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ASA general counsel: Green construction poses legal risks for contractors

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Sustainable buildings may save owners green in the long run, but construction of efficient buildings puts contractors at greater risk than conventional buildings, said Donald Gregory, general counsel for the American Subcontractors Association Inc. during the group’s national convention.

Green building construction practices have become mainstream only recently, and thus little legal precedent exists, Gregory said.

“We don’t have a lot of answers, but we certainly know what the questions are,” he said.

An estimated 25 percent of green buildings do not live up to design predictions for Leadership in Energy Efficiency Design (LEED) ratings under the U.S. Green Building Council and energy efficiency. When expectations for reaching a green status in a timely matter, achieving energy savings, satisfying code and securing tax credits and avoiding increased costs and delays are not met, contractors can be sued for “consequential damages,” Gregory said.

To avoid litigation, Gregory recommends contractors include a waiver of consequential damages in contracts, and condition their green obligations on good faith effort. Contractors should also reserve the right for an extension if green materials are delayed or unavailable. It is not uncommon for contractors seeking LEED certification to have a single supplier that meets the locally sourced requirement for a particular material.

Contractors should also educate customers about reasonable expectations of the project’s outcome, Gregory said. A building will not perform to its efficiency standards if the owner leaves the windows open or does not replace the HVAC system filters.

“You don’t want to guarantee the end result,” Gregory said.

Lack of understanding of green buildings is also becoming a major issue, due to recently revised LEED standards. Owners must now share data related to energy consumption with the U.S. Green Building Council for five years after a project’s completion, Gregory said.

Contractors should negotiate such matters with a prospective customer and insist the contract include Consensus Docs 310, the “Green Building Addendum & Waiver of Consequential Damages,” and the American Institute of Architects form AIA B214, he said.

While private sector contracts usually can be amended as such, public sector jobs cannot be negotiated, said Gregory.

Contractors may also find it useful to appoint a building facilitator to manage and coordinate the various players to ensure the building achieves certification. That person should be solely responsible for the building achieving energy efficiency goals.

Legal issues aside, Gregory urged contractors to prepare their businesses for green projects regardless of their personal feelings about it.

“Whether you buy into it or you don’t, it’s definitely here to stay,” Gregory said. “It’s definitely going to be an important force in our industry.”

Green building indicators are up. As of June 2009, the U.S. Green Building Council listed 24,769 projects registered for LEED certification and just 3,111 certified completed buildings. By 2015, Gregory estimated 50 percent of the nonresidential market will consist of green buildings.

“If you’re setting yourself up for green construction, you’re going to be at a significant advantage over the competition,” he said.

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