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Construction Law – Dangers of Green Construction Building Codes

1. The Classic Framework: LEED Certification as Voluntary and Incentive Driven.

Historically, the most successful green initiatives were those driven by tax abatements and credits, expedited permitting, density incentives, utility credits and other Owner based incentives.. The majority if these initiatives came through the U.S. Green Building Council rating system for Leadership in Energy and Environmental Design (LEED). In the LEED framework, everyone “comes on board” a project from day one, but the project is ultimately evaluated by the benefits weighed against the costs for achieving those benefits. The responsibility of a general contractor under these circumstances was detailed by the contract documents and precise specifications, which the general contractor priced and the Owner either accepted or rejected. . In turn, the Owner who paid higher premiums for a “green” project had the ability to minimize the extra costs of achieving this end result through value engineering and by dealing with a team of construction professionals who are used to operating in this environment.

2. Course Change: The “New Green” in Mandatory Building Codes?

In contrast to the prior contract based model, there are pending legislative proposals to make “green” standards mandatory as part of the building code with only narrow exceptions. As early as 2003, Atlanta led the way in this paradigm shift, requiring city projects in excess of $2,000,000 or 5,000 square feet to reach a LEED Silver certified level. Now, the self proclaimed leader in Southeast green standards is trying to push these and similar requirements on all commercial construction in Atlanta through the potential enactment of green standards into the building code. As of July 2009, the Atlanta City Council is considering legislation that will directly affect developers and contractors by requiring all projects to achieve certain levels of environmental sustainability. Spearheading this effort is a group called the Sustainable Building Task Force which has announced its mission is to amend Atlanta’s building code so that it responds to advances in building technology to protect the health, safety, and welfare of Atlantans and to safeguard Atlanta¹s long term comprehensive competitiveness.

While the Task Force has laudable goals, the question remains: Should green standards rise to the level of building code requirements, and what impact will it have on the construction community as a whole? Certain groups are concerned and are pushing for more time and a more in depth analysis regarding the prior framework of voluntary incentive based green construction. the new framework pending before the City Council would remove the Owner’s ability to opt in or out on LEED, and would require that the architect and general contractor implement the mandatory code based green standards. Owners may face risking construction costs in an economic environment in which construction projects are already being shelved due to an inability to pay for existing construction standards. General contractors and architects will have a new standard of care based on “sustainability” and “efficiency” standards which will be evaluated over years if not decades. The risk control methods will need to evolve to address these heightened standards. The new “green” standards and their interpretation in relation to the statute of limitations will likely be profound, as the sustainability and efficiency of a building or product can only be measured over time. In those states that have statutes of repose, general contractors may be able to look to outside limits and shift risk appropriately. However, in states, such as Florida, green standards may well present extended liability risks for decades. These mandatory standards will continue to build upon the “LEED” disputes that are already arising in commercial construction and drive up costs, potentially resulting in what many have coined as the new age of construction “LEEDitigation.”

3. Bond and Insurance Issues: Examples in the Residential Market and Potential For Future Problems.

Due to the nature of extended liability, it is likely that sureties and insurance companies will begin to encounter difficulties in addressing “green” standards.

Fireman’s fund policy which guarantees replacement of damaged goods and buildings with those that meet Green standards (IN USE IN GA FOR RESIDENTIAL AND ALSO USED ON COMMERCIAL PROJECTS).

By Kevin Hudson and Gregg Bundschuh

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