About a year ago, I wrote a post on the trending topic of LEED revocation or de-certification.  That issue has not gone away … it actually has been brought to the front page of the news.  The hot topic, recently reported by Stephen, Chris and Doug (…sounds like three men in a tub…), involves the LEED certification received by Northland Pines High School in Eagle River, Wisconsin. 

When the story first began buzzing around the internet last year, I called Larry Spievogel, an independent engineering consultant, who was giving a presentation on "the actions of the designers that led to the first ever decertification of and plaque removal from a LEED Certified project.”  What I learned a year ago was just confirmed by fellow bloggers, as well as another friendly email from Larry.  Here is what Larry sent me:

I am not going to retell the facts or the procedural background to this dispute (…you can check out the three men in a tub for that …).  However, since it worked so well for the Spearin Doctrine, here is my Tweet about the LEED certification challenge in less than 140 characters:

Green school built. LEED color gold. Cheddar-heads revolt. GBC-Gods review. LEED challenge tossed. What now? Green atty!

According to representatives for the School, the fundamental allegations in the appeal for the revocation of the LEED certification are that the building did not comply with the mandatory ASHRAE prerequisite standards.  Since these standards are prerequisites to any level of LEED certification, the School argues that even a single instance of non-compliance with the ASHRAE standards provide a sufficient basis to deny certification.

Lucidity is defined as clearness of thought or style.  In its recent revisions to the A310 (Bid Bond) and A312 (Performance Bond and Payment Bond), the American Institute of Architects (AIA) attempts to provide a clearness of thought and style.

Clearness of thought or style

The first publication of AIA’s standard bond form was in 1911.  The most recent revisions were in 1970 for the bid bond and 1984 for the performance bond and payment bond forms.  In 2009, the AIA began revising the bond forms to reflect years of court interpretation of the traditional bond language.  However, as admitted by the AIA, some changes were made simply to "clarify language" in the long-standing bond forms.

You can review the AIA’s Bond Form Commentary and Comparison (pdf).  Here are some of the major changes:

  • The introductory legalese is now gone.  Do you remember the "Know all men by these present, that we [contractor], as Principal, hereinafter called the Principal, and [surety], a corporation duly organized under the laws of the State of ______________as Surety, hereinafter called the Surety, are held and firmly bound unto …" ? Principal, obligee, surety … all that stuff is now gone!  Now, you will find an introductory section that lists Contractor, Surety, Owner, Bond Amount and Project. Now that’s clear!
  • Bid bond form addresses time for acceptance of bids and statutory requirements.  For various reasons, time limits for acceptance of bids are sometime extended.  The revised document allows for up to a 60-day extension of the time for acceptance of the bid (as between owner and contractor), but the surety must be notified and provide consent to extend the bid bond.  In addition, there is necessary language for public projects that have certain statutory requirements.
  • Performance bond eliminates owner-surety conference prior to termination and reduces certain waiting periods.  Under prior documents, the owner had to request a conference when addressing contractor default. Some courts held this to be a condition precedent to the surety’s obligation under the bond. Now, the owner may, but is not required to, request a conference as part of its notice of potential contractor default.  In addition, the new form deletes the 20-day waiting period for terminating the contractor after notice of default.  Finally, the new form reduces the 15-day waiting period to a 7-day waiting period for a surety (not contractor) default.
  • Payment bond makes a number of clarifications to payment obligations, notices and claims, and compliance with bond provisions.  First, Section 2 was revised to better reflect the parties’ obligations under the payment bond.  The revisions also clarifies the difference between a "notice" of nonpayment and a "claim" that is sent to the surety.  Finally, a new Section 7.3 was added to clarify that a surety’s failure to act under the bond is not a waiver of defenses.  However, the surety may have to indemnify (repay) the claimant’s attorney fees if the surety fails to file an answer or fails to pay undisputed amounts.

While there are a number of other changes, these represent many of the provisions that make the AIA bond forms more clear … more lucid.

Image: Jakebouma

Noted author and business attorney, Peter Siviglia, once said: "In this world, … there are two forms of writing: creative (such as novels, plays, and poetry) and expository (such as treatises, letters, memorandums, and briefs).  I’ve tried both and prefer a third: contracts, which do not entertain, do not convey information or ideas, and do not try to persuade."

 

In the world of commercial real estate and construction contracts, Siviglia hit the nail on the head.  Using some of Siviglia’s tips in Courses on Drafting Contracts, 12 Scribes J. Legal Writing 89 (2008-09), here are a few items to think about when drafting contracts:

  • A contract is about defining transactions and relationships.  This more more than the definition that we learn in law school (i.e., "An agreement between or among two ore more parties for the purpose of …").  According to Siviglia, the contract will help define: (1) a transaction, such as the purchase of real estate; (2) a relationship, such as a partnership, or (3) a combination of both, such as a partnership to purchase and develop real estate.
  • A contract is a set of instructions.  Just like the building plans and specifications instruct the contractor how to build the water treatment plant, commercial condo or new hospital, the written contract instructs the parties on their course of conduct in the transaction.  And when problems arise … and they will … the written contract instructs the parties on how to perform in such circumstances.
  • A contract should include standard provisions.   Although each contract is different, there are a number of terms and conditions that are part of the "A Player" list, including: 
  1. Termination, which defines the parties’ rights to terminate the contract;
  2. Assignment, which outlines whether the parties are allowed to assign their rights to another party and the terms in which they are allowed to do so;
  3. Governing law, which defines the law (i.e., Tennessee, Virginia, New York) that will apply to the parties’ contract in terms of both substance and procedural issues;
  4. Disputes, which defines whether the the parties will litigate in court, mediate, or arbitrate;
  5. Notice, which identifies where legal notice of disputes, claims, changes, etc. are directed;
  6. Modifications, which outlines the procedures for modifying or amending the contract terms (not to be confused with a "changes" clause);
  7. Changes, which outlines the procedures for modifying or changing the scope of work by one of the parties (not to be confused with a "modification" or "amendment" clause);
  8. Claims, Rights and Remedies, which describes the method for submitting claims and may also include rights to recover or limit certain types of damages (consequential damages, liquidated damages for delays, attorneys’ fees, interest); and
  9. Indemnification, which describes the circumstance in which one party may have to indemnify (or pay the losses or claims) of the other party for some legal purpose.

Of course, each transaction or relationship should have a written contract tailored to its own project or development needs. In other words, while standard form agreements can be used on successive and multiple transactions, each project should nonetheless be reviewed for the applicability of particular standard form provisions to the particular project.  On occasion, circumstances dictate the necessity of revisions to your standard agreement.

Image: Juli Shannon

As a follow-up to my post yesterday about the costs of LEED certification, I was not surprised to read the following lead line in a local newspaper in Cary, North Carolina:

"Cary wants to be green. Just not certifiable."

According to the article, the local town council voted to skip the green building certification process because of the high costs.  "If the economy was in a better situation, I’d consider it," said Councilman Don Frantz, who made the motion to skip the certification. "But I just can’t see the justification on moving forward and spending extra money."

The Cary fire station is the perfect example of the dilemma faced by commercial developers and public owners seeking to embrace green construction.  For instance, the fire station will spend more than $100,000 on energy-saving features in the new construction.  However, it would cost the town approximately $41,500 in registration, certification and other costs to have the fire station become LEED certified, according to a town report.

At the heart of this debate is the recognition that, to some, the goal is energy and other savings over the life of the building, while, to others, the goal is focused on sustainability.  In other words, to the Town of Cary, the estimated cost savings of employing green standards is approximately $580,000 over the next five years.  Since cost savings was a driving factor, the $41,000 associated with the LEED certification process was a significant amount. 

Nonetheless, the Town had a number of proponents supporting certification.  According to Town Council members who supported the effort, "seeking LEED certification would ensure that high environmental standards would be met."

Given this background, why would an owner-developer want to seek LEED certification? Here are some initial thoughts on the issue: 

  1. It makes good business sense.  The LEED certification, which includes a rigorous third-party commissioning process, can offer compelling proof to you, your clients, and the community at large that you’ve achieved your environmental goals and your building is performing as designed.
  2. It is a good investment.  Not only do LEED certified building embody good business practices, the USGBC’s seal of approval can be a great investment and result in increased property values.  A LEED-certified building can garner a greater premium than a non-LEED certified building for the simple fact that it is … well … LEED-certified.  One provision here: the building standards should, in fact, result in operational cost-savings and energy cost-savings. 
  3. It provides good incentives. There are numerous state and local incentive programs that offer tax breaks, faster or cheaper permitting, and other incentive programs for seeking the LEED certification.  Whether it makes sense that lawmakers are basing these programs on USGBC’s LEED programs or incorporating LEED requirements into local building codes are not the issues.  Here, the issue is that you can in many locations receive great incentives for doing so.

Question: What additional benefits can you identify for the Town of Cary to go through the LEED certification process?

Image: www.architex.ca

Most owner and developers would imagine that the most significant costs of LEED certification are the front-end registration and back-end submittal costs.  Are they correct?  Depends.

www.buildingreen.com | The Cost of LEED

Environmental Building News prepared a primer on the costs of LEED certification for commercial construction.  As noted in the article, LEED certification includes various costs that must be considered separately in order to correctly analyze the total package.  According to EBN, here are the traditional costs explained in more detail:

  1. The fees. Registration and certification fees are roughly 3¢–5¢ per square foot, depending on the size of the project and other factors.
  2. Cost of documentation time and effort. This cost could be for an outside consultant hired just for that task, someone on the staff of the design firm, the contractor, or the owner. This is a big project for someone doing it for the first time and not such a big deal for someone who has done it enough to have figured out the process.
  3. Cost of extra research, design, commissioning, and modeling for compliance. If your baseline is the cost to have a design team create a variant on their last few non-LEED projects, then designing to meet LEED standards will take some extra effort. But these added costs shouldn’t be attributed just to LEED—they are the costs of getting a better building. LEED introduces a few requirements that add costs if they are not already part of the scope of the project. At $0.50–$1 per square foot, commissioning, for example, may seem like a big investment, but it’s cheap compared to the cost of call-backs, fixes, and inefficiencies that are likely if you don’t do it.  If energy models aren’t code-required, then the LEED-specific model represents an added cost that starts at $5,000–$10,000 and goes up, depending on the complexity of the project.
  4. Costs of construction. Including green measures can mean added construction costs such as the following: demand-controlled ventilation adds about $1/cfm to the cost of a standard ventilation system; bike racks will cost about $5 per full-time equivalent (FTE) occupant; occupancy sensors cost about $25 per fixture.

What does all this mean?  By looking at the diagram above, you can easily tell that construction costs account for the largest percentage of a green building project.  The real question remains whether the added costs of registration, adminstration, documentation and operation justify the savings (in terms of tax credits, cheaper operation, etc.) will justify those investments.  Check out what Minnesota has to say about the issue.  

So the real answer depends on a cost-benefit analysis.  The construction costs won’t change with non-LEED certified green construction.  If the benefits and incentives are worthwhile (depending on your project type and location), then the LEED certification may be the route to go.

Image: www.buildinggreen.com

Short answer: Yes.

While most of the best practices that I talk about here involve commercial developments, today’s post applies both to residential and commercial projects.  It’s been two weeks since the historic flooding in Nashville and there is a lot of cleaning up and repair to be done.  On Friday, I received an alert from Davidson County’s Department of Building Codes, which contained guidelines for permits related to the repair of flood damaged homes and buildings (pdf).  Here are a few important things to remember, whether the project involves commercial or residential:

  • You need a building permit prior to making repairs on flood damages homes and buildings.  While you do not need a permit for clean-up or demolition, a permit is required prior to installation of any drywall, electrical, or HVAC systems.
  • The property owner or tenant can pull the permit for repairs up to $25,000.  If the repair costs more than that, the permit must be obtained by a licensed contractor.
  • Use extreme caution with restarting of any electrical systems or units.  Again, it is recommended that you have a licensed mechanical contractor inspect and test these systems before using them.

One final recommendation, as related to residential home repairs, is to make sure that your repair contractor is properly licensed through the Department of Commerce and Insurance.  The State has also put together a guide for finding and selecting a licensed contractors (pdf), which recommends the following: (1) get multiple bids from at least 3 contractors; (2) hire only a licensed contractors; (3) get a written contract; (4) get the contractor’s proof of insurance; and (5) set up a payment plan and do not pay more than 1/3 deposit.

Last week I attended Chick-Fil-A’s Leadercast, which included some of today’s greatest leaders such as Tony Dungy, John Maxwell, Ed Bastien and Dr. Ben Carson.  The Leadercast is about developing leaders at all levels, positions and stages.

Whether you are working with 1000s of employees, 100s of clients, 10 project managers, or 1 other individual … whether you are the CEO, the division head, or the project superintendent … you can benefit from some of these great tips:

  1. Good leaders treat people as a "work in progress" rather than a "work already completed." Mark Sanborn, Best-selling author of The Fred Factor.  If you understand someone’s personal story, you can better understand their professional success (or failure).  As a leader, you should be concerned about making the "stories" of your colleagues and employees better.  According to Sanborn, leaders don’t tell a better story, they help make better stories.
  2. Good leaders are determined. Tony Dungy, retired head coach for the Indianapolis Colts.  People struggle before they make progress and, therefore, you have to teach perseverance, incremental progress.  "One year we lost 10 games and were not showing improvement on the scoreboard," Dungy said, "but we were getting better each week. We had to focus team on the small incremental improvements."  Leaders are determined. 
  3. Good leaders connect with people. John Maxwell, leadership expert and author of best-selling The 21 Irrefutable Laws of Leadership.  Maxwell joked about leadership failures: "If you turn around and nobody is following you, then you are not leading … you are on a walk."  The key is to connect with your colleagues, clients, and employees.  It’s all about helping others: If you help them get what they want or need, then they will help you get what you want or need.

In so many different ways, I am called to be a leader … to my wife, to my kids, to my community, to my colleagues and to my clients.  Are you doing all that you can to be a leader?

Today, the U.S. Departement of Labor’s OSHA announced that it is seeking to team up with local bulding inspectors in an effort to increase safety and avoid serious accidents and fatalities on construction sites.  The pilot program seeks to partner OSHA with building inspector teams in the following 11 cities:

  • Austin, Texas
  • Boise, Idaho
  • Cincinnati, Ohio
  • Concord, New Hampshire
  • Greenwood Village, Colorado
  • Madison, Mississippi
  • Atlanta Metropolitan area, Georgia
  • Newark, New Jersey
  • Oakland, California
  • Washington, D.C.
  • Wichita, Kansas

In a letter sent to the mayors of the selected cities, Secretary of Labor Hilda L. Solis proposed that OSHA train local building inspectors about the four leading causes of death at construction sites (i.e., falls, electrocution, being crushed or caught between objects, or being struck by moving machinery or objects).  During  building inspections, the local teams would then report unsafe work conditions to OSHA, who would then perform a Federal safety inspection.

While the pilot program seeks a laudible goal of safety on construction sites, it will be interesting to see the interplay between the local and federal officials.  In addition, there may be overlap with state OSHA agencies if the program expands to other locations.  In the end, the true success of the program will be the avoidance of fatalities on construction sites.

Hat Tip to fellow construction litigator, co-defense counsel, and sometimes opposing counsel Marisa Combs for the OSHA news link.

On Saturday, it rained … and rained … and rained.

On Sunday, it flooded.

On Monday, I took off from work to help stage a shelter at my local church for a number of Nashville flood victims.

On Tuesday, I spent part of the day with displaced residents whose homes were completely demolished.  I spent the rest of the day dealing with email problems.

On Wednesday, I started fielding calls from clients and other flood victims about what they needed to do following flood losses to their businesses and homes.

Today, I hope to outline some steps about what residents and businesses in Nashville should do about all the chaos, including lost property (personal and business), FEMA claims, insurance claims, and the daunting process of remediation and repair of your home or business. 

  1. For both homeowners and businesses, locate your insurance policies.  There are a lot of rumors about flood coverages (what is required, whether you can get flood insurance, whether the loss covers contents or the building).  The only way to get to the truth is to review your policy.  If the actual written document was destroyed, then call your agent for a copy of the policy … even if they tell you that you do not have coverage for floods.
  2. If you don’t have any insurance, or you do not have coverage for flood losses, then identify what resources are available to you.  As of today, Cheatham, Davidson, Dyer, Hickman, McNairy, Montgomery, Perry, Shelby, Tipton and Williamson counties have all now been granted Federal disaster designation by the President.  That means, you may qualify for assistance through FEMA.  You can apply for assistance online or by telephone.  FEMA requires that losses be submitted with 60 days.
  3. Document your losses.  This may be difficult given your conditions, but it will require making a list of the damaged property, as well as taking pictures and videos. While it may be a no-brainer, separate the good from the bad … what is recoverable and usable from what is completely destroyed.
  4. Contact your advisers, including your insurance agent and attorney.  The process of filing a claim begins with giving "notice" to your insurance carrier.  Even if you are not sure about your coverage, make sure to provide the required notice.  If you are denied for any reason, then an attorney will be able to advise you about your rights. (Remember, though, you need your policy!)
  5. Carefully walk through the remediation and repair process.  Whether or not you have insurance, you will want to work remediation and repair contractors who have experience with these types of losses.  As with any disaster, there will be those individuals who want to take advantage of the situation to offer their services at what may seem to be a discount.  You should check whether the company is registered with the Nashville Better Business Bureau.  To verify whether a repair contractor is properly licensed through the State of Tennessee, please use please use http://verify.tn.gov or http://licsrch.state.tn.us/
  6. For businesses, evaluate whether you have "business interruption" coverage.  Again, this will depend on the actual policy.  Business interruption coverage is generally not sold as a separate policy, but is added or included in a policy package.  It usually covers: profits, operating expenses, and sometimes temporary relocation expenses. 

There is certainly a lot of advice on the Internet … some good … some bad.  There are going to be significant claims in the coming months resulting from the floods in Nashville and it is important that you find reliable information to help you through the process.

Earlier this week, I was talking with fellow attorney who does not practice construction law.  At one point in our conversation, he threw out a goocher of a question: "I know this is a hard question, but what do you think causes most of the disputes on a construction project?  I am sure there could be plenty of reasons for lawsuits, but are there some more to blame than others?"

Wow!  That is a hard one … particularly because there could be so many different reasons for disputes on a construction project.  Here were my top three reaspons for disputes: 

  1. Problems with the contract.  The written (or unwritten) contract is what guides the parties’ expectations as to payment and performance.  The contract must clearly identify the rights and obligations of each player in the process, from developer, to designer, to contractor, to subcontractor and supplier.  More problems occur because an incomplete, vague or ambiguous "Scope of Work" in the agreement. A well-written contract that properly analyzes and allocates the risk on the project will often save heartache at the time of completion.
  2. Problems with the people.  It is no secret that successful companies are driven by successful people.  The opposite is true as well: failing companies suffer from poor management and leadership.  When "people" are responsible for building "things,"  you have to realize that those "people" can cause problems during the construction process, whether you are talking about a loan officer, a design team, a project manager or supply deliveryman.
  3. Problems with the unknown.  This is what I would call the "catch-all" category, as disputes often arise from events beyond one or more of the parties’ control.  This woud include anything from unusually severe weather, to labor strikes, to differeing site conditions.  These "causes" often involve requests by the contractor for more time and/or money.

If you had to answer my colleague’s question, what would you say?