Virginia Real Estate, Land Use & Construction Law : Virginia Construction Lawyers & Attorneys : Bean Kinney & Korman Law Firm : VA Real Estate, Land Use & Zoning

Modular home construction presents significant potential improvements to home construction: significantly reduced construction time; less material waste; and reduced expense.  If not handled appropriately in terms of contracts and risk, modular homes can translate to a gigantic headache for both the designers, contractors, and the owner.

Last Thursday, Lisa Rein of the Washington Post wrote an article on mansions turning to modular construction to reduce time and costs.  The article caught my eye - while I have noticed this trend over the last 5 years or so, it was the first time I saw local mainstream press pick up on this.  My friend Jamie Baker Roskie at the always interesting Land Use Prof Blog picked up on the article and connected the thread towards local codes discouraging use of shipping containers as building materials. 

Adaptive reuse of discarded materials is one of the best ways to improve our economy's sustainability, and using shipping containers for modular construction is really an interesting approach.  Don't believe shipping containers make good construction materials?  Browse through a search of the articles at the highly informative Jetson Green blog that address containers and you will see some remarkable uses of containers, from emergency shelters for recovery in Haiti to very sweet, upscale small footprint breach structures.

Turning from containers to wood based modular construction, count me as a believer that we will see industry move towards more pre-fabricated assemblies to reduce cost and time of construction.  Despite my views on the future, I have particiated in some pretty ugly cases involving modular construction.  Based on the repetitive nature of these problems, I draw some conclusions about risks involving modular home construction that may help put the Washington Post's article into a legal context:

1. Prefabricated assemblies are sales of goods governed by Uniform Commercial Code not construction
2. Sales of goods involve different potential warranty theories and defenses than construction implied warranties
3. Sales of goods potentially have different statutes of limitations
4. While the install time may be shorter, manufacturing and delivery time may be a very different story
5. Most owner/contractor agreements involving modular construction are very weak on defining the remote manufacturer's role and responsibilities
6. Similarly, most owner/contractor agreements poorly define timing expectations until the modular unit is delivered and set on the building pad
7. Simple units seem to do pretty well; however, quality control seems to vary wildly amongst manufacturers and even within specific manufacturers depending on the specifics of a projects and the design complexity
8. As with other manufacturer's warranties, if there are problems, owners and contractors may struggly mightily to get manufacturers to respond appropriately to warranty complaints

This may be coming from the skewed perspective of seeing these projects in litigation, what do you think?  What have you seen?  Finally, how has the economic downturn improved or worsened working with modular manufacturers?

Images by Terretta

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I am very pleased to report that I will be speaking on April 27, 2010 at the Green Legal Matters Conference in New Orleans, Louisiana.  The event includes a large number of talented folks, including good friends of ours from twitter and blogs such as Christopher Hill, Shari Shapiro, and Scott Wolfe.  A number of general counsel of very significant entities are scheduled to participate as well, including:

• Susan Dorn, General Counsel USGBC
• Roberta Lang, General Counsel, Whole Foods
• Steve Harmon, Sr. Dir. Legal Services, Cisco
• Elaine Reilly, Corporate Counsel, DuPont
• Ted Banks, Former Chief Counsel, Kraft Foods
• Kurt Stepaniak, Sr. VP, Law and Acquisitions, Kone, Inc.
• Allyson Willoughby, General Counsel, Method Home

This looks to be a fantastic event.  Last, but not least, the event takes place in the middle of New Orleans' Jazz Fest, a particular favorite of mine.  More information regarding the event is available from the press release issued by the conference organizers.  You can register for the event and see more information on schedule and attendees at the conference website.

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I don't know how many people out there tracked the events at the sustainability forum out in Portland a few weeks ago, but one of the notable take-aways from the event was that HUD Secretary Donovan used the event as an opportunity to announce that HUD was launching it's new Office of Sustainable Housing and Communities (OSHC) under Deputy Secretary Ron Sims.  OSHC is funded in HUD's 2010 budget.  This follows on the heels of the announcement to create the Inter-agency Partnership for Sustainable Communities between DOT, HUD and EPA last June.

The purpose of OSHC is to work with DOT, EPA and other federal agencies to ensure coordination between housing and other departments involved with sustainable community public policies that effect transportation, utility infrastructure, jobs and environmental planning.  It will also "...strengthen HUD's Energy Efficient Mortgage product and other retrofit financing options - both for single family homes and multi-family rental housing - through a $50 million Energy Innovation Fund... and will also make available an Affordability Index that measures the costs of where a home is located in relation to jobs, schools and transportation."  Additionally, $100 million will be available for integrated metropolitan regional planning initiatives per the Sustainable Communities Planning Grant Program, and HUD expects to award grants to between 10 and 15 regions around the country.

HUD and OSHC are also seeking input from stakeholders related to creation of regional plans for sustainable development, execution plans and programs, implementation incentives and entities eligible for funding.  You can make recommendations via HUD Wiki, is pretty easy to do.  Also, Builder Magazine interviewed OSHC's Director, Shelley Poticha, last week, where she shed some light on her thoughts on how the federal government fits into regional land use planning.

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Land use policy is the fulcrum in the tug of war between the property rights of individual owners and the regulatory interest of communities in establishing and enforcing a vision of their own community.  Three separate conversation and analysis threads bring home the reality that the cookie cutter approach to development and even to the ordinances and interpretations that govern development are not the best approach.  Indeed, inflexibility of approach and failing to encourage a more diverse and vibrant style of development are exactly the failings that the new schools of thought of "urbanism" are seeking to replace.

On the first topic, Chris Cheatham reported last week on some criticism of the Tyson's Corner proposal to allow density bonuses to developers for reaching green certification levels.  A multi-family residential developer raised what I regard as legitimate questions about whether LEED should be the only standard used.  If jurisdictions are turning to third party voluntary programs and means of certification, they should develop the means to evaluate and understand these tools and avoid getting handcuffed to a single green standard fits all approach.  While the LEED standards have certainly evolved and continue to evolve, there are some who believe they still reflect their roots flowing primarily from the commercial design and construction environment.

The second thread was covered by my colleague Tad Lunger last week in reporting the results of the recent Arlington Retail Task Force.  Much of Arlington's success has been pinned to the concept of mixed-use development, but many developers have expressed heartburn over filling first floor retail space in areas that do not appear to support such uses.  Many retailers have expressed heartburn that this land use policy creates a glut of too much retail and too much competition.  It appears that the task force has reached similar conclusions.  This is another thread towards the same conclusion that a cookie cutter approach of requiring the same thing in the same way on every project does not achieve the intended results.

Against this backdrop, I ran across a brilliant presentation by James Howard Kunstler posted at Aribra entitled The Tragedy of Suburbia, a video from a TEDTalks conference.  Mr. Kunstler may be somewhat of a lightning rod for the vehemence of his critiques of suburbia, but he makes a lot of great points regarding architecture, community, the challenges we face regarding fossil fuels, and how to build a sense of lasting community through urbanism.  I know this may be a lot to ask, but trust me: watch this video.  It is worth the 20 minutes for sure.  It is thought provoking, and will honestly give you multiple gut busting laughs to boot if your sense of humor is anything like mine.

Pulling this all together, developing vibrant communities certainly requires a regulatory and legislative framework that permits local government to plan areas of density, areas of commercial and residential development, and to encourage the creation of appropriate infrastructure to support those efforts.  That framework should not be reduced to a cookie cutter, one-size fits all approach.  That type of approach is arguably what helped foster the suburban sprawl that most planners are seeking to undo now, most notably in Tyson's Corner locally.  In encouraging a more transit oriented style of development, localities should be mindful of not not crippling the development of true urban commercial cores through excessive restrictive and repetitive requirements, but instead should like to foster organic growth a much as possible. 

Image: Alice and Lorina Liddell on See-saw, from Lewis Carroll photobooks

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There are a number of important construction law and economic developments that I want to pass along to our readers.  Given timing and the plethora of topics to address, I wanted to share these developments in a more rapid fire format so these updates remained timely.

You should be on the lookout for more information on these topics in the future.  We may expand on some of these threads in the future here as well:

• The Supreme Court of Virginia will hear the appeal in AMEC Civil LLC v. VDOT.  This case is a very important case involving what is required for notice of claims on construction projects; any person or entity involved in Virginia construction needs to keep an eye on this case as it could have a major impact on future Virginia construction litigation
• As reported by our friend Chris Cheatham, the District of Columbia has attempted to fix their green building ordinance by no longer requiring a "performance bond" guaranteeing verification of green construction ... they will instead just require a "bond" guaranteeing verification of green construction.  Count me as a skeptic that this editorial change is meaningful or will fix the problem of lack of available bonds in the markets to cover this risk.
• The economy is sending some mixed messages.  Overall unemployment dropped from 10.0% to 9.7% in January according to the latest Bureau of Labor Statistics report
• Unfortunately, that improvement did not translate to the construction industry.  ENR reports a significant continued rise in construction unemployment, jumping from 22.7% in December to 24.7% in January.  The Bureau of Labor Statistics indicates that the construction sector lost 75,000 jobs in January bringing the total to 1.9 million since December 2007
• Associated Builders and Contractors released their latest Construction Economic Update.  The skinny: private non-residential construction spending rose 0.2% in December, but was down almost 18% year over year.

The continuing sluggish economy continues to place significant bidding pressure on the construction industry.  I still stand by my post last October that this bidding pressure will translate to serious claims issues over the next couple years.  Put on your seat belts, it will be a rocky ride here for a while.

Image by Ian Britton courtesy of Freefoto.com

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The Empire State Building retrofit project is reaching for rarefied air: improved energy efficiency,  reduced carbon emissions, and rapid and healthy return on investment.  Recent case study documentation for the project suggests this project will hit the ball out of the bark on all fronts.  Highlights include:

An estimated 38% energy savings compared to high level class A office space

A 3.1 year payback on the incremental cost increase to fund proposed energy efficiency measures

• An 9.2% estimated tenant space savings when increased project costs are weighed against the net present value of energy savings to tenant space fit-outs
• Reduction of well over 100,000 tons of CO2 emissions over 15 years

This project concept directly touches on the concepts of energy efficiency, performance and return on investment that formed the backbone of the recent Trends in Building Green seminar we discussed here.  The Empire State Building project also serves as not only a model, but a potential market game changer and advances many of our predictions for this next building cycle.

On a personal note, I spend a lot of work time looking "green" issues from a contracts, client or risk management perspective.  I spent a lot of personal time thinking about sustainability for its own sake in the context of raising a family and working towards a sustainable future economically and environmentally.  I like environmental sustainability for its own sake, but I love when creative and motivated people fuse the moral high ground with economic success.

Image by Amitmogha

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With well over two thousand bills filed for this session, I was curious to see what our local urban delegates and senators have chief-patroned this year.  So here's what they're up to:

Delegate Brink has patroned HB 1260, which proposes that the Uniform Statewide Building Code should also apply to buildings or structures built on state-owned property and that the Department of General Services would act as the building official for all such buildings.  He has also patroned HB 1314 which contemplates providing financial incentives equal to twenty percent of delinquent taxes collected by tax collectors, chargeable to the taxpayer in addition to the amount of the delinquent taxes.

Senator Whipple has also patroned two bills.  SB 665 would clarify the authority of the Common Interest Community Board relating to disciplinary actions and fact finding procedures.  SB 681 suggests delaying the effective date for the stormwater management regulations passed last session for a year.

Adam Ebbin, via HB 1222, proposes that electric utilities establish a fund to allow voluntary contributions by customers so that the SCC can use the money to incentivize projects that incorporate photovoltaic devices, solar water heating devices, or solar space heating.  He also thinks that HOT lane shoulder widths should be wide enough to handle transit vehicles, HOV service does not deteriorate, and ingress and egress from local connector streets are adequately addressed (see HB 1223).  Delegate Ebbin also thinks vehicles used in abductions should be forfeited (HB 1113)  and that your income tax filings should be due on April 15 to sync up with the federal deadline, rather than May 1st (HB 1278). 

Delegate Englin wants online political advertisements to be subject to disclosure requirements regardless of space to do so (HB 1261) and  wants to see automatic acceptance of service members to Virginia colleges who were in the top 10% of their graduating class (HB 274).

Senator Ticer wants to amend the charter of the City of Alexandria so that the board of review of real estate assessment is composed of nine members rather than five members, with five members appointed by the circuit court and four members appointed by city council (SB 572) and to allow for TDRs in zoning ordinances in localities with the urban county executive form of government (SB 636).  She also would like to see a license plate for recycling advocates (SB 709) and some careless driving offense proposals (SB 566).  She also proposes relaxing campaign contribution reporting requirements for local officials (SB 723).

Delegate Hope thinks that the Commonwealth Transportation Board ought to give first priority to funding transit operating costs rather than transit capital projects (HB 421), wants to prohibit smoking in all public buildings (except certain portions of corrections facilities) (HB 1351), and most notably, is chief patron of the Green Public Buildings Act (joined by Brink and Ebbin) (HB 1264), which would require all new construction public buildings over 5,000 SF (or renovations amounting to over 50% of the value of the building) to achieve LEED Silver certification or Green Globes two globe standards, achieve energy savings that exceed ASHRAE 90.1-2004 standards by at least 15 percent for new construction and 10 percent for major renovation, and  to provide water use savings of at least 25 percent over the baseline standard established in the federal Energy Policy Act of 1992.

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The Trends in Building Green panel last Thursday morning was a great success.  There were a couple interesting take-aways from the panel's materials and presentations:

• Smart property owners need to be taking energy savings seriously; Tommy Russo, Chief Technology Officer of Akridge, described their highly detailed efforts to analyze and implement projects with a reasonable return of investment horizon;
• Per Tom Mawson, Executive Director of the USGBC National Capital Region Chapter, the "USGBC is all about market transformation"
• Bobby Christian, CEO of Green 20 Now, LLC, and Mike Scelzi, President of Net Metering, Inc. demonstrated just how far we have come with access to energy metering information, and its implications on operations and cost savings
• Chris Pyke, Director of Research for USGBC, provided a wonderful overview of where LEED has been and where it may be going, in particular in the context of on-going performance of buildings and where those measures may not match design.  For Chris and USGBC, the question primary question: "Is there a commitment to demonstrated performance ... which is leadership" with regards to energy efficiency and sustainability.
• I covered some of the press crititiques of LEED, what the actual projects demonstrated, and finally where the performance debate may create significant liability issues in the future

My presentation is here for those who are interested.  Mike Scelzi was also kind to provide his presntation as well.  Please feel free to contact me if you have any questions or are interested in tracking down some of the participants or issues we covered.

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Wading through the various layers of requirements, enticements, incentives and regulations that apply to green building can be overwhelming to anyone, let alone the uninitiated.  This process is made far more complicated by adding the layering of federal, state, and local government efforts in this field.

The United States Green Building Council has this effort very easy with regards to LEED related public policy searches.  USGBC has a search engine with multiple selectable criteria to sift through the oceans of regulations to find what you are looking for.  I cannot say the entire database is perfect, but I can say that it appeared that the Virginia state and local discussion was basically accurate, including the status of the green building ordinances in Arlington County, Fairfax County, and the City of Alexandria.

USGBC naturally has an interest in promoting the USGBC's interests with its efforts and these tools are no exception.  The only pet peeve I have is that some of the commentary seems to slant the discussion entirely towards LEED standards without a recognition of the role other standards may play in these regulations.  For example, the USGBC description of the City of Alexandria policy states,

On April 18, 2009, the Alexandria City Council adopted their Green Building Policy requiring all new municipal buildings to achieve LEED Silver certification and all new commercial buildings to achieve LEED Silver certification. The policy also requires all new residential buildings to be LEED Certified with the intention of increasing the standard over time.

In reality, the City of Alexandria policy expressly recognizes the ANSI approved ICC-700 2008 National Green Building Standard for residential construction.  The ICC-700 standard was developed by the National Association of Home Builders in partnership with the International Code Council.  The City's overall adopted standard further provides that while LEED is typical, to the extent equivalent rating systems are available and can be demonstrated as equivalent to the Director of Planning and zoning, they are also acceptable.

That limited comment notwithstanding, the USGBC search engine is a great free tool to dig out federal, state and local requirements.  Careful and prudent use will require clicking through to the underlying source links and maybe digging a bit for confirmation, but used carefully the search tool can save a ton of time and effort.

Image by Timothy Valentine

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I am pleased to invite everyone to attend the upcoming Trends in Building Green Seminar on January 21, 2010. 

Date:       January 21, 2010

Time:       9:00 am - 12:00 pm (breakfast 8:30 am)

Location: National Rural Electric Cooperative Ass'n

                  4301 Wilson Blvd., Arlington VA 22203

A full listing of speakers and information is available, but the main topic is on green buildings and energy.  I will be speaking on some of the historical energy related issues with LEED structures, the attention they have received, and what this may translate to in the future both for LEED and liability exposure;  these topics have received a lot of interest and commentary generally, and we have also commented on them frequently here.

Anyone interested in attending should RSVP to Nancy Shipley of Rutherfoord by Tuesday, January, 19 at 703-813-6575, or nancy.shipley@rutherfoord.com.

Image by Wonderlane

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Energy production, sources, costs and impact are a constant fundamental part of the economy and the construction industry.  Nevertheless, there is a diverse flood of fuel related topics and commentary over the last week or two in Engineering News Record that is suprisingly interesting and dense.

On the biofuel front, ENR reprints and AP report that the biofuel market is particularly dead.  A federal tax credit has expired and, "The biodiesel industry is now operating at only 15 percent of its potential capacity, according to the National Biodiesel Board, largely because the price of traditional diesel has collapsed."  Meanwhile, ENR separately reports that the Canadian government has ordered a study into the environmental and health effects of producing ethanol and biodiesel fuels.  While this is not the first such critique of some ethanol or some biodiesel products, it cannot be heartening for biodiesel producers when juxtaposed against the current economy.

In a more heartening turn, ENR highlights a report of a California trash to gas project that is being used to run a fleet of Waste Management, Inc. garbage and recycling trucks.  The project converts methane gas created by deteriorating natural waste at a 240 acre landfill serving San Francisco and Oakland.  "We've built the largest landfill-to-LNG plant in the world; this plant produces 13,000 gallons a day of LNG," said Jessica Jones, a landfill manager for Houston-based Waste Management. "It will take 30,000 tons a year of CO2 from the environment."   Finally, ENR rounds out the energy card with Don Short's opinion blog making a forceful call for loan guarantees and regulatory support for complete replacement of coal and gas electrical plants in favor of nuclear power.

In my view, energy is absolutely core to sustainable design and development.  Nevertheless, it is striking to see ENR pulling on so many different threads of the energy cloth in such a short period of time.

Image by jurvetson

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As we kick off 2010, it is a good time to make some predictions on the future of green building. While these predictions anticipate a longer time horizon than just the coming year, my bet is we will see some of these trends manifest during 2010. We can also expect that some of these topics will be the subject of a lot of discussion here and elsewhere over the coming year.

1. The marketplace will demand green buildings as the baseline building product. This is particularly true in markets that show signs of economic vitality where construction, redevelopment, or renovation are most likely to occur. (See for example the recent AGC article  highlighted by our friend Chris Hill).
2. Newly built buildings which are not designed and built using sustainable practices will struggle in the marketplace.
3. The marketplace will continue to struggle independently evaluating green building information and concepts. As such, rating systems such as LEED will continue to hold significant focus in the sustainability conversation for some time.
4. Energy efficiency will receive increased attention as the most important yardstick in measuring the sustainability of specific structures. (Here is an example of the discussion regarding the LEED energy debate).
5. The anticipated ASHRAE green code and other code based alternatives will gain traction in comparison to LEED ratings with respect to energy efficiency (see also Chris Cheatham’s recent post on local energy regulation and energy labeling).  LEED will continue to have a significant place for overall evaluation of projects; however, LEED will need to respond to energy performance concerns or risk losing attention to evaluations methods which are more focused on actual energy performance.
6. Longer term investment strategies in commercial property are more in vogue leading to owners who are more interested in operational expenses. Look for increases in renovations of existing buildings focusing on improvements to energy efficiency of older buildings.
7. Governmental bodies will continue to drive sustainable building as a prerequisite both through their own acquisitions and regulations. This trend will further fuel the feedback loop of the marketplace demanding green buildings.
8. Look for continued tension with regards to bonding requirements of green buildings, particularly where specific green performance bonds are required (such as DC’s bond requirement which takes effect in 2012, discussed by Kevin Kaiser at Best Practices Construction Law).

Do you think these are likely to happen?  Did I miss any other big ones?  We are interested in your thoughts, please comment!

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We are very pleased to have our inaugural guest post by John Salmen, AIA.  A licensed architect, John is President of Universal Designers and Consultants, Inc.. John has specialized in barrier free and universal design for 30 years and is a recognized expert on US accessibility regulations and a leader in the field of Universal Design.   We can think of no one better to start the accessibility discussion on our blog, and we also believe John makes an interesting, persuasive and important connection between economic, environmental and social sustainability that merits significant attention.

Inevitably, this question must be raised. As public awareness of green design swells to a tidal wave, many Students of Universal Design (UD) think we see the next wave approaching – and its name is Universal Design. But how do these waves relate to each other? Are they random swells? Or caused by undersea movement of the earth’s crust?

Valerie Fletcher, Executive Director of the Institute for Human Centered Design, and Elaine Ostroff, Founding Director along with Eric Mikiten, AIA of the Bay Area COTE, believe that they are both connected to the earth shaking movement of Sustainability. Eric presented his overview in detail at the AIA 2009 convention. The trefoil logo, developed by the Department of Public Works of Queensland, Australia for its Smart House program (www.build.qld.gov.au/smart_housing/elements/index.asp), communicated how these three universal design leaders visualize the “ three–legged stool of sustainable design.” The graphic above illustrates how universal design is a basic element of sustainable design, as it relates to resource efficiency and economic empowerment under the umbrella of environmental, economic and social sustainability.
Environmental sustainability relates to the green movement and natural resource conservation and efficiency. Economic sustainability relates to concepts of life cycle costing, equity and fair trade value of products and services. Social sustainability relates to systems that support people by creating safe, secure and independent communities.

When compared to financial and natural resources, human ability is arguably the most precious resource of all. Human ability is enabled, supported and encouraged by a universally designed environment that gives everyone the opportunity to participate with a minimum of outside support. Just as we must conserve our natural resources, we must also conserve our human resources. It is a waste of human potential to create environments that demand dependence when a simple change in the design of the path, space or element could allow un-assisted use. Like “green design”, universal design must be an integral part of design programming and the imaginative design process. It cannot be left as an add-on in a minimal compliance mode.

The relationship between two people who are locked in the care giver/receiver dance, while frequently a loving and enriching experience, is difficult, uncomfortable, and too often destructive of human dignity. Independence is best and can be extended with universal design. The obvious example is aging in place, which is facilitated by universally designed homes and communities.

As we struggle to make the most of limited resources, the value of universal design as a tool to conserve human resources will become increasingly apparent, and its relationship to the broader goal of sustainability will become clear.

Editor's post script: In response to Chris Cheatham's fair question of what is "Universal Design", here is a definition from John Salmen's website:

Ron Mace, one of the original universal design movement leaders, defined universal design as: "Universal Design is the design of products and environments to be useable by all people, to the greatest extent possible, without the need for adaptation or specialized design.

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We are pleased to announce that our firm has stepped up and adopted a formal sustainability policy.  The policy adopts specific measures to reduce material and energy usage, increase reuse and recycling of materials, and to include sustainability as a core value in vendor purchases.  We are excited to commit to doing our part to improve sustainability of our own business and legal practice along with other forward thinking businesses.

Our firm has a rich tradition of including environmental sustainability into our decision-making process.  For example, we are located in a LEED Silver building, our space was built out with sustainable principles in design and construction, and we have long had a policy of paying financial incentives to staff using mass transit rather than driving.  In 2009, we invested a significant intensive effort into sustainable design and construction by having eight of our current attorneys and a paralegal all train and pass examinations to become LEED accredited professionals.  This effort included all three of the editors of our blog.

The sustainability policy includes the following highlights:

• Continued support of incentives for public transportation
• Increased education and resources for increased recycling
• Decreased paper and toner usage through increased use of electronic documents, duplex printing and education of use of draft printer settings
• Inclusion of sustainability criteria in vendor and purchasing selections
• Reduction of waste through use of permanent glasses and mugs rather than disposable
• Reduction of energy through appropriate computer, printer and lighting measures
• Last, but definitely not least and my own personal favorite, elimination of bottled water and instead use of water pitchers and glasses (something I know my pal Shari Shapiro will appreciate!)

We see this as being an evolutionary and on-going process.  Please feel free to share your own experiences in adopting such policies and also to add on suggestions for additional ideas moving forward!

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There are three kinds of lies: lies, damned lies, and statistics.

Mark Twain, paraphrasing Benjamin Disraeli

We have a new and very interesting recent report on green building to examine, the Regional Green Building Case Study Project: A post-occupancy study of LEED projects in Illinois. The Illinois report studied a mix of projects of various certifications levels, certified under various versions of LEED, with various applications, that used various baselines, and that used various reporting methods for utilities. The small sample and disparate projects involved lends itself towards a scattershot of data.

The study found a range of cost premiums for green construction (after grants and incentives) at 0.6% to 6.9% of project cost with 3.8% increase as the mean. The Illinois report found that projects focusing on energy efficiency tended to have better energy efficiency (quite a V-8 moment I am sure). Interestingly, the Illinois report found no meaningful correlation between the level of LEED certification and the energy performance of the buildings involved … this may be an off-shoot of the limited sample size.

The most interesting point from the Illinois study was in the details regarding energy modeling. Sixteen projects used energy design models. Of these sixteen projects, twelve projects performed worse than design models … six of them using 100% to a whopping 250% more energy than anticipated in the model. Seventeen projects used at least baseline models and remarkably seven of the projects showed actual energy use above the baseline!

To me, to have energy use of these structures exceed the original baseline is flat out staggering. Looking into the project details, one big factor was more intensive use and occupancy figures than modeled. This continues to point out the flaw of expecting too much from energy modeling that we have previously discussed. In addition, we continue to see the problem of trying to draw averages from lumping apples and oranges together. As someone recently said in a meeting on green building, drawing statistically across these projects appears far less educational and valid than more in-depth case study analysis of the specific individual projects.

(Hat tip to our friend Heidi Schwartz for commenting on this and sending us the report)
 

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A post this weekend by our friend Andrea Goldman raises the interesting question of “why bother with LEED certification”? The post highlights a recent profile on the highly sustainable Hutton Hotel project in Nashville which elected to forego seeking LEED registration and certification. In particular, Hutton Hotel representatives are quoted as saying:

Doing the government documents alone cost $50,000. Also, the paperwork is so complicated you have to hire an expert to do it. They make the certification a little onerous so everyone won’t pile on. You also need engineers that do testing. It’s a whole process.

If the goal truly is to develop more sustainable, energy efficient and better performing buildings, perhaps that is where a project’s generally limited resources should be directed. The question is how less technically savvy owners, developers, and even perhaps government officials are able to evaluate how “green” are these buildings. USGBC has been able to carve out a niche and indeed expand that niche into widespread identification of LEED being synonymous with green building and presenting LEED as the most credible source of third party validation of green design and construction.

The questions raised by Hutton Hotel are not unique. Indeed, last week I had a long conversation with a longtime client who builds very upscale homes. He remarked that their design and building practice had “been what people are calling green now” for years. He added that LEED did not make sense for them because of its lack of teeth regarding energy performance.  These comments echo the themes of our earlier discussions regarding critiques of LEED and energy performance, its efforts to incorporate post-occupancy energy reporting, and the changes in credit emphasis in LEED 3.0.

In the end, the ability of LEED to succeed relies upon its stance as an accepted source for third party validation is critically dependent on its ability to maintain credibility. It is for this reason that the recent critiques of energy performance of LEED certified buildings and the USGBC’s efforts to address energy performance issues are so important to USGBC’s long term success.  It seems to us that in addition, third party validation relies in part on the market necessity to "prove" a project is green rather than having a knowledgeable marketplace already in position to make that evaluation on its own.  As marketplace knowledge and information improves, perhaps the need for third party validation begins to erode over time.
 

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The New York times reported this week that the "Coalition for Fair Forest Certification" has filed a complaint with the Federal Trade Commission claiming that the Forest Stewardship Council has engaged in unfair and deceptive trade practices. According to the report, the main thrust of the complaint centered on FSC's higher levels of preserved land in the United States compared to other areas of the world placing the US at a disadvantage. The complaint further alleges that the USGBC LEED system is anticompetitive because it currently only accepts FSC certified wood products as approved for the LEED program applicable credit. While the Coalition does not have a website, it is widely believe that the Sustainable Forest Initiative (SFI) and other timber industry players are part of the coation.

This complaint is the latest salvo in what is an increasingly ugly struggle over certified wood. As reported at Dead Tree Edition in September, ForestEthics previously filed complaints against SFI. The first complaint with the Internal Revenue Service  requested that SFI's tax exempt status be revoked. The second complaint with the FTC  alleged unfair and deceptive trade practices. ForestEthics claimed that SFI was in essence deceptively postured as an independent non-profit, but instead was an industry shill funded almost entirely by timber industry interests. ForestEthics further alleged that SFI's representations on the quality and chain of custody of SFI certified lumber were false.

These complaints are set against the backdrop of the USGBC's currently pending proposed changes to its certified wood credit. USGBC has conducted its first public comment period regarding opening the wood certification process to other standards.  Some individuals and organizations have raised concerns, including our own Jon Kinney, that the FSC certification may discourage smaller landowners from participating in the FSC certification program due to its extensive reporting and expense. SFI in turn has raised the point that the limited number of FSC certified producers in the United States translates to creating a market for overseas wood products that are shipped long distances. This naturally runs contrary to the LEED system preference for local products and materials to reduce carbon footprint and use of energy where appropriate.

Even before this latest round, SFI has been accused of being an exercise in "greenwashing". In response to the FTC complaint, the President for FSC's United States operations stated, "They're attempting to put a green label on status quo practices ... FSC will fight that. Otherwise, the value won't be there and we will all lose."  Architecture Week takes the analysis a big step forward this month and details a series of 2007 mudslides in Washington that "destroyed significant swaths of mountain habitat, caused hundreds of millions of dollars in property damage, and downed an estimated 140,000 truckloads of timber."  The kicker: the forests were managed by Weyerhauser who conducted extensive clear-cutting which is alleged to be the a main or contributing cause of the mudslides. Weyerhauser in turn claims that extreme weather was the culprit. The credibility of SFI rating and approval is implicated in the mudslide cases because SFI stamped approval on many of the same lands prior to the mudslides. Despite these concerns, SFI has sought and obtained approval for the SFI standards from the American Standards Institute (ANSI) for inclusion in the National Green Building Standard.

Picking one standard over another, or even more particularly excluding all standards except the FSC approval, exposes USGBC to some legitimate scrutiny and criticism. This is particularly true where the program participation costs may exclude many players in the timber industry and who may conduct their operations in an extremely sustainable way. Nevertheless, this appears to be another example where USGBC has started the reaction process and is considering alternatives in response to criticism. Regarding the merits of the FTC complaint by the "Coalition", it is hard to see how a valid complaint can be stated that participation in a completely voluntary rating program operates as a restraint on trade.  What do you think?

(Thanks for our friends Imad Naffa and Shari Shapiro for passing the NYT link on Twitter yesterday!)

Image by Rene Ehrardt

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We have previously discussed the New York Times article criticizing the Leadership in Energy and Environmental Design (LEED) rating systems developed by the U.S. Green Building Council (USGBC) for its arguable lack of translation to improved energy efficiency.  We also discussed energy codes and their interplay with LEED and ongoing reporting.  More recently, similar concerns were raised with respect to performance of LEED certified buildings at Dartmouth College (hat tip to Rich Cartlidge who wrote a nice piece on this topic with an ensuing series of good comments). Stephen Del Percio of Green Real Estate Law Journal has similarly analyzed the 2007 reports from the University of Massachusetts that found various LEED certified buildings used significantly more energy than anticipated under applicable modeling used for the LEED certification process.

In the midst of all this discussion of failed energy performance of LEED buildings, it makes sense to take statistical note of the changes from LEED 2.2 for New Construction to LEED 3.0 for New Construction. These changes appear to reflect an awareness and understanding that energy efficiency is critical to not only measuring the true sustainability of a LEED certified project, but also is key to USGBC and LEED maintaining credibility. A simple numerical comparison of LEED 2.2 and LEED 3.0 reveals a change in focus:

The relative redistribution of credits has resulted in a greater number of points allocated towards carbon footprint, efficient water and energy usage and the provision of alternative transportation options for workforces. A greater importance is placed on sustainable sites, water efficiency and energy and atmosphere. A greater number of points are now focused on sustainable sites credit two, development density and community connectivity and credit four, alternative transportation. While the methodology for compliance with these credits remains largely the same, the increased number of points available for them is evidence of growing relative importance.

For water efficiency, a new prerequisite requires each LEED project to reduce water use by at least 20 percent. Under LEED NC 2.2, a 20 percent reduction would have earned a credit point.  The threshold for attaining credit three, water use reduction, has increased by 10 percent compared to the previous version.

In energy and atmosphere, the points allocated to credit one, optimize energy performance, expanded from a maximum of 10 points to a maximum of 19 points. Similarly, the available points available for the remaining credits have been increased. The relative percentage weighted similarly demonstrates a shift in focus to increase the emphasis on energy efficiency:

It is clear from the above, plus the previously reported requirements for energy reporting as part of minimum project requirements, that the USGBC was already moving towards an increased focus on the need for energy efficiency improvements as part of LEED. It remains to be seen whether these efforts will succeed or whether LEED has suffered on-going credibility damage as its certification plan comes under the spotlight of scientific and journalistic scrutiny.

As a LEED AP and human being, I am all in favor of a relevant and successful program that makes a difference. As a construction litigator and business attorney, I am concerned that the LEED structure will start (or has started) to suffer from the natural human temptation towards self-perpetuation and amalgamation of resources, influence and power. In both capacities and finally as a blogger, I am not sure it is entirely fair to pile on LEED on the energy question in particular given the statistical demonstration that USGBC is trying to shift increased focus towards energy efficiency and energy reporting. It seems to me the discussion should be about how to improve energy efficiency and energy modeling accuracy rather than trying to discredit LEED.

Editorial Note: This article is adapted in part from a recent article titled "Shades of Green".  This article was co-authored by me and Ela Kapusta, LEED AP. This article is made available as a reprinting from Commonwealth Contractor, September 2009, a publication of the Associated Builders and Contractors - Virginia Chapter (all rights reserved). 

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I had a great time last Thursday at another one of Rutherfoord’s Trends in Building Green seminars. We got to hear from Tommy Russo from Akridge, Eric Oliver from EMO Energy Solutions, Bobby Christian from Tangible, and Tom Mawson, the Executive Director for the U.S. Green Building Council’s National Capital Region Chapter. 

I made a presentation outlining our region’s local jurisdictional green building trends, policies and incentives for private commercial development from a zoning, planning and land-use perspective. Here’s the slide show from the presentation. There was quite a bit more explanation beyond what is outlined in the slides, including bonding and other security requirements for incentives and a number of new initiatives a number of localities are currently pursuing. If anyone has any questions about what any of these localities (Arlington County, City of Alexandria, Fairfax County, Loudoun County, Prince William County, Montgomery County, Prince George's County and Washington, D.C.) are doing, please feel free to post a question and I can respond in more detail.

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As discussed previously, USGBC has imposed extended reporting requirements as part of its minimum program requirements for LEED. It appears the extended reporting already adopted may only be an initial step. We may see extended reporting requirements backed up by decertification; we may see on-going recertification as a basic part of LEED program structure.  I admit this is speculative, but we may be seeing a shift from LEED using energy modeling towards an actual performance model.

Given the overall goal of improved building performance implicit in LEED, these changes and speculated upon shifts may make sense technically. These changes, however, raise some significant questions regarding risk and responsibility. The ultimate impact on risk, and thus embedded costs, of these changes may vary dramatically from state to state because of each state's underlying legal framework.  Placing these changes into the complex network of construction contracts, contractual allocations of risk, and shared responsibilities raises some interesting observations and questions:

• States whose limitations period runs based on "injury", such as Virginia, may experience extended limitations triggers where building performance is alleged to be the failure; such results could be different for the various players depending on their roles
• In damage trigger states, courts may find that "injuries" were suffered far earlier than owners even suffered performance problems, so results in these states are difficult to predict and there could be big winners and losers
• States with discovery based limitations accrual, such as Maryland and the District of Columbia locally, will present cases with ever longer, potentially plausible, arguments regarding why the owner "reasonably did not know" of a problem for years after occupancy of the project
• The timing issues presented by extended performance questions mean that contractual agreements on statute of limitations and when they start to run should be focal points of contract negotiations; negotiations regarding extended warranties will be pivotal as well
• The growing use of LEED certification in various local zoning approvals means decertification may carry unintended consequences. If a project is decertified, is there a possibility that its occupancy permit is threatened?
• The potential for decertification, or a failure to participate in recertification if that becomes standard, may place commercial landlords at potential for extended risk of breaches of lease agreements depending on the LEED requirements imposed
• Lease agreements in turn need to be carefully worded so that all parties are on the same page as to exactly what is the yardstick and time frame for complying with LEED related terms

These are just a few of the wrinkles that come the mind when one places an overlay of extended performance obligations into the context of LEED.  We will keep a close watch on these developments moving forward.  We believe that continued movement on the extended performance axis by USGBC will have some serious economic impact on the financial aspects of LEED projects, who "wins" and who "loses" based on these changes, and where bottlenecks may develop on the economic risk side of the equation in reaction to extended performance obligations.

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The recent New York Times piece criticizing LEED (discussed previously) has reignited discussion of the potential for decertification after initial issuance of LEED certification. Some previously pointed to the USGBC addition of extended energy reporting for five years after occupancy as a "Minimum Performance Requirement" and the threat of decertification as an enforcement mechanism.  More recently, commentators have predicted recertification programs.  Rich Cartlidge even called for a wedding between LEED for New Construction and LEED for Existing Buildings.

The USGBC changes must be viewed against the backdrop of the development of international, state and local building codes and even Congressional legislation.  Codified efficiency standards would clearly and immediately raise the minimum energy bar across the board and reduce or eliminate some of the arguments raised by the Times article.  Reducing compliance to clear codes may also reduce in part the increasingly complex interface between local authorities interpreting prescriptive codes and the interpretive voluntary third party organization subject to little if any legal challenge or appeal (commented on previously by Chris Hill).   LEED as a voluntary tool has succeeded in driving the dialogue and advancing knowledge of green building.  LEED as a remotely delegated code interpretative structure with limited avenues of legal challenge is far more complicated.

With regards to code based approaches to energy efficiency, at least one local energy code has been passed and partially tested ... and stopped dead in its tracks (at least temporarily). The City of Albuquerque passed its own building code with energy efficiency standards. In granting a preliminary injunction blocking application of the code, a federal district court judge made the preliminary finding that it was more likely than not the challenger would prevail based on an argument that Congress had spoken on energy efficiency and that the federal statutes preempted state or local action.

The City of Albuquerque case reached the preliminary finding of federal preemption despite the fact that when Congress passed its energy efficiency measures, it included an express limited caveat that excluded building codes from preemption. The case is still pending, so the ultimate result is up in the air. The case does, however, offer a roadmap to those seeking to challenge statewide and local building code efforts to impose energy efficiency standards.

Given these complexities, it may be simpler for proponents of increased efficiency to do so at the federal level. The Waxman-Markley bill (described as the cap and trade bill by some, by others as The Illiad) includes significant increases in required energy efficiency requirements. While these standards have received extensive attention and commentary from green building bloggers, the press and public discussion of these aspects of the bill have been almost strangely silent.

The interplay of these issues raise a number of questions, particularly if proponents are successful at incorporating energy efficiency standards into federal or state statutes:

• If LEED in fact incorporates recertification and/or on-going performance requirements, will it reach the tipping point where owners and end-users push back on fees and process?
• What is LEED's role in the future if green requirements are increasingly codified? Does LEED always impose higher requirements? Does it stick to a holistic approach and avoid "energy myopia" as coined by Shari Shapiro?
• If/when statutory framework for sustainable development emerges in earnest, will the position of pre-eminence of LEED erode? Is the USGBC's ultimate mission of "working to make green building available to everyone within a generation" furthered more by advancing legal codification or increasing the reach and depth of its current market penetration?

These are the Ghosts of LEED Present.  Next time we will discuss in greater detail the thicket of legal risk and defense issues posed by extended reporting requirements, decertification and recertification, including statutes of limitations and shared/murky issues of risk and responsibility.
 

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The legal blogosphere has been active the last two weeks with discussion of the recent article in the New York Times critical of LEED. The article in essence uses the example project of the Federal Building in Youngstown, Ohio as a sample for LEED projects that fail to be "green". The Times in particular attacks the actual energy performance of a specific project as an example of why the LEED certified project is not in fact green. Reaction has been varied, from Shari Shapiro pointing out these discussions have been in the mix for some time  to an impassioned, relatively emotional, reaction from Rob Watson, a board member of USGBC and significant national player in the green movement.  Chris Cheatham has pointed out for discussion the interplay between green building success on the one hand and risk associated with projects receiving funding under the American Recovery and Reinvestment Act.  Before we move on to the bigger picture, the article deserves the specific focus on the example project, called by the Times the "Federal Building", but more properly known as the Nathaniel R. Jones Federal Building and US Courthouse (Youngstown, OH).  

After first glance, the Times article raises more questions than it purports to answer. The article states, "[T]he building is hardly a model of energy efficiency. According to an environmental assessment last year, it did not score high enough to qualify for the Energy Star Label[.]"  A review of the GSA study on its website reveals a few interesting facts that the Times left out of the article:

• The GSA study was of 14 first wave green GSA buildings ; 8 were LEED certified, 2 were LEED registered, one used Green Building Challenge, and three were designed with an emphasis on energy efficiency
• The Federal Building project did not seek any credits for energy efficiency under EA Credit 1. Similarly, the project did not seek points for additional commissioning, measurement and verification, or green power 
• While the Federal Building project did not receive the 75 score required to qualify for Energy Star, it did in fact reach a 58 despite the fact the building did not even try for the energy efficiency credits. Every other GSA project contained in the study qualified for Energy Star

So how did a project that is alleged by the Times to have a "major gas guzzler" of a cooling system reach LEED certification in 2002? A review of the GSA's webpage describing the project, and further discussion at BuildingGreen.com, reveals that the site is a downtown redevelopment of a previously paved site. The project included restoration and planting with native and adapted vegetation and reduction of impervious area by a whopping 58%. The project reduced ozone depletion by use of HFC refrigerants and the fire suppression system includes no halons. Over 72% of project waste was recycled and the project used structural steel with 90% post-consumer recycled content. Over 62% of the project's building materials were manufactured locally.

The New York Times' focus on the Federal Building project does bring a couple of key themes into focus.  First, "green" is not the same to everyone.  Indeed, Build2Sustain has had a fascinating discussion on-going on its blog and also on its various members blogs and twitter accounts comparing use of "green" and use of "sustainable" terminology. The use of loose labels where everyone does not agree on a shared meaning can create misunderstandings. Green does not necessarily mean energy efficient as there are plenty of areas allowing points under LEED that can in fact inhibit energy efficiency.

Second, the project used as the centerpiece of the article was completed in September 2002. LEED has come a long way since then and trying to extrapolate structures that were designed roughly ten years ago and apply that to current conditions may be suspect.

Finally, the USGBC has in fact already taken steps to address these issues. The new LEED 2009 standards incorporate a shift in greater emphasis towards energy efficiency in particular. Further, USGBC is taking steps to require on-going reporting and has indeed discussed using decertification as a means to require on-going compliance. (Please visit Matt Devries' blog for an excellent recap of the commentary that erupted when the decertification discussion first broke several months ago). 

In summation, it appears like the NYT dug and found an example of an old project to raise objections that the USGBC has already been addressing with LEED ... in short, they are perhaps trying to resurrect the Ghost of LEED Past.  In a few days, we will visit with the Ghosts of LEED Present and Future and try to extrapolate where LEED may be heading and what that means in terms of future risk management, contract exposure, and potential economic pitfalls associated with these trends.

Image (Courthouse): by OZinOH

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