The Legal Logistics of LEED

By Bonnie Barnett and Joshua KaplowitzDrinker Biddle & Reath LLP

One Logan Square18th and Cherry St.

Philadelphia, PA 19103

2

What Is Sustainability?

• UN definition: Development that "meets the needs of the present without compromising the ability of future generations to meet their own needs.”

• Practical definition: Constructing and maintaining businesses and residences in a way that minimizes waste, energy use and impact on ecosystems.

3

What Are Colleges & Universities Doing?

•Thought leaders: Educating students on climate change and sustainability.

•Voluntary action: American Colleges and University Presidents Climate Commitment (ACUPCC), green construction policies.

4

Two Sets of Legal Issues

(1) The current legal landscape for green building.

(2) Potential liability related to green advertising.

5

Why Build Green?

Source: U.S. Green Building Council

6

Why Build Green?

Source: U.S. Green Building Council

8

Why Build Green?

Source: U.S. Green Building Council

9

LEED Certification – The Basics

•Voluntary certification system run by the U.S. Green Building Council (USGBC)•Uses “points” system to determine how “green” your building is.

Source: U.S. Green Building Council

10

LEED Certification – The Basics

• Main ratings for: New Construction (LEED-NC) Existing Buildings (LEED-EB) - renovations Commercial Interiors (LEED-CI) – tenant space Core and Shell (LEED-CS) – building w/o tenant space

• LEED is best-known green building standard, often used as a default.

• Many local & state laws incorporate LEED standards.

11

LEED Certification – Points

LEED New Construction – 69 possible points

Certified: 26-32 points

Silver: 33-38 points

Gold: 39-51 points

Platinum: 52-69 points

12

LEED Certification – PointsExample – LEED for New Construction

• 14 points – Sustainable Sites

• 5 points – Water Efficiency

• 17 points – Energy & Atmosphere

• 13 points – Materials & Resources

• 15 points – Indoor Environ. Quality

• 5 points – Innovation & Design

= 69 possible points

13

LEED Certification – Points

1 Sustainable Site point for bike rack and shower facilities.

1 Water Efficiency point for flushless urinals.

1 Materials & Resources point for using certified wood.

14

Criticisms of LEED

• Substantial certification costs.• Some LEED points cost much more

than others.• Points skewed toward ongoing use

of fossil fuels.• Greater up-front construction cost

(BUT strong evidence that costs are recouped in energy savings).

15

Alternatives to LEED Certification

•The Green Globes are billed as less expensive and time-consuming alternative to LEED

Only new construction Uses a more holistic, benchmark-based approach

•The National Association of Home Builders recently announced green building program

LEED-like points system

•Many states have programs (usually homes).•“Living Building” program goes beyond LEED Platinum, requires its buildings to generate all of their own energy.

16

Legal Benefits of Green Building

17

Federal Incentives

•The Energy Policy Act of 2005 gives commercial property owners a deduction of up to $1.80/sq. ft. for building green.

•Points awarded under LEED for building on federal/state Brownfield site.

•Federal “Green Buildings on Brownfields” pilot program.

18

State Incentives

•At this point, mostly tax credits.•Example 1: Pennsylvania bill proposes a base tax credit of $35,000 for eligible buildings which attain a certain level of energy efficiency, with potential for other tax credits if building exceeds base level of efficiency. •Example 2: Virginia bill establishes energy efficient buildings as a separate class of taxation, allows localities to levy equal or lesser taxes on energy efficient buildings.

19

Local Incentives

The most aggressive green incentives are at the local level:•Expedited permitting (San Francisco, Chicago).•Free professional consultation for developers intending to use LEED (Issaquah, WA).•Loosened zoning requirements/density bonuses (Seattle, Tampa, Nashville, Pittsburgh).•Tax incentives for LEED buildings (Cincinnati, Honolulu).•Direct grants to LEED builders (Los Angeles, El Paso).•Monitor developments in your area.

20

Legal Pitfalls of Building Green

21

State Mandates

•Most state laws only apply to state-owned, funded or operated construction or renovation.•No states have imposed mandatory green standards on private construction… yet.•Like on the benefits side, local governments are another story.

22

Local Mandates

•Many local governments are beginning to require LEED elements or certifications for new construction projects.

•Mostly publicly-funded buildings, but some include private construction.

•Focus on high square footage projects.

•Began on West Coast, but spreading to other regions.

23

Local Mandates

•Example 1: Dallas - all new city buildings 10,000+ sq. ft. must be LEED Silver.•Example 2: Arlington, VA - all private commercial site plans must include LEED “scorecard” and have LEED-accredited professional on project team. •Example 3: Albuquerque, NM - commercial and multifamily residential buildings must be 30% more efficient than “baseline” building.•Example 4: Babylon, NY (Long Island) - all new commercial buildings 4,000+ sq. ft. must be LEED certified.

24

Local Mandates In the Future

•Washington, DC: By 2009, all new construction or major renovations to private office buildings 50,000+ sq. ft. must submit green building checklist.•Baltimore, MD: By 2009, LEED Silver requirement for all private buildings 10,000+ sq. ft.•Dallas, TX: By 2011, all new residential and commercial construction must submit green building scorecard.•Boston, MA: Now amending Zoning Code to require LEED certification for all new public and private development projects 50,000+ sq. ft.

25

What If No Local Mandates?

•Check for conflicts between LEED and building codes (though LEED requirements usually stricter).•Preempt potential problems by communicating with local government officials who might not be familiar with green building methods. •Encourage jurisdictions to adopt Standard 189, a model local green building ordinance developed by the USGBC.

26

Green Construction Contracts

“Standard” construction contracts often do not address green building issues:•Roles of the parties. Who is responsible for LEED compliance and expenses?•Consequential damages. Who is liable if building not certified? How measured?•Warranties. Green buildings are long-term investments with long-term materials.

27

Green Construction Contracts

• Intellectual property. Who has rights to innovative green building techniques?

• Availability of materials. Buying locally is key.

• Timelines. LEED certification is lengthy process.

28

Green Construction Contracts

Potential for disputes:

Misrepresentation - Architect or contractor overstates building’s energy efficiency and eco-friendliness.

Mistake of fact – One or both parties fail to anticipate costs of attaining certification.

29

Insurance issues

Property insurers starting to develop green building policies with several purported advantages:•Coverage of unique attributes of green buildings not included in conventional property policies (solar panels, green roofs, recycled water supply systems) •“Green upgrades” for not-yet-green buildings under which they cover a green-certified replacement for any part of property destroyed in an accident.•In case of total loss, some policies provide coverage for replacement building to also be certified green.

30

Insurance issues

•Inquire as to whether their contractors’ and designers’ professional liability insurance takes into account the green nature of the project.

•So far, few to no claims against design professionals based on green building issues.

31

Issues in Green Advertising

32

Green Advertising

“Greenwashing”: Making false or exaggerated claims regarding a product’s eco-friendliness.

Green Guides: Nonbinding guidelines, which are interpretations of laws administered by the FTC as applied to environmental advertising and marketing practices.

33

The Present “Green Guides”

•FTC demands substantiation of any environmental claims, including reliable scientific evidence based on research, studies and tests.•The FTC requires specificity in any environmental claim. Advertisers should be careful not to overstate claims or create consumer confusion.•FTC examines environmental seals and certifications to ensure that they are substantiated by highest industry standards and not deceptive.•FTC examines specific claims made with respect to consumer goods, i.e. “recyclable,” “compostable,” “refillable” and “recycled content.”

34

Revising the “Green Guides”

The FTC is now formally reviewing the Green Guides. It has solicited comments on:

(i) benefits provided to consumers by Green Guides; (ii) proposed modifications to the existing publications; (iii)the costs imposed on consumers or on businesses

by the guides; and (iv)potentially unfair or deceptive environmental

claims not covered by the guides.The comment solicitation period closed in mid-

February of 2008, and the FTC is now hosting a series of public workshops.

35

Revising the “Green Guides”: Carbon Offsets & REC’s

Several public workshops are examining the market for carbon offsets, REC’s and related advertising claims. This may be the first step toward federal oversight or regulation.

•Carbon offsets are credits bought by consumers, businesses, and government agencies to compensate for greenhouse gas emissions caused by driving, electricity use, or other activities.  •Renewable energy credits (RECs) allow corporations and other buyers to purchase electricity from wind farms and other renewable sources, with the amount of power represented by certificates that are purchased and traded as a commodity.

36

Revising the “Green Guides”:What does it mean for you?

•Institutions may seek to reduce their carbon footprint by purchasing REC's and carbon offsets in an effort to become “carbon neutral” (particularly if they are participants in ACUPCC). •Institutions that elect to compete for applicants, faculty and research grants based on their green credentials may face increasing scrutiny.•Potential danger spot: the Princeton Review’s forthcoming “green ratings,” which will be based on a voluntary survey sent to each institution.

37

Conclusion

College and university can mitigate risks and realize substantial benefits by:

(1) Being attentive to new laws on the local, state and federal level.

(2) Adapting traditional construction and insurance contracts to reflect green building certification requirements.

(3) Being aware of the existing and future pitfalls of green advertising.