Green Building Contracts

We've written extensively here at gbNYC about the potential for litigation arising out of green construction projects. To date the issue has been on the radar screens of numerous industry authors, but real-life application of green legal theory has been relatively difficult to come by outside of a handful of green-related claims reported by insurance carriers. However, a (relatively) recent lawsuit that was filed on the eastern shore of Maryland demonstrates that green building risk is real- particularly in light of rapidly increasing regulatory activity at the state and local levels. The suit suggests the critical importance of clear contract language for each stakeholder on a green construction project and posits that the alternative could be massive exposure to unanticipated liability for every project participant.

Background to the Lawsuit

I had the opportunity last week to attend an excellent CLE that was offered by American Land. The program focused on the legal issues that attorneys must remain particularly mindful of when advising clients on green real estate projects. Accordingly, here are gbNYC’s top five legal issues that green construction projects may present to participants. While parts of the following list were offered by one of the lecturers, I've augmented it and included links to pertinent posts here at gbNYC that expound on each where appropriate.

#1: Negotiate and draft contracts that reflect each project stakeholder's role in earning the desired level of LEED or Green Globes certification and allocate that responsibility accordingly.

Strong contract language is critical for a number of reasons. First, with respect to obtaining certification pursuant to any green building rating system, which party will be responsible for tracking, collecting, assembling, and submitting the supporting documentation? Second, design professionals must be careful that, by signing credit submittal templates, they do not trigger an exclusion in their professional liability policy (the standard exclusion in such policies states that the policy "does not apply to warranties and guarantees and any claim(s) based upon or arising out of express warranties and guarantees.") Architects and engineers should thus insist on contract language that clearly indicates their signing of credit submittal templates is solely for the purpose of satisfying the given rating system credit and does not constitute any type of warranty or guarantee.

#2: Select design professionals and consultants that have participated on other green projects and are familiar with sustainable design, green building rating systems, and the corresponding certification process.

Obviously the best way to avoid legal problems down the road is to head them off at the pass up front. Sophisticated designers, contractors, and consultants that have extensive green experience are limited in number, but their ranks continue to grow as more owners are demanding sustainability. Due diligence by those owners in order to engage a green-savvy project team is critical to executing a successful project that achieves the desired sustainable result- whether that's certification under LEED or Green Globes or some other quantifiable measure of building performance- both on time and on budget.