Green Buildings – Boon or Liability?

by | Jun 5, 2009

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office-building2Much hay has been made about the benefits of green building. However, a recent report from Harvard Law School points to potential liability issues with green buildings.

The study, by Harvard Law School and sponsored by Manko, Gold, Katcher & Fox LLP, uncovers potential legal liabilities and risks for builders, investors, insurers, architects and others.

In addition to lawsuits for negligence and fraud, violation of consumer protection laws is a possibility. Also, a builder’s failure to meet certification standards may result in a loss of tax credits that are essential to the financial feasibility of a project, Harvard reports in its white paper, “The Green Building Revolution: Addressing and Managing Legal Risks and Liabilities.”

The white paper suggests that companies safeguard themselves by undertaking the following:

  • improve project management
  • pay attention to contract language so it accurately reflects expectations for certifications, tax credits and sustainability
  • assure that any disclosures and marketing materials defining expectations and risks for a green construction project are aligned with reality

To Claire Woolley, who has previously handled construction litigation cases, the Harvard recommendations are not surprising.

“Construction is rife with issues that you have to be cautious about regarding litigation, misrepresentation and liability,” said Woolley, who now is a Vice President at Howard Ecker & Co.

But because green building is such a new area, there are sure to be liability issues as the industry evolves, she said, adding, “I hope it won’t deter people by having them think that green building is too difficult and rife with pitfalls.”

Companies considering green building must look closely at municipal codes, she said. For instance, using gray water for irrigation may not meet code in certain cities. She also referenced a past example from Chicago, where a company wanted to use waterless urinals, but the urinals were against city code at the time.

Parking is another area of concern, she said. “Some city codes say you have to have a certain number of parking spots per employee, but some ideas in green building point toward having fewer parking spots.”

Howard Ecker & Co., a commercial tenant representation company, has launched a new business unit called Ecker Green, which, among other things, is involved in helping commercial office tenants apply RECs to their carbon balance sheet.

At a recent symposium Ecker was part of, the subject of green leasing was explored.

“It’s the nexus between the landlord and the tenant, a way to get sustainability requirements into your lease,” Woolley said.

A builder of green commercial buildings must have proper documentation about environmental aspects, especially when they are leasing the property to clients who have sustainability goals to meet.

“In contracts, both parties have to pay attention to details and be specific about carbon reduction goals. It’s not good enough to specify that you want it to be LEED Silver. You have to define which version of LEED Silver, and which year,” she said.

“Warranties and disclosure must meet the expectations of the parties. Green leasing is new, so it’s not a case of taking an old approach and tinkering with it. It requires fresh eyes,” she said.

In time, Woolley expects the industry to develop standard provisions for green leasing contracts. “Green is not a fad. It makes so much sense in terms of saving money and the environment. It’s the new way forward.”

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