Green building is gaining momentum as a construction trend with widespread benefits, from environmental efficiency and resource conservation to human health and lifestyle improvement. Several government entities have reacted to the green building movement, creating national and local standards and monetary incentives for developers to create green buildings. In representing developers and others associated with green building, attorneys should consider how to contractually plan for risks that may not otherwise arise in ordinary development projects.
I. What is “Green Building”?
Green buildings are “designed, built, operated, renovated, and disposed of using ecological principles for the purpose of promoting occupant health and resource efficiency plus minimizing the impacts of the built environment on the natural environment.”[1] The costs of green building as compared to ordinary construction are debatable. One 2001 study found that green buildings cost “ten to fifteen percent more” than conventional buildings.[2] To the contrary, a 2003 study found that green buildings incorporate less than a two percent premium on conventional buildings.[3] Despite the costs, many developers think that green buildings enhance the occupant’s health and quality of life.[4] Studies show that a building’s environment influences the productivity and performance of the building occupants and that connecting building occupants with the environment “reduces worker stress and improves overall psychological and emotional functioning.”[5] It is predicted that eventually not only developers, but consumers themselves, will desire to live and work in green buildings because of such “health and lifestyle benefits.”[6]
II. Government Initiatives
The momentum gained by the green building movement has not gone unnoticed by government entities, who have stepped to the forefront in promoting workable ways to construct green buildings. The United States Green Building Council (“USGBC”) has created a Leadership in Energy and Environmental Design (“LEED”) Green Building Rating System.[7] The LEED system “evaluates the design, construction, and operation of newly constructed or renovated buildings.”[8] Additionally, it provides a “voluntary national standard” for green building.[9] Following the initiative demonstrated by the USGBC, many states and cities have created their own standards and incentives for green building.
For example, the City of Chicago has established a Green Permit Program though the Department of Constructions and Permits (“DCAP”).[10] Application into the Green Permit Program requires meeting a series of green building certification requirements.[11] For example, commercial projects must meet appropriate LEED certification levels, and residential projects “must meet or exceed EnergyStar requirements developed by the U.S. Environmental Protection Agency.”[12] Additionally, green projects must incorporate certain DCAP “menu items,” such as a green roof, renewable energy, or extra affordability.[13]
In addition to the environmental benefits, the Green Permit Program offers several incentives to developers.[14] First, the Green Permit Program offers a shorter permit application and review process.[15] Projects accepted into the Green Permit Program may receive permits “in as little as 15 business days.”[16] Comparatively, ordinary permits issue in about four months.[17] Second, developers of green projects can expect “cross-departmental coordination” among city departments responsible for reviewing the projects.[18] Third, developers may receive fee waivers for services from green permit experts.[19] For developers that are motivated by saving time and money, the quick issuance of a green permit and the savings from consulting green permit experts provide incentives to create green projects. The costs savings of time and money may negate some of the purported premiums on green building, making it easier to rationalize costs of the bottom line against the added environmental and health benefits.
III. Attorney Concerns
One recent article lists several risks an attorney should consider in representing parties to green building projects.[20] These risks include, among others, defining who is responsible for the green building process, ensuring adequate insurance coverage, and checking that green building techniques do not interfere with product warranties or intellectual property rights.[21] In general, it seems that attorneys must ensure that contracts adequately and accurately document the obligations and responsibilities related to the green building process.
In addition, attorneys must think about how novel issues raised by the green building process relate to an attorney’s traditional role in real estate development projects. For one, an attorney should consider how green building projects relate to one’s ethical responsibilities as a lawyer. For example, the Model Rules of Professional Conduct require that an attorney consult with the client about the means to achieve the client’s objectives. It is therefore important that an attorney working with a developer discuss the green technologies and processes involved in the green building development so that an attorney can provide adequate representation. Additionally, the Model Rules require an attorney to act with competence, or to act with the legal knowledge, skill, thoroughness and preparation reasonably necessary for representation. Thus, an attorney should become familiar with the green building standards, permits, and processes in preparation for the representation.
Another concern relates to representing a financial institution lending a construction loan for a green building project. Conceivably, the lender will want to document how the green building construction processes and certifications relate to draw-downs on the construction loan. The parties should discuss the green building process in detail, including what materials are to be used and when green certifications are to be obtained and by whom, to clearly and contractually establish guidelines for the lender to supervise how the green building process correlates to the money drawn-down to finance the project.
Ultimately the green building trend is bound to continue as it gains favor from developers and consumers alike. In serving this trend, so long as developers and attorneys pay close attention to the unique concerns raised by green building projects, green buildings will provide positive benefits for all.
[1] Charles J. Kibert, Green Buildings: An Overview of Progress, 19 J. LAND USE & ENVTL. L. 491, 491-92 (2004).
[2] Stephen T. Del Percio, The Skyscraper, Green Design, & The LEED Green Building Rating System: The Creation of Uniform Sustainable Standards for the 21st Century or The Perpetuation of an Architectural Fiction?, 28 ENVIRONS ENVTL. L. & POL'Y J. 117, 133 (2004).
[3] Id.
[4] Id. at 136.
[5] Id.
[6] Darren A. Prum, Environmental Protection: What You Should Know About Green Building, 36 REAL EST. L. J. 239 (2007).
[7] Del Percio, supra note 2 at 120.
[8] J.R. Steele, Green Construction: Initiatives and Legal Issues Surrounding the Trend, BUS. L. TODAY, Nov./Dec. 2007, at 13.
[9] Id.
[10] Judith Nemes, Coloring the City Green, CHI. TRIBUNE, Nov. 4, 2007, available athttp://www.chicagotribune.com/classified/realestate/news/chi-cp-city_green_re_11-04nov04,0,3020579.story.
[11] Green Permit Program Brocheure, http://www.cityofchicago.org/dcap (last visited Nov. 27, 2007).
[12] Id.
[13] Id.
[14] Christopher P. Perzan, What You Should Know About Green Building, CBA REC., Nov. 2006, at 38, 42.
[15] Id.
[16] Green Permit Program Brocheure, supra note 11.
[17] Nemes, supra note 10.
[18] Perzan, supra note 14 at 42.
[19] Nemes, supra note 10.
[20] Steele, supra note 8 at 16.
[21] Id.