With presumably billions of dollars being pumped into the creation of “green” jobs by the recently passed Economic Stimulus Package many questions loom regarding what is it to be green. Recent litigation gives those interested in green development food for thought.
In Somerset County Maryland, an owner brought suit against its contractor because the U.S. Green Building Council did not issue the hoped for silver certification causing the owner to loose $635,000 in tax credits. The issue was whether the contractor promised to deliver the certification or whether the certification was merely a goal. Although the case settled it does caution those drafting contract language relating to green projects and the appropriate expectations of the parties. Because certification is determined by a third party and compliance with certification requirements is the obligation of many parties involved in the construction process, communicating expectations in the contract is paramount. The process should be inclusive of all parties with an understanding of the certification process and the manner of obtaining certification. A greater understanding will eliminate unjustified expectations and a reasonable allocation of risk.
On the flip side of the equation is the increase in governmental entities encouraging green buildings through tax incentives and zoning variances. Some municipalities are even imposing environmental standards on buildings which provide for LEED certification as a basis for determining compliance. This type of governmental regulation raises the issue of whether a third party should be empowered with the ability to both determine the standards and compliance. Although the rating system is a numbers game, there is no doubt a certain amount of subjective determination behind the numbers. These types of regulation have already been challenged. In Albuquerque N.M. a coalition of HVAC distributors sought an injunction against the city for implementing rules that mandated new buildings obtain LEED certification or to otherwise comply with energy reducing standards. A Federal judge entered the injunction on the basis that the new codes were pre-empted by federal regulatory standards.
Some owners even complain that the environmentally friendly elements of their green buildings are causing hidden problems. For example the roof garden is contributing to mold development and the passive solar shading operates as a haven for pigeons causing outbreaks of fungal disease.
Remember the word “green” has taken on a generic connotation meaning different things to different people. To combat this perception care must be taken to communicate the intentions of the parties and to accurately incorporate the mutually agreed understanding into the contract.