Nashville's Green Ribbon CommitteeWhen Nashville Mayor Karl Dean created the Green Ribbon Committee on Environmental Sustainability, he had lofty goals of making Nashville the greenest city in the Southeast.  Indeed, Tennessee’s Lt. Governor Ron Ramsey shared a similar commitment to be a green "LEEDer" in the South. 

Fast forward to January 2010 … Where are we on the green front?  What have we learned over the past year?  Where are we going in the future? Have we met any goals outlined in the Green Ribbon Committee report?  How have the current real estate market conditions impacted the short-term future of green building in Nashville?  Is it time to require some sort of mandate for green buildings or are incentives enough? 

Yesterday morning a group of community leaders, developers, bankers, attorneys, engineers, contractors and other green players met for breakfast at Waller Lansden’s sustainability breakfast series to tackle these questions. The panel included the following: 

The one-hour discussion was very thought-provoking and the panelist had some practical comments on the future of green building in Nashville.  Here are a few:

On the progress of green building:

Jimmy Granbery applauded the development of technology and better understanding of green solutions.  "For example, we can now build a green roof with only four inches of dirt rather than two feet of dirt," said Granbery.  This has certainly resulted in significant cost savings in the underlying materials, as well as the building costs such as the steel needed to support a heavier roof.

On city or state-wide green building code:

Councilmember Mike Jameson discussed the problem that localities face by adopting a third-party building code such as USGBC’s LEED certification, suggesting that the building code will have to change as the third-party standard changes.  "Instead, I would like to see the city code mirror the [third-party version] … to be a stand alone code," said Jameson.

On local incentives for green building:

Joni Priest highlighted some potential incentives, including bonus square footage for LEED certified buildings and building height variances.  Priest said  that there was significant opposition to any mandate for LEED certification on construction, joking that her phone rang off the hook when the mandate issue came up for discussion.

On general trends for green building and sustainable design:

Bert Mathews said that it really depends on the client, as some tenants of his developments have absolutely no interest in green building, while for others, "it is a standard that many have come to expect."

Question:  How would you rate Nashville’s commitment to green building?

I look forward to the sustainability breakfast series over the next few months.  Thanks to @tenngreenlawyer for the tweet about the breakfast.

On December 24, 2009, the United States Senate voted to pass its own version of the health care package.  You have probably heard cries about the length of the bill (1,990 pages).  You have probably heard the cries about the costs.  But have you heard about an amendment that may significantly affect the construction industry?

Read Between the Lines

According to a letter from the Associated General Contractors of America to Senator Mitch McConnell (pdf), the bill is non-workable and unnecessarily targets the construction industry.  The AGC opposes the health care package because of the complexity of the plan, the cost-shifting (rather than the cost- reductions), and the likelihood that it will increase insurance costs for those construction businesses that provide insurance to their employees.

Even worse, according to the AGC, is an amendment drafted by Senator Jeff Merkley (D-Or) and inserted into the bill by Majority Leader Harry Reid (D-Nev.) that would exempt the construction industry from the small business exemption that was included in the original bill.  According to another letter from the AGC to Senator McConnell (pdf), this would cripple small construction businesses:

For all other industries, H.R. 3590, exempts employers with fewer than 50 employees from the fines levied on those who cannot afford to provide their employees with the federal minimum standard of health insurance. However, the Manager’s Amendment alters the exemption so that it singles out small businesses in construction for special punishment by applying the exemption to only those firms with fewer than five employees in the construction industry. . . . The 50 employee threshold was meant to exempt smaller firms, [and] this amendment will unfairly punish small construction contractors.

There remains considerable debate about the effectiveness of the health care package.  The introduction and consideration of the Merkley amendment is a reminder for all industries to do your homework as Congress enacts laws that may affect, both directly and indirectly, your company.

Photo: Flickr | pixelle54

Is it too late to discuss a case from 2009?  Nah.  Especially if the court released the opinion within the past two months.  And according to the decision in Shelby County v. Crews (pdf), there are times when it may be too late to withdraw a condemnation petition. That line in the sand appears to be the date after the public entity takes legal possession.

Time Limits on Condemnation Proceedings

In Shelby County, the Court of Appeals of Tennessee recently held that the County was precluded from backing out of condemnation proceedings too late in the game. The County had possession of a small strip of land owned by the Crews. The County used the land as a parking area for a nearby penal farm and had gone as far as to pave the property. In the summer of 2004, the County filed a Petition for Condemnation of the strip of land pursuant to the condemnation statutes. The County offered approximately $40,000 as to the amount of compensation for the family land owners. The family did not contest the County’s right to acquire the property, but disputed the amount of compensation it should receive for the land. Thereafter, the trial court entered a Consent Order that granted “all property rights and ownership in fee simple” in the property to the County. The trial court scheduled a trial on the issue of compensation for a later date.

One week prior to the scheduled trial date, the County filed a Notice of Non-Suit, which is a document that gives notice of a voluntary dismissal of the condemnation proceedings.  The Crews filed an objection to the non-suit order, arguing that the County was not entitled to dismiss the case because it took possession of the property. The issue before the court was whether the County was entitled to voluntarily dismiss the condemnation after it took possession of the property.

In a short five-page opinion, the court held that the County was precluded from voluntarily dismissing the condemnation proceedings after it had acquired ownership and legal right to possession, leaving only the issue of compensation to be decided.

While this issue may seem like a no-brainer to you, the case is important because it establishes a limitation on a public entity’s power to condemn property.  The public entity can no longer take possession of the property and later "back out" of the deal if compensation looks to fall in favor of the private owner.

Photo: Flickr | ToniVC

Everyone knows that this is a slow week for work … unless you work in retail and there is a mad, crazy 75% off sale. For me, I am using the time to clean up my legal files, assess the deadlines for the next three months, evaluate what went right in 2009, contemplate what went wrong in 2009, and plan better for 2010. 

Planning for the New Year

With so many ways to attack this evaluation process, I want to share with you my top sources of evaluation (in no particular order):

For career development … Cordell Parvin is a fellow Richmond Spider (…although a few years before me…) and former construction attorney. I came across Cordell’s name about 6-7 years ago when I was contemplating a move to Dallas, Texas and I reached out to fellow law school alums. While that venture did not turn out, I have kept in touch with Cordell regularly through his books, blog, and Tweets. While you can find a lot by browsing his blog, my favorite year-end posts include:

For balancing family and career and life … sure you have your Zig Ziglar’s, your John Maxwell’s, and even your Rick Warren’s … but my favorite, local, "living-life-right" model is Nashville’s own Michael Hyatt, CEO of Thomas Nelson Publishing. I first started following Michael’s blog, Leading with Purpose, at the beginning of this year when I revved up my career planning and life assessment. Michael is a model husband-father-businessman-leader, who Tweets about leadership and life. Here are a few of my favorite posts, including the year-end assessment:

For sheer motivation … speaker and author Andy Andrew challenges you to evaluate the importance of halftime. As for me, this week is my "halftime" moment and the second half is about to begin. The year 2010 presents some great opportunities for my career, my family, my community and my church. How about you? I know. I have lived them, too. The past few years have been tough. But the best years lie ahead.

What are you going to do to make 2010 different? … or better yet … What are you going to do to make a difference in 2010?

TN Commissioner Leslie NewmanBack in November, I wrote about a Tennessee Attorney General Opinion that addressed the new workers’ compensation law in Tennessee that requires sole proprietors to carry workers’ compensation insurance on themselves. (Traditionally, there was an exclusion for sole proprietors.)  Just after release of the AG-Opinion, the leadership in the state house and senate came to an agreement to suspend the effective date of the new law.

Over the past month, there have been a number of grass roots campaigns to address this issue.  So, where does the law stand now?  According to an official bulletin from the Department of Commerce and Insurance Commissioner Leslie Newman (pdf), the statute goes into effect at midnight on December 31, 2009.  Although the General Assembly has reported that it will address the issue as soon as they convene on January 12, 2010, the statute as written and enacted is enforceable on January 1, 2010.  The most important tip from the Bulletin is about election of coverages:

The Department interprets this change in the law to mean that a sole proprietor, partner, or limited liability company member ("LLC member") who had not previously been required to have coverage on himself must  now obtain coverage on himself. . . . The Department wishes to make clear its position that failure of a sole proprietor, partner, or LLC member to obtain such coverage without having met an exemption, is in violation of [the new law] and could subject such person to penalties by the Department of Labor and Workforce Development.

The Bulletin also includes the "Certification of Election" form that must be filed with the Department. I plan on following this issue closely.

"Pay me less before the dispute erupts … or pay me more after the dispute erupts …" is a phrase that many construction litigators have said to their clients.  What that means, practically, is that if you invest the time and money to have your attorney review construction contracts before the job starts, you will save time, money and effort later when the dispute begins (and perhaps you may even fend it off). Despite the warnings, there are many out there who want to "go it alone" … and that’s okay.  This post is for you.

Learn to Write Better

The American Bar Journal posted an article two weeks ago about a federal bankruptcy judge who was fed up with "superfluous words and too much capitalization."   The judge took a stand against legalese and issued some guidelines (pdf) to the practicing bankruptcy attorney.  Some of my favorites include:

  • Lawyers apparently disfavor articles, both definite and indefinite. Use the
    articles “the,” “a,” and “an” as appropriate.     Write the way you would speak.
  • Never use and/or.
  • Eliminate superfluous words. They serve no purpose other than to make the
    document sound more legal … Examples of such words are: “hereby,” “herein,”
    “in and for,” “subject,” “that certain,” “now,” “that,” “undersigned,”
    “immediately,” “heretofore entered in this case,” “be, and hereby is”–the list
    goes on and on.
  • Keep plurals and possessives straight and consistent. Know when to use
    debtors (plural), debtor’s (singular possessive), and debtors’ (plural
    possessive). Make sure the verb matches the subject of the sentence.

You can tell by the terse language in the judge’s guidelines that he likes clarity and he wants litigants (and particularly their attorneys) to follow those guidelines.  If I were a construction litigator … which I am … I wonder what my suggested guidelines would be for construction contracts.  Here are a few:

  • Keep the names consistent.  I know this will take some searching and replacing in your form contracts, but it is important to track the parties’ names correctly.  Many times, I have found a "subcontractor" listed as "contractor" in one section and "subcontractor" in another section.
  • Identify the "contract documents" for the parties.  Too many disputes arise because someone thinks the proposal or purchase order is part of the parties’ agreement only to learn later that it has not been incorporated as part of the contract documents.  Many form contracts have an "order of precedence" clause that ranks the precedential value of the documents in the event of a dispute.  Make sure to expressly include every document that you want into the contract documents.
  • Evaluate and clarify the "dispute" provisions.  Again, I have seen a number of lawsuits between parties spend too much time on the procedural issues such as litigation, arbitration, mediation (because the contract was not clearly written), rather than getting to the heart of the matter.  Make sure your contracts clearly identify your method of dispute resolution.

Do you have any other guidelines for your construction contracts?

Photo: Flckr – LucasTheExperience

This guest post was written by Kevin Kaiser of SuretyBonds.com, specializing in teaching consumers about surety bonds through the Surety Bond Education Center.  I do not represent Kevin or his company, nor do I sponsor any of their products.  Kevin has some great things to say about the surety’s perspective in green construction, which is particularly timely given the announcement of a recent challenge to a LEED certification in Wisconsin. 

The Green Performance Bond

Green Construction Performance BondGreen building continues to gain momentum across the country, as project developers and consumers look for ways to incorporate environmental consciousness into everyday life.

Last year, Energy Star homes accounted for almost 20 percent of all new single family construction, up from 12 percent the year before. There’s also greater interest this year in LEED-certified homes and other more involved green-certified standards from the U.S. Green Building Council.

But it isn’t all smooth sailing. In fact, green construction is proving extremely problematic for the surety industry, which ensures that construction projects are completed and in accordance with contracts by issuing bonds.

And until that’s rectified, a nationwide wave of green construction might be on hold.

The Friction

In short, the issue is a performance bond. These are a key part of the normal construction bonding process that guarantee a contractor completes all work up to contract and code.

Surety companies typically scrutinize a contractor’s financial health, expertise, work history and likely ability to perform the job before underwriting a bond. They also look at a given project’s specific contract. Performance bonds are tied to specific, quantifiable goals grounded in industry standards and accepted practices.

That’s why green building performance standards are becoming a significant and mounting problem for surety companies.

To obtain certain green building designations, third parties like the U.S. Green Building Council look for specific levels of energy efficiency and other quantifiable improvements. But most sureties will steer clear of bonding a company with a contract that calls for third-party certification or requires specific energy reductions.

The reasons revolve around risk mitigation and responsibility: Who’s on the hook financially if the building falls to meet those third-party requirements?

“It’s not always the party that has to post the bond that’s responsible for that element of LEED certification,” Bob Duke, director of underwriting and assistant counsel for the District-based Surety and Fidelity Association, told the Washington Business Journal. “Maybe the party posting the bond doesn’t have control of the total obligation.”

Because of those lingering questions, most surety companies will not issue a bond for a contract that calls for any type of green or energy efficiency benchmarks, which are not performance standards but prescriptive requirements.

“In the event that a building fails to perform to a specified level of resource efficiency, should the surety be required to compensate the owner to rebuild the structure?” Mark Rabkin, a risk manager for Althans Insurance Agency, noted in a recent blog post. “That is not what they are in business to do and will not bond contracts guaranteeing efficiency and performance specifications.”

The D.C. Green Building Dilemma

The green performance bond issue has garnered headlines in the last year because of new regulations in Washington, D.C.

The District in 2006 created a green building requirement for certain private and public projects. The regulation basically requires the use of a bond that doesn’t really exist yet — a green performance bond.

Surety companies and associations have lobbied against the new regulations, which take full effect in 2012.

Projects that fail to meet the new green standard would pay claims of up to 4 percent of building costs to a city green building fund. Compounding the situation is a clear conflict of interest: The District agency that maintains the green building fund is the same that can determine whether a project is in compliance with the new regulations.

Last fall, surety claims attorney Bryan M. Seifert addressed the D.C. green building regulation in a piece on Entrepreneur.com:

This type of legislation involves a fundamental misunderstanding of the marketplace, the type of products available in the insurance and surety industry and how those products respond to today’s construction needs. Performance bonds typically guarantee the performance of a quantifiable objective. Rather than legislate a performance bond to guarantee a quantifiable goal based on an objective standard for which the bond is written, the District has chosen to legislate a particular prescriptive rating system with attendant unknown risks. The surety product will more likely end up contributing to the District’s green building fund and not the sustainable performance objectives of the District’s projects.

Owners, stakeholders, contractors, risk managers, insurers and sureties must be keenly aware of the flurry of legislative activity and its implications for their interests. Much of the recent green building legislation is a result of advocacy for intangible outcomes with little analysis given to the overall performance of the public asset and little consideration for the industries that support and sustain the construction process such as insurers and sureties. The D.C. Act is just one of many examples of legislative activity that may have profound and unknown affects on these industries.

Sureties continue to balk at the vague and risky language of this and other proposed green building bonding measures. If that persists, the burden will fall to contractors and developers to assume greater risk when taking on some green public and private projects.

Current Environment

After consistent outcry from the surety industry, officials in Washington, D.C., are trying to rework the language regarding performance bonds.

Industry officials and observers alike are unsure when or how the issue will likely get resolved. D.C. environmental officials have staked a claim that green performance bonds are feasible.

Now they have to find a practical way to prove it to the nation’s surety industry.

Seth Godin is the bestselling author of ten books on topics about marketing, the spread of ideas and managing both customers and employees with respect.  This week, Seth released an e-book, a FREE DOWN-LOADABLE BOOK, that addresses some exciting ideas for the new year. 

Seth Godin's What Matters Now

Why is this important for the construction industry?  Just download the book and find some of the following nuggets of encouragement and advice for the new year:

  • Seth Godin (blogger and speaker): "…the more you give the more you get…"  Seth speaks of the importance of generosity in our lives.
  • Howard Mann (entrepreneur and author): "They do business through personal relationships, by delivering great customer service and it’s working for them."  Howard suggests that you stay connected and build personal relationships, which does not always  mean that you Tweet or blog more.
  • Michael Hyatt (CEO of Thomas Nelson Publishing): "When times are tough, vision is the first casualty. Before conditions can improve, it is the first thing we must recover."  Michael highlights that vision is the lifeblood of any organization.

Are you being generous in your business?  Are you investing in personal relationships?  Do you have the vision that your company needs to get you through these difficult times? 

Some of the most successful construction business owners I know are also some of the most generous people that I know.  Even if they are not blogging, Twittering, or Facebooking, they know how to build personal relationships with their clients.  They also treat their employees well and they have the ability to stand at the helm of their company, encouraging their people through the tough times.  Are you doing the same?

Litigating Consumer Protection Act CasesEvery construction litigator in the residential arena knows that a state’s consumer protection laws are good grounds for disputes.  Will my client get treble damages?  Will they recover attorney fees for deceptive trade practices?  Does my client have any defenses to these types of claims?

In Fayne v. Vincent (pdf), the Supreme Court of Tennessee held that the Consumer Protection Act applied to real estate professionals engaged in the sale of their personal residence. The case involved problems with a septic tank that were discovered after sale of the residence to the purchasers.  Mr. Vincent was a builder and developer and his wife was a realtor. Mr. Vincent was the developer of the neighborshood and he constructed the home in question, moving into the house after it was completed. Mrs. Vincent signed the Tennessee Residential Property Condition Disclosure Statement in her dual capacity as owner of the property and as realtor for the property.

After the purchasers moved into the home, they began to notice odorous fluid seeping from around the septic tank. After investigation, the purchasers filed suit against the builder and the realtor for various claims including negligent misrepresentation, fraud, deceit, and violation of the Tennessee Consumer Protection Act.

Following a two-day jury trial in the trial court, an appeal to the Court of Appeals, a remand back to the trial court, and a subsequent appeal, the Supreme Court held that the sale of the home was covered by the Tennessee Consumer Protection Act (TCPA). Specifically, the Court recognized that the TCPA does not apply to sellers who are “not in the business of selling property as owners or brokers” and therefore that “persons making an isolated sale of their home [is] not covered.” The Court reasoned:

We adhere to the holding … that homeowners participating in the casual and isolated sale of their personal residence and not in the conduct of trade or commerce cannot be sued for damages under the TCPA. This principle applies to developers, contractors and realtors who are selling their personal residence in a casual or isolated sale and who are not performing or providing professional services to facilitate or finalize the sale. However, we have also concluded that developers, contractors, and realtors cannot insulate themselves from liability under the TCPA simply by owning and briefly residing in a house before they offer it for sale as their personal residence.

Accordingly, the Supreme Court held that the TCPA applied to the facts of this case.

The Fayne case is a good reminder to developers, contractors, and realtors, as well as to purchasers of residential property, to know and understand the full breadth of your state’s consumer protection laws.  Imagine the case of where verbal abuse by the builder against a purchasing couple gives rise to a claim for intentional infliction of emotional distress and consumer protection act violations.  It happens.

In this day of Blackberries and iPhones, one of the best communication tips I have ever heard was at the American Bar Association, Forum on the Construction Industry’s fall meeting in Philadelphia a few months ago.  Since we live in world of mobile communication and technology, you have to assume that everyone else is on the same mobile playing field and are working on-the-go.  What does that mean?

Communicating in the digital age...

Christine McAnney explained that as general counsel for a large construction company, Balfour Beatty Infrastructure Inc., she is pulled in all directions.  On some days, she will be tied up in depositions, while other days she is traveling to meetings across the country.  Given her on-the-go career, it helps that messages sent to her mobile device actually explain what is attached to the email.  In other words, when sending an attachment, you should do the following:

  • Do not use "FYI" … This assumes that the recipient knows what the email string involves and what has transpired prior to this particular email.  You don’t have to write a novel about the attachment, but include more than an "FYI."
  • Explain what the attachment is … "Attached is a copy of the draft change order language  from ABC Development Co. on the USA Zoo project."  Since many construction contracts are lengthy and legal pleadings are voluminous, it is often impossible to download the full attachment and actually read it on a mobile device. 
  • State whether the matter is urgent or whether you need a response … The owner will be out of town for a week so we do not need to respond immediately.  Again, if the attachment is a letter from the opposing party that requires an immediate response, then you should say so in the email. Don’t assume that your recepient can or has read the attachment.

You may think these tips are no-brainers, but they have changed the way I communicate with my clients over the last month.  For example, I regularly sent the "Please see attached" emails to my clients without even thinking that the email was sent to a Blackberry or iPhone (…even though I carry my phone everywhere and expect the same communication from my assistant …)  Thanks to Christine, I am taking the extra minute to explain my attachments and include a response line.

How about you?  Do you have any tips for communicating in the digital age?