Be Green, Not Green With Envy

On behalf of Kaplin Stewart Meloff Reiter & Stein, P.C. posted in on Oct 25, 2016.

Combining the words “green” and “real estate” can invoke a range of emotions, beginning with apathy, and continuing to fear and perhaps even to optimism. While green building concepts continue to mature, the actual use of “green building” techniques, designs and construction materials are still relatively new. The United States Green Building Council is a private organization that has created and operates a the “Leadership in Energy & Environmental Design” system. Rating levels, using a points system, may include benefits such as property tax breaks and financing incentives, as well as the intangible benefit of an enhanced reputation.

Nonetheless, different companies, in different markets, facing unique economic conditions, may decline to go green for a variety of reasons. Many building owners, developers and contractors fear the belated discovery of a serious defect in design or construction. As the demand for green buildings grows, the risks associated with their construction will continue to evolve. In the future, courts are sure to address legal issues pertaining to green building design, construction and ownership. As a result, legal, design and construction professionals must stay ahead of the curve by identifying and addressing areas of potential liability, but without frightening their clients into retreat.

Unquestionably, risk arises because green construction requires an increased up-front cost, an often complicated LEED certification process and the often unknown future performance of green products and systems. Project owners commonly require additional contract provisions and warranties, which come with an increased exposure to potential liability for breach of contract or warranty by design professionals and contractors. The performance of new products and technologies that are being developed for green construction may be risky. Many of these products are being developed quickly and are not being properly field tested, sometimes leading to disputes.

A good example is a court’s 2014 grant of summary judgment to a product supplier on the grounds that the suit filed by the building owner almost ten years after the construction was completed in 2001, was time-barred. But the Fourth Circuit Court of Appeals has now overturned that decision, setting the stage for a trial in which the building owner, the Chesapeake Bay Foundation, will square off against behemoth Weyerhaeuser. At issue will be the Foundation’s attempt to prove Weyerhaeuser’s liability for construction flaws at the Foundation’s Annapolis “Platinum” rated headquarters. The green design called for exposed structural wood made with a special coating to prevent rotting. After rotting was discovered, the Foundation determined that Weyerhaeuser had not used the contracted-for protective coating, which may not have been effective in any event.

The advent of green building technologies and designs are certainly a positive step in creating building and construction techniques that will create more ecologically friendly and energy sustainable systems. However, the potential litigation risks in a variety of areas may lead one to invoke the old adage that “no deed goes unpunished.” A builder or owner must maintain diligent risk management practices to anticipate as much as possible the consequences of being green.

There are plenty of strategies available to balance the green goals of an owner or developer with business realities and risk evaluation. However, no project owner or design professional (or attorney for that matter) should succumb to scare tactics and “fear of the unknown.” Be green, not green with envy.