Despite the economic slump, interest in green building construction likely will gain strength over the long term. That’s why owners, designers, contractors and subcontractors should educate themselves about the responsibilities of various parties and learn more about the difficulties and legal disputes that may arise out of green requirements.

Recent court opinions have not offered guidance that will help building professionals avoid green building disputes. However, one trial-level case involving a dispute between Shaw Development and Southern Builders provides an example of what can go wrong.

Shaw was the owner of a $7.5 million Maryland condominium project completed in 2006. At the time, Maryland law provided a tax credit for certain LEED-certified buildings. Shaw applied to the USGBC for LEED Silver rating. The state set the project’s potential tax credit amount, establishing an expiration date for the credits. Two milestones had to be met by the expiration date: The Certificate of Occupancy had to be obtained, and an Eligibility Certificate had to be secured from a LEED Accredited Professional stating that the building met the criteria for LEED certification.

Shaw claimed Southern failed to complete the project in a timely manner, resulting in the expiration of the tax credits. Shaw made a claim against Southern, including $635,000 for lost tax credits. The case was set for trial in 2007, but apparently the parties settled out of court.

While the Shaw case does not set legal precedent, it demonstrates that liability for failing to meet green building standards can take many forms. Without applicable legal precedent, looking for potential green building liability requires best practices, including careful contract negotiation. Green building concerns may not present novel problems in drafting and negotiating contracts, but they may create new contexts for old issues.

Clarity and certainty may conflict with some of the USGBC’s goals such as promoting an “Integrated Project Delivery Model” involving a “team approach” to projects, which may be incompatible with the design-bid-build setting.  

Some variant of the design-build method may be more appropriate. Early and clear communication of expectations, education about the process, careful review of contracts and thorough documentation are also essential.

When looking for contract clauses relevant to green building issues, it’s important to read and understand all of the contract documents. Clauses specifically relating to the project’s green objectives and the role of each party in attaining them require close attention. While some clauses clearly define the obligations of each team member, others merely outline aspirations without defining a scope, establishing responsibility or establishing how problems may be resolved. The worst clauses obfuscate other provisions in the contract.

Other contractual clauses that should be analyzed in this context relate to design responsibility, compliance with codes and standards, compliance with the intentions of the owner or the designer, force majeure, indemnification, exculpation or limitation of liability, time of performance and insurance.

The dominant contractual issue relating to green building liability may be design responsibility. As with other projects, building professionals should seek clarity and certainty regarding what is to be built and how. Muddy waters generally are not green.