Today’s guest post is by Angela Stephens, a fellow construction attorney in the Construction Service Group and Green Law Group at Stites & Harbison PLLC. She is a LEED Accredited Professional and is the first attorney in the Commonwealth of Kentucky to achieve Green Advantage® certification.

 Sustainable Design and Construction raises unique legal issues for all parties who touch the project. It affects sureties, insurance companies, banks, owners, design professionals, contractors, subcontractors, material suppliers, vendors, and their respective employees.

Design professionals should work with the owner and contractor to develop sustainable goals that are attainable. Owners and banks want to be sure that they have adequate remedies in case costs exceed what was promised, tax incentives which were being sought by having a sustainable and energy efficient building are lost, or if the design or construction of a project does not result in LEED Certification.

Contractors and subcontractors need to make sure that they understand the unique requirements for “green” projects such as: (1) following the Erosion and Sedimentation Control Plan adopted for the project, (2) avoiding disturbance of more areas than necessary or allowed by LEED on previously undeveloped land, (3) properly installing the right materials (i.e. materials with low VOC limits, high SRI values, which are recycled, reused, regional, or renewable) and equipment, (4) protecting materials and equipment during construction from moisture or construction debris, (5) collecting and submitting the required documentation for those materials, and (6) following the waste management plan for recycling construction waste materials. If a contractor fails to comply with one of these requirements which was tied to a sustainable goal or point needed for certification, then it may be liable for any resulting damages suffered by the owner.

Owners, design professionals, and contractors want to make sure that they have adequate insurance coverage in place to cover any potential risks. However, insurance companies are still evaluating whether special coverage is needed on sustainable design and construction projects; only a few companies are currently offering specialized coverage for “green” projects. In addition to obtaining insurance coverage to help minimize the risks to your company, here are some ways to minimize the potential legal risks of sustainable design and construction.

1. Don’t Promise More Than You Can Deliver.  In addition to environmental stewardship, there are many recognized benefits to sustainable design and construction such as energy and operational cost savings, healthier workspaces, increased worker productivity, increased tax incentives, and financing incentives. However, what happens when your marketing materials promise or guarantee these benefits and they are not realized or there is a dispute over whether these benefits are actually realized? The parties may end up in a dispute alleging breach of an express or implied warranty, fraud, false advertising, or other similar claims. The key is to monitor your marketing activities. Only promise what you can measurably deliver, and include clauses in your contracts which limit all warranties to those expressly provided in the contract.
2. Don’t Guarantee the Level of Certification. Likewise, if you are a contractor, subcontractor or design professional, do not guarantee the level of certification on any project unless required by law. In many cases, the determination of whether a project achieves a certain level of certification is regulated by a third party over which you have no control. For example, under the Leadership in Energy and Environmental Design (LEED) Green Building LEED Rating System, owners who want to design and construct a LEED certified building must first register the construction project with the Green Building Certification Institute (“GBCI”), a third party responsible for project registration and LEED certification. During the design and construction phase of the project, the project team submits documentation to the GBCI, through LEED Online, verifying that certain points have been achieved. Ultimately, the GBCI determines whether various points are achieved in order to reach the various levels of LEED certification. Therefore, instead of guaranteeing a certain level of certification, warrant that the work will be in accordance with the contract, the plans and specifications, and accepted industry standards.
3. Identify the Participants, Their Roles, and Their Responsibilities.  Many disciplines are involved in achieving a project’s sustainable goals (whether obtaining LEED Certification or following the guidelines of the Green Globes rating system). On most sustainable construction projects, no one party is in control of obtaining all of the points or goals. The parties must collaborate and work together in order to obtain the project’s goals. Most importantly, the parties must understand who is responsible for all of the aspects of meeting the project’s goals. For example, if the owner’s goal is LEED Silver Certification, the parties should create a version of the LEED 2009 score card which clearly identifies which parties will be responsible (i.e. architect versus the general contractor and subcontractors) for achieving the various points sought within LEED 2009, and make this document an addendum to each of the contracts on the project. Additionally, owners and contractors should select an experienced green building team and consider inserting clauses in their contracts affirming that the contractor and/or subcontractor have read, understands, and will comply with the LEED or green requirements for the project.

To continue reading Angela’s post and learn about the seven other tips, please click here.