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The New ConsensusDOCS 310 Green Building Addendum: Avoiding Green Legal Liability With Actions Over Words

April 26, 2010 in Green building, LEED

By Gary L. Cole AIA, Esq.

ConsensusDOCS, the construction industry’s leading standardized construction contracts and general analogue to the American Institute of Architect’s Contract Documents, recently unveiled a new contract addendum for “green building” projects – the “ConsensusDOCS 310 Green Building Addendum.” The two most interesting things about the new document are: (1) that it exists at all; and, (2) that ConsensusDOCS has very cleverly taken steps to shield its users from what, to some, is the Achilles Heel of the entire green building movement: that in any useful design, construction or legal sense, the term “green” has no reliably consistent meaning at all. That the new ConsensusDOCS 310 Green Building Addendum achieves its goals by contractually defining a project’s greenness through actions instead of words is perhaps its most admirable achievement.

“Green Building” – “Green Living” – “We’ve gone Green!” In any real design, construction or legal sense, exactly what does “green” mean? And what does “green building” mean? Ask a hundred people at the next green building conference you attend to define “green building” and I promise that the answers will range somewhere between “energy and resource-efficient humanistic design and construction” to “a sacred calling to protect Gaia from rapacious bottom-dwelling Industrial-Capitalists.”

Don’t get me wrong – it’s not as if green building advocates don’t attempt to define “green” or “green building” – they do, with varying degrees of success. And I’m not suggesting that a perfect combination of words and sentences that would satisfy everyone’s requirements ever could, or even should exist. Flexibility can be a good thing and sometimes just stating a set of principles that are intended to achieve substance through actions is enough. Sort of like the Ten Commandments, or the slightly lesser – to some – Secretary of the Interior’s Standards for Rehabilitation – it’s what you do with them that counts.

Which is great when you’re preaching to the already-converted, but not so great when trying to convince everyone else, like say, a court of law, where skepticism and burdens of proof tend to run a little higher. Sure, thanks to aggressive marketing, the term “green” has evolved enough general meaning in the public mind to be used on bumper stickers and t-shirts with reasonable definiteness – if by “definite” we mean “less vague.” But for legal contracts involving the transfer of massive amounts construction-related capital, and all the legal liabilities that attach like barnacles to everyone involved – a slightly higher standard of clarity is probably in order.

Enter the new ConsensusDOCS 310 Green Building Addendum, which doesn’t even attempt to define uncertain terms like “green” or “green building” with mere words – it does so through the actions of a project’s parties. And as much as lawyers like words, when constructing contractual bulwarks for our clients, we like actions a lot too. The new ConsensusDOCS addendum allocates the responsibility for defining what “green,” and therefore what “green building” means on any given project to the parties who should be responsible for defining it – the owner, its architect/engineering team and a third party referred to as the “Green Building Facilitator” (the “GBF” – who may, or may not be the architect, contractor or construction manager). After all, unless a contractor is part of a design/build team and/or intends to assume the role of the GBF, then absent shoddy construction, why should it be dragged under when green turns to brown and the finger pointing starts? Its job is to build, not design. And it’s certainly not to save Gaia.

ConsensusDOCS was kind enough to provide me with a copy of the new addendum to review. There are no less than ten (10) defined terms that use the word “green” – which at first made me wonder why they didn’t just define “green” for any particular project in the usual way, such as: “ . . . For purposes of this Addendum, the term “green” shall mean and refer to, etc., etc . . . .” But a little closer look made that clear. The 310 Green Building Addendum’s real purpose is to identify the roles of relevant parties and to define the methodology they’ll use to plan and implement a project’s sustainability goals. It also serves to clarify that unless a contractor has specifically accepted the role of Green Building Facilitator, their job is to build – planet saving’s outside their scope of work – and an extra.

Here’s a snapshot of how the ConsensusDOCS 310 Green Building Addendum goes about that:

First, the GBF, working with the architect/engineering team, advises the owner on alternatives for achieving a project’s desired “Green Status” – such as a LEED designation goal;

Second, how a project achieves its Green Status is defined by its “Elected Green Measures” (comprised of the “Elected Physical Green Measures” + “Elected Procedural Green Measures”) which arises from reports and discussions between the owner, its A/E team and the GBF; and

Third, the details of the first two steps are incorporated with specificity into a project’s plans and specifications – again, not something for which a contractor is usually responsible.

Of course, the above simplifies a fairly complex procedure, but unless a contractor wants to step into the center of the green action – such as becoming the Green Building Facilitator, or if the project is design-build – by using the ConsensusDOCS 310 Green Building Addendum, it may avoid being directly in the green legal liability line of fire by requiring a project’s greenness to be defined by the decisions, work product and actions of other parties. And if that weren’t clear enough, the addendum wraps it all up with an entire final section on risk allocation.

So, when a green roof leaks, or an HVAC system underperforms, or a project’s new, imported and unvetted “sustainable” materials off-gas toxic chemicals killing every parakeet within a square mile, or a project doesn’t achieve its LEED designation and the owner doesn’t obtain its proforma-required tax benefits and starts looking around for someone to blame – the contractor has something of a defense.

Will it provide absolute protection when the plaintiff’s attorney lets loose with both barrels of 12 gauge, no. 10 buckshot and names everyone who ever glanced at a project in a lawsuit?

Probably not – but the ConsensusDOCS 310 Green Building Addendum, along with the many other documents produced during discovery that support it by substantiating the relative roles of a project’s parties, might make for a very nice place to start crafting a defense.

The ConsensusDOCS 310 Green Building Addendum is an admirable end-run around the green building movement’s obvious shortcomings – defining what “green” really means. But perhaps it’s time for green building advocates to convene their own Council of Nicaea and hammer out the canons and doctrinal orthodoxy of green building – take it to the next level – the one that recognizes the inherent legal dangers of vagueness. It won’t be pretty or easy. Or, here’s a thought – ditch the marketing slogans and just start calling green building what it is – maybe: “energy and resource-efficient humanistic design and construction.” Or something like that.

Sure, it’s not as snappy as “green” and might not fit as well on a Prius’s bumper – but what more do you really need to say? Green Building has enjoyed a good run of public support over the past decade, but anyone with their ear to the ground lately has heard the approaching hoof beats of the inevitable pushback. The time may be fast approaching when words and actions – not to mention results – must merge into one for green building to sustain its credibility as a valid design and building ethic.

Is it possible that’s what ConsensusDOCS recognized when it created its new 310 Green Building Addendum?

Gary L. Cole AIA, Esq. is a Chicago-based Illinois and Florida-licensed attorney and an Illinois-licensed architect with over twenty years experience representing clients in design and construction, real estate development, historic preservation and accessibility matters. He’s worked for two of Chicago’s largest law firms – Winston & Strawn LLP and Seyfarth Shaw LLP, and was in-house counsel for one of the largest retail developers in the southeast – The Sembler Company. He earned his law degree at Loyola University Chicago and holds both Bachelor of Architecture and Master of Architecture degrees from the University of Illinois, where he was a Visiting Associate Professor of Architecture for over a decade. Mr. Cole regularly publishes timely articles concerning design, construction, real estate development, historic preservation and accessibility issues on his website “LawArk” at www.lawarkbuilding.com, and can be contacted by email at garycole@lawarkbuilding.com.

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Green Building and Federal Stimulus.. Got the money, but where are the green jobs?

February 24, 2010 in Green building, LEED

The American Recovery and Reinvestment Act makes available over $787 billion federal dollars nationwide for investments in new projects, development to be used for green building, retrofitting, energy efficiency and renewable energy projects, including those in federal facilities, states, localities, tribal areas, schools and housing. So, I am curious how us greenies can make the most of the opportunities available from the allocation of over $55 million in green job grants?

This funding is great to get green initiatives rolling, and hopefully we will soon see solid results in increased job placements and the promotion of economic growth.  But, according to the LA Times, California‘s unemployment rate increased in October from September’s rate of 12.2%, giving the Golden State the fourth-highest spot in the country. Still, the state gained 25,700 jobs last month.  So, while the pace of unemployment has slowed, it doesn’t look like green jobs have arrived in force or maybe they are just not easy to find. Either way, things look promising on the horizon. Additionally, a new national program has been unveiled to re-train the workforce for green jobs starting with the renovation of public housing to become more efficient by exceeding basic LEED standards. Not only can with this reduce energy costs for the tenants and the government, it can help offset many layoffs. Hopefully this type of program can expand to other business sectors as well.

So it appears to me that offering financial incentives to green businesses will inspire innovation in new products and manufacturing utilizing a largely unemployed, but trained workforce.  This initiative will make us more competitive on a global scale and energy independent at the same time creating new jobs that will certainly transform our economy. The American Recovery and Reinvestment Act promised to create 3.5 million jobs by 2010, but reports from the Administration show that only about one million jobs have been created. I wonder how many of these jobs are green.  Do you think that we need to offer money to inspire innovation, or would jobs just go green, because it makes financial and environmental sense?

Posted by: Jenica Egan @ http://www.greenbuildingpro.com

Thank you Jenica

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The Real Green Goblin – Emerging Legal Liability for Green Design Professionals and Contractors (Part 2.1)

February 23, 2010 in Architecture, contractor, Green building, LEED

August 18th, 2009

[NOTE]: The voice employed in Law/Ark posts is intentionally non-legal. Herein, you will find no wherefores. And, while I welcome and warmly appreciate the readership and comments of my fellow attorneys, these posts are written mostly with Law/Ark’s other readers in mind – those of you out there responding to your passions and answering your callings by designing, building and developing green projects.

And, despite the sometimes playfully polemical tenor of these posts, they’re not intended to discourage you from that pursuit, but, rather, to encourage you to pursue them with the proper forewarning and forearming.

Part 2.1 (Part 1 was posted May 18, 2009)

This is Part 2.1 of the “Green Goblin” Series, of which Parts 2.2 and 2.3 will follow shortly. The series will wind it all up with Part 3, which will address specific legal and design/construction practice approaches for avoiding the pitfalls discussed in the series.

The Green Goblin series can be summarized in one statement: “unsupportable claims about the performance of “green” design and construction may inspire a new understanding of the American legal system by those who make such claims – as defendants.”

Part 1 of this series touched on something I called “unfulfilled expectations” in green design and construction – essentially, what was expected did not occur, and/or what occurred was unexpected. Unfulfilled expectations is a simplified way of referring to some manifestation of a “breach of contract.” Breaches of contract can arise by violations ofexpress terms – as in writings, or, even by implied terms. Either way, someone’s not happy with an outcome – in this context, most likely a client who believes they were deliberately mislead by the representations of their design and construction professionals about the performance and/or value of their new green project.

But wait! some readers are thinking indignantly – I would never misrepresent a design!And, as an architect, I agree, you would probably never do that intentionally. Architects and other designers are many things, but charlatans only very rarely – it’s just not in their DNA. But, as this series of posts explores, green design and construction is particularly vulnerable to claim-making on a whole new level –a global level. And, as an attorney, I also know that when the finger pointing starts, what was done intentionally or unintentionally can sometimes matter only slightly under the hairy eyeball of the law. Or, it’s the crux of everything, depending on the facts. But what is deeply encoded in the double helix of most architects and other designers is a yearning to create something wonderful – a longing to make something from nothing and delight the world. And therein lurks the slumbering danger for green design and construction professionals – the desire to please an authority higher than the client and the project’s program – which higher authority may, or may not exist.

It starts in school. Design schools have their shortcomings – most notably in business education – but failing to imbue their acolytes with a sense of unbridled idealism and religious certainty and then cursing them with cynicism isn’t generally among them. That comes later – when rosy idealism runs headlong into the hard, sharp corners of business reality. And when that happens, designers have a choice: retreat into the warm and cathartic refuge of imagination (and blissfully ignore the risk), or, accept that the design profession is like many things – pleasant enough if done right, but always subject to the tedious business of balancing idealism and risk. And, at least as far as construction law is generally concerned – also subject to the requirements of the client and the project first, and other callings second, if at all.

And this is the dilemma for some green design and construction professionals – the ones who are most vulnerable to legal liability – how to achieve a balance between serving theclient and the project, while still serving a higher, even global calling?

The problem is in the creative process itself – a way of thinking utterly alien to most in the legal profession – but key to understanding both the problem and its solution.

By necessity, design is often conceived in the haze of the half-waking dream – the fertile ground between mythology and science where nearly anything is possible and the realities of engineering, building codes and especially the law, stand pale and ghostlike in the background, patiently waiting to be acknowledged. By virtue of their academic and professional training, those who enter the design professions have been culled from the many applicants who found this Phantom Zone a bit too, well – ephemeral, for their way of thinking. In over-simplified terms, conceptual building design is a right brain activity, with just enough of the left brain kicking in to make sure that designs can be built, stand up and preferably not kill anyone along the way. All of this, of course, ignores the long-simmering civil war within the design professions – especially in architecture – between the pure designer and the others – those who have sought peace between their warring cranial hemispheres and achieved a sort of balance and détente between the rational and romantic synaptic impulses crackling away in their melons like a tree full of blackbirds. Or, less metaphorically, the conflict between those who regard architecture as merely a poetic thought exercise that sometimes results in buildings, and those who see architecture as a building art necessarily expressed by, you know – real buildings. For purposes of green design and construction legal liability, it’s the former who are most at risk, but in the current state of the green building industry, even the latter need to navigate with caution.

At the same time, speeding along in their different, but often intersecting orbits, and generally unconcerned with romantic sentiments, design theories and ideology – are the lawyers. Much-maligned and often underappreciated, they suffer from a long history of popular distain as evidenced in movies and books populated by two-dimensional stereotypes that only someone who’d never set foot in a court room or who’d maybe spent their first year out of law school as a litigation whipping boy at some hard-charging mega-firm – before fleeing to a less stressful career hauling crab pots in the Bering Sea – would think bore any resemblance to real lawyers and the real practice of law. But, for this series’ purpose, lawyers are just like other people and hardly any fit any of the popular stereotypes – except, of course, in one very important way.

By necessity, the law requires a full-on, highly caffeinated, linear way of thinking by individuals who, from cradle (or law school anyway) to grave are culled from society’s broader and less focused thinkers, and trained to apply their powers of unemotive logical reasoning with the precision of an excimer laser and a rigor that could bring a tear to even Mr. Spock’s stoic eyes. The beautifully creative and impressionistic notions of designers are as incomprehensible to most lawyers’ fast-firing, sixteen-cylinder minds as a description of the aurora borealis would be to someone unsighted from birth. And when, as discussed inPart 1 of this series, that green roof turns from a much-lauded butterfly refuge to a sopping mess in the offices below, any green design or construction professional whose defense is proudly based on idealistic and heroic notions of saving the planet instead of tedious due diligence and observance of a standard of care, may abruptly find themselves in a new line of work. Measuring the Cheshire Cat grin of the plaintiff’s attorney who hears that defense in a deposition or at trial would be done in feet, not inches – as beautiful in its expression of victory as the defense counsel’s involuntary gagging is sudden and violent.

This then, is the essential conflict that can lead to career-ending legal liability: unfulfilled expectations which arise because green design and construction professionals, in their desire to imbue their work with more then mere programmatic compliance, choose – unwisely – to advocate questionable solutions to uncertain problems in a quest for the salvation of the planet – all of which runs headlong into the snapping jaws of a legal system which is generally unimpressed with messianic notions and world-saving idealism, and more concerned with whether proper professional duties and standards of care were observed. In this way, the popular stereotypes of lawyers and the legal profession are not the amusing stuff of popular entertainment – but of a reality that green design and construction professionals either willingly appreciate at the beginning of their projects – or may unwillingly at the end.

[END PART 2.1, PART 2.2 TO FOLLOW SOON]

NEXT: For green design and construction professionals – and green building advocates in general – the following parts of this series may sting a little. But fully addressing the root causes of emerging green legal liability isn’t done through a typical, dry legal discussion about traditional causes of action and contract defenses. It’s done by understanding – really understanding – the reasons why green design and construction professionals passionately (though, perhaps unwittingly) risk their practices to advocate a theory of design and building that relies as much on a currently legally indefensible ideology of global salvation as it does on traditional notions of high-efficiency building design.

But is green design and construction really based just on ideology, theology or even superstition as some have claimed? Or, is energy efficient and human-centered design just the most sensible way for a technologically advanced civilization to design buildings and cities in the 21st century? Have humanistic values finally returned to our way of thinking, living and designing our communities? Do traditional legal causes and effects even apply here or are we into new territory that will require attorneys to reach deep into their right brains and create new defenses to address a new way of designing and building, rather than simply relying on traditional, possibly outdated and even ineffective approaches developed for a different design/construction/law paradigm? Is it time for everyone to bring their A-game to develop a whole new way of thinking about how our values are reflected in the way we design and build and the law’s response to those changes?

Maybe – or not. Maybe green design and construction is just the same old – with a new paint job to match a new vernacular.

But the answers to these questions will not be found by cringing behind delicately minced words and the occasional grand jeté between half-truths – but will be found tackling the issues head on with an unapologetic and sometimes polemical directness that brings the matter into full light for a much-needed objective rational discussion. Even so, it’s likely, as is often said in the law, that reasonable people may disagree – and probably will.

© Copyright Gary L. Cole AIA, Esq. 2009

http://www.lawarkbuilding.c

At last! Green Professional Liability Insurance for Architects and Engineers

February 17, 2010 in Architecture, LEED

By: Gary L. Cole AIA, Esq.

[DISCLAIMER: The following discussion is intended for general informational purposes only and is expressly not offered as legal or architectural advice, nor does it constitute advertising or a solicitation of any kind. And most of all – readers should always seek legal advice about their specific situations only from their attorneys, and architectural advice only from their architects.]

First it was the lawyers. Now, professional liability insurers are dipping their toes in the reclaimed waters of the green building movement.

Argo Insurance Group recently announced its “comprehensive insurance solution for architects & engineers servicing “green” developers and owners.”

Underwritten by Lloyd’s of London, Argo’s intent is to provide architects and engineers with claims coverage for green design’s unique risks, including:

•   failure of projects to achieve a required LEED certification;

•   failure of projects to meet their specified energy performance criteria; and

•   failure of projects to qualify for certain economic incentives related to their green certification.

While some builders’ risk carriers already offer “green” endorsements and the insurance industry in general is actively tracking the green building movement’s rapid growth, professional liability coverage for architects and engineers involved in green design and construction is something new – and welcome.

Goblin Glider
Image via Wikipedia

Some may see the need for tailored professional liability coverage as a sign that the green building movement’s better days have passed. Not so.

Attorneys and insurers are the harbingers of change in the green building movement, not its cause. Just as green building advocates have responded to a call for more humanistic, energy efficient buildings, the legal profession and insurance industry are responding to those changes by providing developers and building owners with ways to mitigate the risk of unfulfilled expectations – thereby making green building a more attractive option – and by providing architects and engineers with protection for failing to observe properstandards of care – all discussed at length in Law/Ark’s Green Goblin series.

In this case, the arrival of attorneys and insurers is an indicator that the green building movement is passing through its early, idealistic years and settling into the business of becoming, well – a business. And while the exuberant energy of idealism may coalesce and propel a movement, unless it successfully transitions into a business – including embracing certain tedious details like risk management – it will not sustain its energy long enough to affect any kind of meaningful change.

© Copyright Gary L. Cole AIA, Esq. 2009

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Are Architects and Other Designers Missing Out On the Gold in the Green?

February 11, 2010 in Architecture, LEED

by Gary L. Cole AIA, Esq.

[Disclaimer:  Nothing in the following article should be construed as legal or accounting advice, nor endorsements of any parties referenced within – the contents are entirely the opinion of the author.  Parties interested in learning more should always consult their tax, legal and other professionals for specific advice and information.]

Architects, engineers, contractors and other designers of energy-efficient public projects may be eligible for substantial tax benefits under the Energy Policy Act of 2005 – though it appears than many are unaware of this opportunity to effectively increase their project compensation.

Under Section 179D of the Internal Revenue Code (the “IRC”) – created as a part of the Energy Policy Act of 2005 – owners of energy-efficient commercial buildings, which generally includes federal, state and local properties, may take a tax deduction of up to $1.80/SF square foot of qualifying construction.  The $1.80/SF maximum deduction is allocated at $.60/SF for each of the three following improvements: (1) the interior lighting system; (2) the heating, cooling, ventilating, and hot waters systems; and, (3) the building envelope.

While that’s great for owners of income-producing commercial properties – how does it help architects, engineers, contractors and other designers increase their compensation on such projects?

In an apparent effort to incentivize the design and construction of green public buildings, Section 179D of the IRC includes a clever provision that allows owners of “Government-Owned Buildings” to  “. . . allocate the § 179D deduction to the person primarily responsible for designing the property (the designer).

In other words, since the federal, state or local agency that owns the energy-efficient building doesn’t pay income taxes – and therefore doesn’t need and can’t take tax deductions – they can allocate their tax deducations to the “designer” (defined as “.  .  . the person that creates the technical specifications for installation of energy efficient commercial building property . . .”) of the building.

Let’s do the math.  Suppose the “designer” designs a 100,000 SF building that qualifies for the maximum deduction of $1.80/SF.  Since 100,000 multiplied by $1.80 equals $180,000, the owner can allocate a tax deduction of $180,000 to the designer.

Nice as this is, it’s important to understand that a $180,000 tax deduction doesn’t equal $180,000 cash as it might in the case of a dollar-for-dollar tax credit.  A tax deduction lowers a taxpayer’s taxable income by the amount of the deduction.  The cash value of a deduction is then, roughly calculated by determining how much in taxes a taxpayer does not pay by virtue of having taken a tax deduction that lowers their gross income.  However, in some cases, depending on when the subject building was placed in service and a designer’s particular income and tax history, they may be able to file an amended tax return for an immediate refund.

A certification of the project, made by qualified individuals, is also required to establish that the property meets the IRC’s energy efficiency requirements.  Companies such asEngineered Tax Services provide assistance in obtaining such certifications, as well as providing other accounting/engineering services (contact Cyndi Lucas atclucas@engineeredtaxservices.com for more information).

Also, while the IRC specifies the form of the written allocation of the deduction to be made by the building owner, it doesn’t appear to require an owner to make it since the language says that an owner may, not shall make the allocation.  Architects and other designers may consider negotiating provisions in their service agreements that require owners to properly allocate any tax deductions to them – something always best negotiated before the services are commenced than after.

Naturally, nothing is simple when dealing with tax issues and architects and other designers should consult their tax and legal professionals to understand how to qualify for this benefit – the requirements are complex and precise – and beyond the scope of this article.  And, what the Government gives, the Government shall also take away as this tax benefit is currently set to expire in 2013.

In the meantime, however, architects and other parties who qualify as “designers” may be able to enhance their compensation on energy-efficient public projects by availing themselves of these tax benefits.

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