Green Construction Law Issues Beginning to Emerge

By Stephen Del Percio

The real estate industry continues to embrace the benefits of sustainable design but attorneys are only beginning to investigate the implications that green building may have for construction stakeholders. While there has yet to be a reported judicial decision arising out of a green construction project, practitioners are beginning to pay attention to a number of emerging green legal issues that are adding some twists to traditional principles of construction law. Participants on green projects should pay close attention to how their contracts are drafted, the types of materials and products that they may specify, and the shifting regulatory landscape that is obligating an increasing number of projects in both the public and private sectors to earn third-party certification.

As a threshold green legal issue, governments at both the state and local level are enacting legislation that requires specific types of projects to comply with various rating schemes, ranging from LEED to Green Globes to EnergyStar. For example, New York City's Local Law 86 now obligates most public construction greater than $2 million to earn a Silver rating under the U.S. Green Building Council's LEED program. While such mandates originated in the public sector, many municipalities are requiring private projects to achieve certain ratings or offering financial incentives to developers who choose to do so. Understanding the requirements that government may place on construction- both public and private- is obviously critical, particularly if a project anticipates the receipt of certain incentives that may be offered in connection with a local program.

For projects that intend to seek third-party certification through rating systems such as LEED, project participants' contracts should clearly reflect the role that each will play in earning the desired level of certification and allocate that responsibility both clearly and accordingly. For example, there should be a clear understanding at the start of the project with respect to which parties will be responsible for collecting, assembling, and submitting credit application materials in order to achieve the anticipated rating. Strong contract language is therefore key.

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Moreover, design professionals should be careful that they do not trigger any exclusion in their professional liability policy by signing submittal templates in support of certain credits. (Most professional liability policies contain a standard exclusion that the policy does not apply to any express warranty or guarantee). Accordingly, architects and engineers should insist on contract language that makes it clear they are doing so solely to satisfy the credit application and not as a warranty or guarantee that the project will either receive that particular credit or achieve a given level of certification.

Evaluating the veracity of purportedly green products' claims of environmental sensitivity is likely to be another important ongoing obligation for the industry. Green promotional materials abound and stakeholders should verify that the green materials, systems, and products that they may specify for their projects are both readily available and capable of delivering at the anticipated level of performance in order to protect themselves from unanticipated liability.

Green building remains in its relative infancy and its associated risks largely unexplored. The legal industry will continue to examine and monitor trends in green construction law in order to assist stakeholders in managing risk as sustainable construction practices continue to proliferate.

Stephen Del Percio is an associate in the New York office of Arent Fox LLP.