in lost tax credits
  29. 29. Shaw Development v. Southern Builders • Problem: Contract required building to meet Silver Certification. It didn’t. • Whose Fault?: Developer sued builder, but there was no clear allocation in contract of who was responsible for certification • Damages: $700k+ in lost tax credits • Result: Unknown - Settled.
  30. 30. Washington DC v. Washington Nationals
  31. 31. Washington DC v. Washington Nationals • Problem: Expectations for “Green” LED Scoreboard wasn’t met. Owner claimed project wasn’t substantially complete and withheld funds.
  32. 32. Washington DC v. Washington Nationals • Problem: Expectations for “Green” LED Scoreboard wasn’t met. Owner claimed project wasn’t substantially complete and withheld funds. • Damages: Not too clear in settlement materials released, but $3.5 Million was withheld based in large part on the scoreboard dispute.
  33. 33. Washington DC v. Washington Nationals • Problem: Expectations for “Green” LED Scoreboard wasn’t met. Owner claimed project wasn’t substantially complete and withheld funds. • Damages: Not too clear in settlement materials released, but $3.5 Million was withheld based in large part on the scoreboard dispute. • Result: Unknown - Settled.
  34. 34. What Are The Damages?
  35. 35. Show Me The Money!
  36. 36. Show Me The Money! • Tax Credits: Missing a certificate level can effect tax credit eligibility
  37. 37. Show Me The Money! • Tax Credits: Missing a certificate level can effect tax credit eligibility • Energy Efficiency: If property is not as energy efficient as promised, damages can include increased energy costs
  38. 38. Unique Damage Situations
  39. 39. Unique Damage Situations • Missing Certification: If a property expects to have Gold certification, but only gets Silver, and this doesn’t have any tax credit implications...what are the damages?
  40. 40. Unique Damage Situations • Missing Certification: If a property expects to have Gold certification, but only gets Silver, and this doesn’t have any tax credit implications...what are the damages? • Goodwill: How will courts calculate loss of good will if green construction misses expectations.
  41. 41. Unique Liability Situations
  42. 42. Unique Liability Situations • LEED Responsibility Allocation: Responsibility for LEED points is distributed between architect, owner and contractor. If energy efficiency is not as expected, how do you assign liability?
  43. 43. Unique Liability Situations • LEED Responsibility Allocation: Responsibility for LEED points is distributed between architect, owner and contractor. If energy efficiency is not as expected, how do you assign liability? • Energy Efficiency: Energy efficiency of a building relies on factors: (i) climate; (ii) property placement; (iii) property use; (iv) etc. How do you clearly blame a party for inefficiencies.
  44. 44. Preparing for the Risk
  45. 45. Preparing for the Risk • Control Expectations
  46. 46. Preparing for the Risk • Control Expectations • Limit Exposure By Contract
  47. 47. Preparing for the Risk • Control Expectations • Limit Exposure By Contract • Be Careful, and Keep It Simple
  48. 48. Control Expectations “ ...Expect the unexpected. Always sounds like good advice. Except, of course, if you are expecting the unexpected, then well then it really isn't really unexpected anymore. Is it? And that leaves you vulnerable to the truly unexpected. Because, you're not expecting it.
  49. 49. Control Expectations
  50. 50. Control Expectations • Clear terms identifying scope of work
  51. 51. Control Expectations • Clear terms identifying scope of work • Clear terms in Subcontracts
  52. 52. Control Expectations • Clear terms identifying scope of work • Clear terms in Subcontracts • Very specific specifications, making them as independent from specific certifications as possible
  53. 53. Control Expectations • Clear terms identifying scope of work • Clear terms in Subcontracts • Very specific specifications, making them as independent from specific certifications as possible • Get team together ahead of time (BIM, Charette)
  54. 54. Shaw Development v. Southern Builders Contract required “Silver LEED Certification,” but lacked clear specifications. Two lessons: - Builder’s obligation to achieve certification and build to specs must be aligned; - Certification is not a guarantee, and architects / builders should be weary of promising a certification.
  55. 55. Limit Risk in Contract
  56. 56. Limit Risk in Contract • Avoid warranties of long term energy performance
  57. 57. Limit Risk in Contract • Avoid warranties of long term energy performance • Set performance expectations at time building complete, not some time in future
  58. 58. Limit Risk in Contract • Avoid warranties of long term energy performance • Set performance expectations at time building complete, not some time in future • Clearly allocate responsibilities between owner, builder and architect
  59. 59. Limit Risk in Contract • Avoid warranties of long term energy performance • Set performance expectations at time building complete, not some time in future • Clearly allocate responsibilities between owner, builder and architect • Get LEED AP to consult
  60. 60. Things That Affect A Building’s Energy Performance A building’s energy performance can be a very complex matter, affected by things out of the builder / architect’s control: - Climate - Use and Users of Building - Third Party Interference
  61. 61. Allocate Responsibility The LEED Program allocates responsibility for points between the Owner, Builder and Architect. It is an error to not allocate responsibility for green building design and construction when contracting.
  62. 62. Non-Contractual Actions
  63. 63. Non-Contractual Actions • Check and Double Check Subcontractors’ and Consultants’ Credentials
  64. 64. Non-Contractual Actions • Check and Double Check Subcontractors’ and Consultants’ Credentials • Be Careful with Advertising. Keep it Simple and Don’t Greenwash.
  65. 65. Non-Contractual Actions • Check and Double Check Subcontractors’ and Consultants’ Credentials • Be Careful with Advertising. Keep it Simple and Don’t Greenwash. • Require Communication in Contract
  66. 66. Non-Contractual Actions • Check and Double Check Subcontractors’ and Consultants’ Credentials • Be Careful with Advertising. Keep it Simple and Don’t Greenwash. • Require Communication in Contract • Consider Green Building Insurance
  67. 67. What is Green Washing? 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. The term green sheen has similarly been used to describe organizations that attempt to show that they are adopting practices beneficial to the environment http://en.wikipedia.org/wiki/Greenwash
  68. 68. Novel Insurance Products • Green Washing Insurance • Green Certification Insurance • Heightened Risk caused by certain green building practices like Vegetative Roofing, Alternative Energy Generational Systems, etc.
  69. 69. LEEDigation The Impact of LEED on the Practice of Law Scott Wolfe Christopher Hill Wolfe Law Group The Law Office of Louisiana | Washington Christopher G Hill, P.C. wolfelaw.com Virginia constructionlawmonitor.com christopherhill-law.com LEED AP constructionlawva.com LEED AP

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