The construction of green buildings has been, and will continue to be, an emerging topic in the construction industry. Builders understand not only the importance of green buildings to the environment, but also the financial benefits they can bring. Green buildings sell faster and for higher prices. Buyers appreciate the lower maintenance costs, improved air quality and environmental considerations.
In Canada, a building’s “greenness” is generally measured through “LEED” (Leadership in Energy and Environmental Design) , a third-party classification system based on five different categories: Sustainable Sites, Water Efficiency, Energy and Atmosphere, Material and Resources, and Indoor Environmental Quality. A sixth category, Innovation in Design, addresses other factors not covered under the five main environmental categories. Bonus points are also awarded regionally, depending on location design and local construction practices. In Canada, the responsibility for administering the LEED certification falls on the Canadian Green Building Council (CaGBC). According to the CaGBC’s website, the classification systems are, “[b]ased on existing and proven technology, they evaluate environmental performance from a whole building perspective over a building’s life cycle, providing a definitive standard for what constitutes a green building in design, construction and operation”. In an assessment, points are given for LEED credits, and buildings can then be classified as either Certified, Silver, Gold or Platinum.
From a legal perspective, construction projects seeking LEED certification can be vulnerable to litigation. While still rare, lawyers have suggested that “LEED-igation” will only heat up as more and more green buildings are constructed, especially if (or when) projects are delayed because of the builder’s failure to obtain the desired LEED rating. In the US, the first known LEED-igation case was in Maryland, in Southern Builders Inc. v. Shaw Development. In that case, a condominium project was completed late, which prompted the developer to withhold payment from the builder, which in turn prompted the builder to register a lien. As part of its defence to the lien, the developer argued that the builder failed to construct the building in accordance with LEED specifications, causing the developer to forfeit a significant sum of state tax credits. The case settled, and we therefore do not have the benefit of a judgment on this case, but research has shown that one of the main issues in the case was who, as between the developer and builder, was responsible for obtaining the LEED certification. It appears that the contract failed to allocate clearly that responsibility.
In Canada, there have been no reported decisions on this issue, but at least one lawsuit has been filed by a disgruntled group of condominium buyers in Ontario alleging, among other things, that the builder failed to construct the building in accordance with the LEED-related promises it outlined in its marketing material. The writer will keep readers posted on any developments.
As LEED-rated construction projects rise, so too will the risks of litigation. As always, builders can minimize risk by using contracts that outline and define the specific LEED rating they intend to obtain (and ensuring that they do, in fact, obtain it!) and by delineating in their contracts who is responsible for, and the procedure involved in, obtaining certification.
A condensed version of this article was published in the January 2012 edition of the Kingston Home Builders Association Newsletter.
