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    Legal and Business Issues of Green Building

    "Green building" - the incorporation of construction practices and standards that maximize human health and economic return and minimize negative environmental consequences - will have wide-ranging impacts on many clients.

    Brian D. Anderson

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    Wisconsin Lawyer
    Vol. 79, No. 8, August 2006

    Legal and Business Issues of Green Building

    "Green building" - the incorporation of construction practices and standards that maximize human health and economic return and minimize negative environmental consequences - will have wide-ranging impacts on many clients.

    green buildingSidebar:

    by Brian D. Anderson

    Disco came and went. Frisbees came and stayed. Though it is difficult to know whether a trend will vanish or take hold, there are clear signs that "green building" is a trend that is here to stay.1 Whether representing builders, architects, engineers, hospitals, nonprofits, manufacturers, banks, or plaintiffs in product liability suits, every Wisconsin lawyer should anticipate and understand green building.

    With significant and favorable recent coverage in the New York Times,2 Vanity Fair,3 and the trade publications of builders and design professionals,4 including the Wisconsin Builders Association,5 green building has acquired an undeniable cachet among groups not always aligned. Even recent plans for the nation's most prominent and controversial building project, the Freedom Tower meant to replace the Twin Towers, call for the construction of a "green giant."6

    Brian AndersonBrian D. Anderson, Maryland 2000, is an attorney with Axley Brynelson LLP, Madison, practicing in real estate, construction, and corporate law and is a member of the firm's Construction and Transportation Practice Group. He gratefully acknowledges the research assistance of firm librarian
    Danielle Goldsmith.

    Many Wisconsin companies are at the forefront of green building construction, construction materials, and consulting,7 and we have seen the construction of many high profile green buildings. Among them are the JohnsonDiversey Global Headquarters in Sturtevant,8 the Johnson Controls Brengel Technology Center in Milwaukee,9 a residence hall at Lawrence University in Appleton,10 a new Home Savings Bank in Madison,11 and Harley-Davidson's Product Development Center expansion in Wauwatosa.12

    More and more, it appears that consumers, home builders, environmentalists, real estate developers, regulators, and architects are ready to champion the cause of an often amorphous set of principles and practices loosely termed "green building." After all, that's where the market appears to be headed.13 According to a recent study conducted by McGraw-Hill and the National Association of Home Builders, the residential green building marketplace alone is expected to grow from $7.4 billion (in 2005) to between $19 and $38 billion by 2010.14

    What is Green Building?

    In large part, defining what is green building depends on who you ask. But some of the recurring buzzwords and phrases are "sustainable," "healthy," "environmentally responsible," and "high performing."

    For a community designer, green building may mean a comprehensive neighborhood building plan that aims to minimize a broad range of negative environmental impacts, such as water runoff, sprawl, and commuting distances, while maximizing energy efficiency and water efficiency.15

    For an architect, green building may mean a design and construction strategy aimed at maximizing the health of building occupants and minimizing negative environmental impacts.16 Such a plan might include energy generation, recycling of rain and waste water, use of nontoxic or recycled building materials, and maximized natural light. For some homebuilders, it may mean building healthy homes (as opposed to "sick" homes) that can be advertised as free from mold and toxic building materials.17

    The best answer, as discussed in detail below, is that "green building" refers to practices having the goal of maximizing human health and economic return while minimizing negative environmental consequences.

    However it is defined, the green building movement is being propelled by forces that include the desire to burnish corporate images and by new "green" building codes, state and federal tax incentives, concern over global warming, rising energy costs, and a desire among builders and design professionals to protect the natural environment while selling an array of sophisticated products and services.

    Paul von Paumgarten, director of energy and environmental affairs with Johnson Controls, has assessed the trend and puts it this way: "Any business in the automotive and building sectors that is not in the process of greening its products is on its way out of business."

    "Green building is not just a passing trend - it has taken hold and is here to stay," says Sonya Newenhouse, president of Madison Environmental Group,18 an award-winning, Madison-based environmental consulting firm that assists businesses and individuals with, among other things, green building strategies.

    According to Newenhouse, "Any attorney who is not at least somewhat conversant with the issues and terminology of green building will be behind the game."

    Toward a Definition of Green Building

    Green building, according to Connie Lindholm of the Milwaukee-based Wisconsin Green Building Alliance, is a concept that defies concise definition. Instead, Lindholm describes green building as a set of practices falling along a continuum of increasingly sophisticated building design choices and material selection, all having the common aim of improved public health and environmental outcomes.

    "Green building can range from someone putting in a water garden in her lawn, to the `straw bale' home and green roof buildings being developed by Julilly Kohler, to the new Johnson Controls Brengel Technology Center in downtown Milwaukee," said Lindholm. Kohler, an attorney, activist, real estate developer, and granddaughter of the Kohler Co. founder, is a successful "green" developer in Milwaukee.19

    The Web site GreenBiz.com, designed to promote environmentally sustainable business ideas and best practices, defines green building even more broadly.20 According to GreenBiz.com, green building includes community planning strategies that decrease traffic, sprawl, demolition and other waste production, and the use of toxic materials, while increasing indoor air quality, water conservation, and energy efficiency.

    Although definitions of green building vary, the United States Green Building Council (USGBC)21 nevertheless has taken the lead in establishing a formalized green building rating system. The USGBC is a private, nonprofit corporation founded in 1993 and claims to have approximately 8,000 member organizations that include builders, architects, academics, engineers, and law firms.22

    Although other rating systems exist, the USGBC has virtually cornered the market on the rating of green commercial buildings. The organization developed the Leadership in Energy and Environmental Design (LEED) rating system, which, according to the USGBC Web site, is "a voluntary, consensus-based national standard for developing high-performance, sustainable buildings."23

    The USGBC's aim in developing the LEED rating system was to improve the well-being of building occupants and the environmental performance and economic return of buildings by employing established and new practices, standards, and technologies.24

    The USGBC has developed or is in the process of developing six LEED rating systems, each geared to specific projects. They are the LEED-NC (for new commercial construction and major renovation projects), the LEED-EB (for existing building operations), the LEED-CI (for commercial interior projects), the LEED-CS (for core and shell projects), the LEED-H (for homes), and the LEED-ND (for neighborhood development).25

    In addition to developing the standards, the USGBC sells educational materials and seminars and administers accreditation programs for design professionals and others (including lawyers) interested in earning a professional accreditation in the application of LEED standards. The USGBC also certifies projects as LEED compliant by obtaining written certifications from project architects stating that design elements meet prescribed LEED goals. The USGBC does not actively inspect buildings.

    The LEED system awards points for achieving a number of environmental and efficiency standards. Projects that obtain the highest number of points under the applicable LEED standard are designated "LEED Platinum." Fewer points merit a LEED Gold or Silver ranking, or simply "LEED certified."

    Many owners of LEED-certified buildings are not shy about proclaiming their green achievements. A Google search of "LEED Platinum" yields approximately 180,000 hits, many of which are press releases from proud building owners and developers touting their USGBC designation.26

    On the residential side of green building, the National Association of Home Builders has emerged as the national leader in green residential standards and certifications.27 In Wisconsin, Green Built Home has emerged as a leading residential green building program that reviews and certifies new homes and remodeling projects for compliance with its sustainable building and energy standards.28

    The Attorney's Role

    What role do attorneys play in green building? The answer depends on who is your client. It is best to begin with an example.

    Your hospital client asks you to attend a board meeting where an architect or design-builder will present its LEED-Platinum new building design for the new hospital wing. The hospital board appears enamored with the design firm claims that the LEED-certified building will result in better patient outcomes, better staff retention and productivity, greater energy efficiency, and a marketing edge over competing hospitals. The hospital's general counsel asks you to act as the board's representative in negotiating a contract with the architect or design-builder, assessing the legal risk involved with seeking the LEED certification, and to report on whether such a green building designation would qualify the hospital for any federal or state grants or tax exemptions.

    To effectively advise the board in assessing the risks and benefits involved with a green building, it is clear that you will have to understand a range of issues involved in the LEED certification process. In order to gain this understanding, counsel should not rely solely on the information provided by the architect, but should seek independent advice from an architecture firm or other LEED-accredited consultant with substantial experience in making a thorough and critical examination of the risks and benefits attendant in similar green building projects.29

    Once you understand the risks and benefits as applicable to your project, you will then have to assess whether the hospital and the design team are adequately equipped to efficiently and effectively deal with the LEED certification process and whether LEED certification is worth the extra expense. Finally, you will need to assess key contractual and risk management issues such as whether, for example, the hospital faces potential liability in making representations about the building's beneficial effects on indoor air quality.

    Or, consider that you are representing an asthmatic doctor in a personal injury suit against a "green" hospital. The doctor left her former position and joined the new hospital because the new hospital represented to her that workers and patients in the LEED-Platinum hospital would suffer a lower incidence of asthma attacks. Your client claims that her asthma worsened in the new hospital. To effectively represent the doctor, you need to decode the LEED certification process and its interaction with HVAC specifications regarding indoor air quality in order to build a potential case against the hospital, the design-build firm, or other parties.

    Finally, consider that you represent the architecture firm with respect to the hospital project. Ujjval Vyas,30 a former architecture professor and now an attorney with Foran, Glennon, Palandech & Ponzi, Chicago, who focuses on green building issues, says that to effectively advise the design professional, an attorney must understand the mechanics of the LEED certification process and develop a "proactive risk strategy."31

    The risk strategy should include creating clearly articulated performance expectations between the architect and the owner. Specifically, the architect should review with its counsel and the owner the contract regarding the scope of services and be sure that any reference to the anticipated level of LEED certification is not "phrased in a way that might be interpreted as a performance specification."32

    In addition, Vyas urges careful review of any certification documents submitted by the design professional to the USGBC pursuant to a LEED certification. Some required certification documents have language that could easily be interpreted as providing warranties or guaranties of performance. According to Vyas, such a warranty could vitiate coverage under many professional liability insurance policies, depending on how the policy defines "professional services."33

    An attorney representing a developer or property owner also should be aware of certain state and federal tax credits associated with green buildings. Many states, but not Wisconsin, have enacted tax credit provisions based on achieving standards modeled on LEED.34 Attorneys should exercise caution regarding any performance verification requirements that might later void a tax benefit if the building fails to perform as represented to the tax authority.

    Whether representing the hospital, the doctor, or the design professional in the above examples, an attorney versed in the legal risks, benefits, procedures, and tax consequences involved with constructing a green building or having it LEED certified can deliver valuable advice to a client. One way for attorneys to gain LEED expertise is the USGBC professional accreditation program.35 The USGBC offers a series of classroom and Internet-based classes that culminate in the professional accreditation exam. People who pass the exam are awarded the accreditation.

    Green Building in Wisconsin

    Wisconsin is a leader in the green building movement. The state is home to many of the nation's key green building visionaries, academics, product manufacturers, design professionals, and building projects. Recent action by Gov. Doyle indicates a trend toward green building in state-financed projects. Wisconsin lawyers have ready access to some of the most knowledgeable green building professionals in the world and the opportunity to expand the reach of their practice into a growing and dynamic field.

    Johnson Controls, a public company based in Milwaukee and well-known for its building and automobile interior climate control systems, has emerged as an international innovator in green building.36 Not only has the company recently completed construction of its own green facility in Milwaukee, but it recently completed a green building project in China37 and appears likely to receive a contract to establish more than 400 additional green structures there. The company also has created software designed to automate the LEED certification process.38

    Johnson Controls' von Paumgarten is a key figure in the green building movement. He served on the board of the USGBC and helped create the LEED standards. Michael Arny of Madison's Leonardo Academy also served on the USGBC board and was instrumental in guiding the development of the LEED standards. Arny currently chairs the USGBC LEED-Existing Buildings committee.

    Gov. Doyle recently took steps toward requiring Wisconsin state buildings to comply with a number of LEED-like requirements. On April 11, 2006, Doyle signed Executive Order 145 Relating to Conserve Wisconsin and the Creation of High Performance Green Building Standards and Energy Conservation for State Facilities and Operations.39 Although the order does not require LEED certification for state-owned facilities, it does contain minimum performance standards based on LEED tools and approaches, as well as measurement and reporting requirements.

    The city of Milwaukee is actively engaged in promoting green building. It has created the Milwaukee Green Team, a group of business leaders, government officials, and citizens, to promote green building and other green initiatives. According to the city's Web site, qualifying green building projects may be entitled to an expedited permitting process.40

    Finally, networking with educators, builders, real estate developers, design professionals, attorneys, and others involved with green building recently got a lot easier in three Wisconsin cities. Greendrinks.org is a worldwide organization that brings together people interested in green building and its practices. The times and venues for each Wisconsin meeting are listed below:

    • Green Bay: The third Thursday of every month at 6 p.m. at the Kavarna, 112 South Broadway.
    • Madison: The first Wednesday of every month at 5 p.m. at the Flatiron Tavern, 102 King Street.
    • Milwaukee: The third Wednesday of every month at 5 p.m. at the Palms on Broadway, 221 North Broadway.

    Conclusion

    With its roots in Wisconsin, a growing national profile, and emerging contractual, insurance, tax, and legislative implications, green building is a trend that is likely to impact many lawyers' practices. Lawyers' ability to identify the issues, and to critically assess attendant risks and benefits, can provide a substantial benefit to clients.

    Endnotes

    1See, e.g., Christopher Klein, ed., 2005 AEC Industry Outlook: Strategy and Insight for Design and Construction Firms, Zweig Market Intelligence Reports for Design and Construction Firms 22 (2004); and Materials for New York City Green Building Competition (PDF 48K); and Materials for the National Building Museum Exhibit on Green Building in Washington, D.C. <>.

    2See, e.g., Johnathan D. Glater, `Greenwash': A Way to Say Hogwash, N.Y. Times, May 17, 2006.

    3See, e.g., Editorial Staff, The Re-Inventors: Green Architects and Designers, Vanity Fair 190 (May 2006).

    4See, e.g., Ujjval Vyas, Delivering Green Buildings: Taking Off the Rose Colored Glasses, 10 Licensed Architect 1, 24 (2006).

    5Nikki Brand, The Future of Green is Rosy, Badger Builder, July/August 2006, at 15.

    6See John Gartner, Freedom Tower Will be Green Giant (Sept. 15, 2004).

    7See, e.g., Wisconsin Green Building Alliance directory.

    8See description <www.usgbc.org/docs/LEEDdocs/JohnsonDiversey_Case_study.pdf (PDF 656K)>.

    9See description <www.johnsoncontrols.com>.

    10See description <www.wgba.orgl>.

    11See Genie Campbell, It's Not Easy Being Green, but this Bank Accepts the Challenge, Capital Region Bus. J. Home Savings Bank in Madison "is one of the first banks in the nation to offer mortgage-rate incentives for buying a certified Green Built home." Marv Balousek, Rate Deals for Green Built Homes, Wis. State J.

    12See www.aisc.org.

    13See, e.g., Study: Green Building Market Poised to Take Off.

    14See McGraw-Hill/NAHB Survey Says Number of Green Home Builders to Increase by 30% in 2006 (June 6, 2006).

    15See, e.g., USGBC LEED standards.

    16See, e.g., USGBC LEED standards.

    17See, e.g., Dana Dugen, Green Building Trend Hits Home, Idaho Mountain Express.

    18www.madisonenvironmental.com.

    19See Todd Beamon, Building Homes With a Purpose, Bus. J., Sept. 16, 2005.

    20Seewww.greenerbuildings.com.

    21The United States Green Building Council.

    22www.usgbc.org/DisplayPage.aspx?CategoryID=2.

    23www.usgbc.org/leed.

    24For a discussion of the LEED rating system and an analysis of its environmental versus financial benefits, see Stephen T. Del Percio, The Skyscraper, Green Design, & the LEED Green Building Rating System: The Creation of Uniform Sustainable Standards for the 21st Century or the Perpetuation of an Architectural Fiction?, 28 Environs Envtl. L. & Pol'y J. 117 (Fall 2004).

    25Id.

    26For a compendium of LEED buildings by certification level and location, see, e.g., www.fundinggreenbuildings.com.

    27See www.nahb.org/page.aspx/category/sectionID=222.

    28Green Built Home is sponsored by the Madison Area Builders Association. Green Built Home promotes green building practices with its new home and remodeling green certification programs.

    29The USBGC's searchable database

    30Attorney Vyas' profile.

    31Ujjval Vyas, Delivering Green Buildings: Taking Off the Rose Colored Glasses, Licensed Architect 1, at 24 (2006).

    32Id. at 25.

    33Id.

    34A summary of tax incentives available to green building projects.

    35www.usgbc.org/DisplayPage.aspx?CMSPageID=69.

    36Johnson Controls Web site.

    37See press release.

    38See press release.

    39www.wisgov.state.wi.us.

    40www.city.milwaukee.gov/.

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