Developers

Contracts
When a construction agreement requires that a building satisfy a particular green standard or protocol that has been adopted by a municipal governing body as a precondition to a density enhancement, the failure to meet the requirements of such standard or protocol on the part of the builder may be evidence of negligence (in addition to constituting a breach of contract). Indeed, New Jersey courts have held that although the violation of a statutory duty of care is not usually conclusive on the issue of negligence, it is a circumstance that a jury should consider.

When a builder seeks to enter into a contract for the construction of a high performance building, the builder should take care to set realistic performance goals that are within the builder’s reasonable control and establish a mutually agreeable method for measuring building performance after construction is complete. As such, a builder should never represent in a contract that an energy efficient structure to be constructed by the builder will produce specific energy costs or savings when the truth of such claims is dependent on factors outside of the builder’s control, such as fluctuating utility costs and homeowner use patterns.

Zoning Approvals and Permitability
Although approvals under the Municipal Land Use Law, such as a site plan or variances, are ordinarily not required for the construction of interior tenant fit-out improvements, where changes are made to property and/or the improvements situated thereon to improve energy efficiency or convert to renewable energy land use approvals may be necessary. Fortunately, as a result of amendments to the Municipal Land Use Law in 2009, “a wind, solar or photovoltaic energy facility or structure” shall be deemed to be an inherently beneficial use irrespective of whether such facility or structure constitutes “a principal use, a part of the principal use or an accessory use or structure.” This change in the law should make it easier to obtain approvals for and install alternative energy facilities or structures where they are not permitted under local zoning regulations and require a use variance.

Historical Properties
A developer needs to be especially careful when constructing a new green building within an historic district or within the viewshed of an historic building and when renovating an historic building into an energy-efficient structure. Not only should a developer want to harmonize modern, energy-efficient design with the attributes of an historic building or neighborhood, but a developer may have to do so depending on the circumstances. For example, if a project includes or otherwise impacts a property that is listed on (or is eligible to be listed on) the National Register of Historic Places and requires a federal permit or license or is the recipient of federal funding, it may be subject to review by the State Historic Preservation Office pursuant to Section 106 of the National Historic Preservation Act of 1966. 16 U.S.C. §470(f). Similarly, a developer whose restoration plan for an historic building includes the installation of energy efficient improvements must be certain that design and construction will comply with the Secretary of the Interior’s Standards for Rehabilitation published in the Code of Federal Regulations at 36 C.F.R. § 67.7 and the applicable provisions of the Internal Revenue Code (IRC) if the developer seeks both the rehabilitation tax credit under Section 47 of the IRC and the energy efficient commercial buildings deduction provided by Section 179D of the IRC or the nonbusiness energy property tax credit (for residential dwellings) provided by Section 25C of the IRC.

Landlords/Tenants

The growing interest in the construction and operation of energy-efficient lease spaces has created a demand among both landlords and tenants to rethink how they build out, use and occupy space in commercial buildings. For instance, a landlord may wish to promulgate and memorialize building-wide policies that promote energy conservation measures and to incorporate them into the landlord’s rules and regulations that apply to all tenants. On the other hand, a tenant may seek to require the landlord to provide comprehensive operating and maintenance services that are both energy-efficient and responsive to the tenant’s needs. Special needs may include implementation of a special recycling program, use of specified green cleaning products or adherence to a certain standard of building performance, such as ANSI/ASHRAE 55-2004, Thermal Environmental Conditions for Human Occupancy.

A landlord who has constructed or renovated a building to meet a given green building certification protocol, such as the U.S. Green Building Council’s Leadership in Energy and Environmental Design (LEED) Green Building Rating System, should develop interior fit-out guidelines for incoming tenants to achieve and sustain energy efficiency goals and preserve the integrity of the building. These guidelines might specify, for example, that construction in tenant spaces shall conform to LEED for Commercial Interiors and must be performed by persons on a pre-approved list of green contractors and subcontractors. A landlord might also want to include in the interior fit-out guidelines for the building product and material specifications and a requirement that tenants employ a construction manager who is a LEED accredited professional. In any event, the owner of a green commercial building, who is planning to rent it out, should carefully think though and plan the interior fit-out guidelines.

Green Building Service Providers

Managing risk is crucial for anyone who seeks to construct a high performance building, especially with respect to the attainment of certification under a green building rating system, such as the U.S. Green Building Council’s Leadership in Energy and Environmental Design (LEED) Green Building Rating System, or the receipt of grants or tax credits for the installation of energy-efficient improvements or renewable energy facilities. One way to manage these risks is the proper delegation of tasks to those on the project team with the greatest capacity to perform them successfully. For example, the architect should take responsibility for adjusting project design in the event there are changes in the law relating to energy efficiency or building performance or changes in the standards relating to the applicable green building protocol being utilized by the project owner. Likewise, the architect should be made to pay for compensatory and consequential damages that flow any failure to achieve LEED certification or the loss of financial incentives if either such occurrence is due to design deficiencies or any other act or omission on the part of the architect. However, these and any other type of risk allocation would have to be specified in the contract in order to be enforceable.

In preparing or reviewing an architectural services agreement on behalf of a tenant or landlord for the design of a high performance interior fit-out, it is important to negotiate and settle on a standard of care to which the architect will be subject and then make sure that the architect’s professional liability insurance covers any breach of that standard. Indeed, in designing green tenant improvements an architect may be expected to improve health and energy efficiency through architecture and materials selection and to achieve certification under a particular green building certification protocol, such as the U.S. Green Building Council’s Leadership in Energy and Environmental Design (LEED) Green Building Rating System for Commercial Interiors. However, the architect’s professional insurance policy may not cover the architect’s breach of an elevated or heightened standard of care or a guarantee or warranty related to certification.

Marketing building products and services requires careful thought and planning, especially when the advertising message contains claims that a product or service has particular environmental attributes or will provide special benefits to consumers. The Federal Trade Commission has broad regulatory authority over the advertising of all such goods and services under the Federal Trade Commission Act, 15 U.S.C. § 41 to 15 U.S.C. § 58. Persons and corporate entities that engage in any unfair or deceptive acts or practices in their marketing activities are subject to disciplinary action. The FTC has formulated guidelines for some types of environmental marketing claims through its Guide for the Use of Environmental Marketing Claims, also known as the “Green Guides.” Presently, the Green Guides provide no specific instructions for advertising building products or services. However, on July 15, 2008, in furtherance of the FTC’s periodic review of the Green Guides it held a workshop on the topic of green building and may revise or supplement the Green Guides to include guidance in this area.

Homeowners

A person seeking to achieve certification for an energy-efficient home under a particular green building rating system, such as the U.S. Green Building Council’s Leadership in Energy and Environmental Design (LEED) Green Building Rating System should delegate to a qualified member of the project team the responsibility for assembling, reviewing and managing all required documents and obtaining certification at the desired rating level, as specified in the project manual for the proposed home. The architect is often the best person to carry out these tasks provided that the architect is accredited under the green building rating system selected by project owner.

When contracting to build a high-performance home that is worthy of the label “green,” it is essential for the future homeowner to have someone on the project team who has experience in and understands energy-efficient building materials, appliances and products. This responsibility can be delegated to the architect or a green building products and design consultant working with the architect. Additionally, the homeowner’s contractor, although not a design professional, may be able to advise a homeowner with respect to green building materials, products and appliances. However, whoever the homeowner chooses, at a minimum, should be accredited in a recognized green building certification protocol, such as the U.S. Green Building Council’s Leadership in Energy and Environmental Design (LEED) Green Building Rating System or the National Association of Home Builders’ National Green Building Standard approved by the American National Standards Institute in January 2009.