As the green building movement gains momentum across all sectors of industry, “green” construction is becoming the norm on almost any new construction project. The U.S. Green Building Council  (USGBC) predicts that the volume of green-building construction and renovation work will reach $60 billion by 2010. Even those who have never before attempted to build green will likely be transitioning to green projects.

Accordingly, many in the construction industry will be actively competing for a share of green construction projects, including numerous contractors who are new to “green” construction, and many contractors who focus on government construction, the latter who are now turning to the green sector to sustain them through these difficult times. This shift in market focus has important implications for newcomers to green building and for newcomers to government construction.

It is critical that these participants quickly learn that success on green projects requires education and adjustments. Likewise, those transitioning into the green building world or from the commercial to the government sector must be aware of the potential pitfalls for the inexperienced.  

Green Incentives
The push for green building has been particularly prominent in light of the tremendous impact buildings have on the nation’s environment and the significant funds and “green” incentives included in the American Recovery and Reinvestment Act of 2009 (the “Recovery Act”). In addition to a number of “green” tax incentives, the Recovery Act provides for tens of billions of dollars in funding initiatives for green building and creates a number of “green” jobs with the purpose to:

• improve the energy efficiency for up to one million modest-income homes through weatherization;
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• make key energy efficiency upgrades to public housing and HUD-assisted housing with new insulation, windows, and furnaces; (iii) green school renovations;
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• create work-force training; and
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• complete the upgrade of federal buildings and make them more energy efficient.

Specific to the last point, the provisions for modernizing federal infrastructure, include, among others: the investment of $4.5 billion for renovations and repairs to federal buildings, making them more efficient and saving tax dollars by reducing their energy costs by 25 percent; and investing $4.2 billion in energy-efficiency projects at the Defense Department and repairing and modernizing their facilities, including military medical facilities and Army barracks.

As state and local governments work toward a sustainable future, designers, developers, owners, builders, politicians and, most importantly, the general public are quickly becoming a part of the green movement. However, becoming a part of the green movement is not without risk and those new to the game especially must protect themselves from potential liability.

The Risk of Building Green
The potential liability associated with taking on a green project without proper preparation is huge. Potential causes of legal action include claims for misrepresentation, fraud, negligence, negligence per se and breach of contract. Some factors that will likely contribute to an increase in green-building litigation include: (i) the volume of inexperienced parties attempting to build green; (ii) a lack of understanding and defining the term “green”; (iii) a lack of understanding of the Leadership in Energy and Environmental Design (LEED^®) certification requirements; (iv) unintentionally guaranteeing an outcome that does not occur; and (v) failing to draft green building contracts to appropriately account for the unique risks inherent in green building projects. Thus, it is essential that ­before undertaking to work on a green project, you think through all aspects of the project and fully understand what a green building project constitutes and ­requires.

Unfortunately, building green is still so young that there is little guidance and very few published cases to guide participants in green projects on where liability falls. However, more examples are becoming available. They include:

Shaw Development, LLC v. Southern Builders, Inc.: Shaw involved a developer who contracted for the construction of a $7.5 million, 23-unit condominium complex in Crisfield, Maryland. The contract between Shaw Development and the general contractor was based on an AIA A101-1997 Standard Form of Agreement Between Owner and Contractor. The AIA 101-1997 contract, however, does not mention green building requirements.

Additional requirements for the Project were incorporated through a Project Manual that specifically referred to green building certification and required green building products and features intended to support a LEED Silver rating for the project. The LEED rating was significant to the project, because the project had been accepted into a Maryland Energy Administration program that provided an eight-percent, green-building tax credit.

After the contractor had sued the developer asserting a mechanic’s lien claim, the developer countersued, alleging that the contractor was responsible for the project losing the tax credit, worth $635,000. When the project failed to obtain a LEED Silver certification, the developer sought to recover $1.3 million in damages from the builder, including the $635,000 in alleged lost tax credits. The developer asserted that the contractor had failed to build the project in compliance with the LEED rating system and sued under theories of breach of contract and negligence. The case was ultimately settled out of court.

AHRI, et al v. City of Albuquerque: A group of plaintiffs, including the Air Conditioning, Heating and Refrigeration Institute, plus two major industry groups and 11 HVAC and water-heater contractors and distributors, sought to bar the enforcement of newly enacted, local-level, energy-efficiency building codes in the City of Albuquerque on the basis that federal standards preempted the application of the proposed local-level codes. The United States District Court for the District of New Mexico entered a preliminarily injunction banning the city from enforcing its new building code, reasoning that the new codes are pre-empted by federal regulatory ­standards.

Common Disputes
The most common sources of green-building disputes that have been seen thus far include the following:

• Claims by a project owner or developer that the building’s actual performance and/or systems and components failed to achieve the as-advertised function or as-promised efficiency goals.
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• Claims, similar to those in the Shaw case, that arise from a project’s failure to obtain the expected or promised certification rating.
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• Claims by or against contractors for delays and increased construction costs that arise as a result of design errors, and/or increased and more onerous building requirements associated with the LEED certification process.
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• Claims by project participants against each other arising from a lack of specific industry accepted definitions and standards for commonly used terms such as “green”, “energy efficient” and “sustainability”. Similar types of claims are now beginning to arise between landlords and tenants under lease agreements that contain green and energy-efficiency requirements and guarantees.
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• Claims against designers and others for leaks associated with green roofing, indoor air pollution, and mold associated with green flooring ­materials.

Minimize Your Risks: Be Proactive and Plan for ­Litigation
Litigation, or some form of it, is generally an inevitable part of any construction project, let alone a project that is part of a developing industry. Thus, to avoid the prospect of costly claims and litigation, green-project participants must be proactive at the outset of a project and pay careful attention to potential pitfalls when drafting and negotiating contract documents. This is true for every contract, including contracts with design professionals, builders, equipment and materials suppliers, lenders and tenants. To protect their interests, project participants should, at a minimum, follow these tips:

Don’t Promise Too Much: Refrain from making statements in any form that imply an outcome, promise, commitment or guarantee regarding future performance of the building. Do not overstate your experience or offer more than you can deliver. Green design and construction is still relatively new, with much uncharted territory. Thus, don’t be reluctant to acknowledge your limitations and appreciate that you should first learn and then do. Understand the owner’s expectations of the green project and communicate. Carefully tailor statements made in applications and in the public record of hearings regarding proposed green-building ratings and objectives. This is especially important for design professionals, property owners and builders. Design professionals who rely on manufacturers’ unproven claims of product performance and who then “sell” that performance to an owner will pay dearly when the building fails to perform to the manufacturer’s advertising claims. Similarly, a landlord who promises prospective tenant’s energy savings or a particular air quality that are never realized will face claims from the tenants.

The Meaning of  “Green”: There is no uniform definition of green. Thus, it is critical that every “green” term in the contract is specifically defined and that agreed-to objective standards of performance are established in the contract. For example, if particular energy efficiencies are to be realized, they must be set forth in a carefully drafted and technically correct and verifiable standard.

“Green” Provisions: Identify unique risks and requirements of the project and include express provisions in the contract documents which provide for an agreed-to matrix of risk allocation and sharing. For example, if an owner expects to have his designer and builder construct a Platinum LEED-certified building, the owner’s contracts with each should contain specific warranty provisions that not only clearly impose such a requirement but which also address the responsibility and liability of the designer and builder in the event the certification is not obtained at all, or is not obtained in the appropriate timeframe.

LEED Certification: Take the time to understand the LEED certification and the process for obtaining it. Clearly specify in the contract documents the responsibility of each project participant with regard to obtaining the LEED certification. For example, the LEED certification requires proof of green building practices and use of approved materials. This translates into increased documentation requirements. Thus, the contract documents and contract schedule should address these requirements and allocate the risk of delay associated with the LEED certification process. While the LEED certification is the most widely accepted “seal of approval” for green projects, it does not mean that the building will be without design or construction problems. Thus, owners should make clear that achieving the contractually specified LEED certification does not relieve the designer and/or builder from having otherwise performed in accordance with the governing standard of care.

Ask for Help: At any point in the process, getting the appropriate advice from experienced counsel or consultants who are also familiar with the environmental, regulatory, permitting and community issues related to construction in a project’s locale is key.

Green construction is still in its relative infancy and continually developing. So too is our recognition of the risks associated with it. To avoid or limit costly litigation, be mindful of the known pitfalls; carefully allocate risks, demand clarity and specificity in the contract documents and most importantly, acknowledge your limitations upfront. SLDT

About the author: Judah Lifschitz is co-president of Shapiro, Lifschitz & Schram, P.C. and a Martindale-Hubbell AV rated attorney. He is the author of “District of Columbia Construction Law,” a comprehensive resource book published for executives and legal professionals working in the D.C. construction industry. He can be reached at This e-mail address is being protected from spam bots, you need JavaScript enabled to view it