Constructing green is filled with legal obligations

In keeping with the region's reputation for progressive innovation, Wisconsin businesses and communities have embraced the idea of building green.

According to the United States Green Building Council (USGBC), creator of the Leadership in Energy and Environmental Design (LEED) green building rating system, there are more than 100 Wisconsin projects seeking LEED certification. Those projects include schools, office towers, condominiums, hospitals, libraries and even a convention center.

LEED rating systems award points for implementing "green" building practices and material choices. Various LEED rating systems exist for different types of construction, including new construction (LEED-NC), existing buildings (LEED-EB), commercial interiors (LEED-CI), LEED for Schools and LEED for Retail, among others.

In order to earn points, the architect and/or general contractor submit credit templates to the USGBC certifying that the project will meet applicable LEED criteria. The USGBC reviews the submissions and, if acceptable, awards points.

In the end, the USGBC totals points awarded and awards a certification, with higher point totals leading to more prestigious levels of certification.

As investment in green building grows and as the parties involved increasingly demand measurable, objective results, the potential for dispute rises and so, too, the need for sound legal and risk management.

We urge clients interested in green building to consider, at a minimum, the following:

Define Green. Meet early to objectively define and prioritize green building elements that are important to your company culture, region and community. Work through those elements in light of their expense, the availability of expertise and materials, and applicable tax, marketing, legal, and environmental factors.

Quasi-Legal Nature of LEED. LEED is a quasi-legal process, subject to the presentation of evidence, judgment and an appeals process. The process demands a careful scrutiny of requirements and judicious record keeping.

Failure to Achieve Certification. Work through the implications of a failure to achieve LEED certification, including defaults under applicable financing, valuation problems, sales and marketing issues, possible securities and interstate real estate issues, and commercial leasing provisions.

To LEED or not to LEED? LEED has been criticized as costly, bureaucratic and inflexible. Critics have claimed that LEED is merely an ideology lacking sound scientific basis for its allocation of points and priorities.

Though USGBC has recently revised LEED in response to those criticisms, boards or public authorities evaluating the merits of LEED certification have a legal duty to carefully evaluate the merits of LEED certification and to thoroughly document that analysis. Though not discussed here, other ratings systems exist that may be more appropriate, depending on the project.

LEED Credit Templates. The legal import of the credit template certifications made to USGBC is not clearly understood. Some authorities suggest they might be considered ongoing, performance specifications with long-term legal implications for the architects and contractors making them.

Scope of Bonding. The performance and payment bond requires careful scrutiny because of the high performance standards required of sustainable buildings and because of the possibility for latent defects that may be discovered during the LEED required commissioning process.

Tax Credit Implications. Many states are providing tax credits in exchange for achieving certain levels of LEED certification. If building performance is later found deficient, it is conceivable that building owners will be forced to refund the credits and pay penalties.

LEED Creep. LEED has proliferated. In several states and municipalities, it has been enacted into law as the basis for awarding tax benefits or it has been included in building codes. The Environmental Protection Agency has issued a policy allowing parties subject to environmental enforcement to mitigate penalties by agreeing to follow LEED-based development in the future. Some insurance companies and lenders are issuing discounted rates for LEED projects. Before embracing the benefits of such programs, consider LEED-related risks and obligations.

In this exciting and heady time for green building, attorneys have a role in soberly assessing and allocating associated legal risks and benefits. Doing so requires careful attention to the mechanics and legal implications of LEED certification and the goals and culture of each client.

Brian D. Anderson is a senior associate at Axley Brynelson.