Despite predictions that the construction industry would be inundated with green building lawsuits, there is a paucity of reported lawsuits relating to green building projects. One of the first reported cases involving green buildings is Southern Builders, Inc. v. Shaw Development, L.L.C., Case No. 19-C-07-01145 (Circuit Court of Somerset County, Md. 2006). This dispute arose from a $7.5 million, 23-unit condominium project in Maryland. The owner wanted the project to attain a USGBC LEED certification, which would have resulted in more than $600,000 in tax credits if a certificate of occupancy was issued by a certain date. After the contractor filed a $45,000 mechanic’s lien action, the owner counterclaimed against the contractor for, among other things, its failure to deliver a LEED silver certified project. The parties used an AIA A101 -1997 Standard Form of Agreement Between Owner and Contractor and the contract documents included LEED requirements in an incorporated project manual. The contractor, however, was not obligated to secure a formal silver-level certification. Although this case had the potential to resolve a LEED issue and provide guidance to the green industry, the case was not litigated to conclusion because the parties settled.
A second reported lawsuit, filed in federal court in 1998, arose from the City of Albuquerque, New Mexico’s enactment of a new green building law. The case, The Air Conditioning, Heating, & Refrigeration Institute v. City of Albuquerque, Civ. No. 08-633 MV/RLP (D.N.M.), involves the novel application of federal preemption doctrine, in which federal law trumps local-level green-building legislation. The Air Conditioning, Heating and Refrigeration Institute and several distributors sued the City of Albuquerque alleging that the city sets energy efficiency standards for furnaces, water heaters and air conditioners that are more stringent than those allowed under federal law. The U.S. District Court agreed with the plaintiffs and issued a preliminary injunction temporarily stopping the city from enforcing the law.
There are other potential areas that may give rise to green building litigation, which are not as obvious as the failure to achieve a certain designated LEED standard. They include:
1. “Green washing.” Building owners, landlord representatives and real estate brokers need to be careful on describing a building as “green.” There is no legal definition of what a green building is and if not carefully limited, this could give rise to a claim of a breach of warranty or fraud.
2. Failure of a building to achieve expected energy performance and savings, which a purchaser or tenant may assert were either explicitly promised or implied, failure to achieve zoning bonuses or other preferential development approvals, utility rebates, and the like.
3. Claims by design professionals asserting that they have the experience and expertise necessary to serve on a green design team. In many areas of the country, there have not been enough green projects to justify a large number of experienced professionals. Specific background and experience should be carefully disclosed.
4. Fitness of new materials for their intended use as well as issues related to durability and reliability. There are many new products involved in green building which do not have proven reliability, which could give rise to claims.
5. Increased burden of ownership and maintenance of a green building. The design of a LEED building, particularly a gold or platinum, can include many new and complex systems, such as vegetative roofs, new building materials and the like. The responsibility and liability for these type systems needs to be carefully addressed.
The number of green building lawsuits and reported decisions is certain to change as state and local governments continue to enact green building statutes and regulations, the number of LEED projects proliferates, and the means and methods to measure post-occupancy performance are refined.
Posted by Jeffrey S. Wertman of Berger, Singerman and
Terence J. Delahunty, Jr., Esq., LEED AP of Gray Robinson, P.A.
Filed under: Uncategorized
