The Legal Pitfalls of LEED (J. Cliff McKinney II Expert Advice)

by J. Cliff McKinney II  on Monday, Jul. 7, 2014 12:00 am  

J. Cliff McKinney II

I am a major supporter of the LEED rating system and truly believe it is the best way to verify that a building is environmentally friendly. However, as with nearly anything, there are legal pitfalls that participants in the LEED rating system may not be aware of. Consider the following scenarios:

• In order to obtain approval from a city for a controversial rezoning, the developer agrees that the building will achieve LEED silver status as a condition of the rezoning. The building falls short of the points needed to obtain LEED silver, but the developer believes the U.S. Green Building Council misinterpreted the point allocations and unfairly denied certification. Unfortunately for the developer, the USGBC is a private, nonprofit organization and is under no obligation to grant LEED status to any project. The USGBC does not owe “legal due process” the way that a municipality does, and it is exceedingly hard to sue a nonprofit for relief (not to mention the jurisdiction and venue issues). The failure to satisfy the rezoning condition means the building is a nonconforming use, and the city may be under no obligation to issue a certificate of occupancy for the building. In the worst-case scenario, there could be a court order to remove the nonconforming building. This will result in a lawsuit between the developer, its lender, the design professionals and the city. One way to at least mitigate this risk is to agree that the development will be built to LEED silver equivalent standards (rather than require the actual certificate) to give some legal wiggle room to argue that the building achieved the objectives, even if the certificate is not issued by the USGBC.

• A developer purchases a building constructed in 1890 and subject to a historic preservation easement placed on the property in 1980. The developer decides to renovate the building to achieve LEED certification. Under LEED, renovating an existing building can make certification easier. However, LEED may conflict with the historic preservation easement in some respects, especially when it comes to the windows. Energy-efficient windows are often critical to obtaining the desired energy efficiency rating, but replacing historic windows may disrupt the historic nature of the property. Depending on what conservation restrictions may apply, there could be legal issues from removal of the windows and making other design modifications to the building. If seeking LEED certification for an old building, it is important to investigate title to the property to be sure there are no historic easements or covenants that need to be taken into account.

• A developer builds a new shopping center and decides to achieve LEED points through the use of a new type of permeable pavement that is supposed to be exceptional at permitting storm water to drain through parking surfaces to reduce runoff. LEED encourages the use of cutting-edge technologies to achieve green goals. While innovation may be great for going green, it may also come with unintended legal risk. Suppose the new type of permeable pavement has an inherent defect that results in sediment buildup over time that creates a slippery surface. The slippery surface could lead to lawsuits when customers fall. This is not to say that innovative technology should be shunned, but anything untested carries a risk that it may be defective, which could lead to legal liability. It is important to consider the history of any products used and the availability and strength of the product warranties.

These are just three scenarios where LEED can result in unexpected legal issues. There are other legal issues to consider, such as requiring tenants to properly care for a LEED building, recording appropriate notices in real estate records and being sure that all LEED points comply with local construction ordinances.

The key to being sure that LEED does not result in legal consequences is a good development team with open, effective communication. Everyone involved in the development process needs to have the same expectations and understanding of what is involved in LEED. This obviously includes the owner and the design professional, but there are other parties that need to be in the communication loop as well, such as the lender and the city planning staff. Effective communication and understanding of the process are the keys to a successful LEED project with minimal legal risk.

J. Cliff McKinney II is a managing member at Quattlebaum Grooms Tull & Burrow PLLC of Little Rock. His areas of practice are real estate, green building, land use and business transactions. Email him at CMcKinney@QGTB.com.

 

 

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