LEED certified and other green building certification measures are in place in a growing number of areas. Along with this growth, there is the potential for a corresponding increase in disputes and litigation against green developers, owner, builders and manufacturers. However, green building legal liabilities are no different than other contract disputes and rulings will generally be made based upon interpretation of current common law and statutory laws.
As with any project, LEED green building developers must assess the potential for legal risks regarding potential buyers and tenants. Failure to satisfy these individuals could result in claims ranging from breaching express warranties, habitability and other similar warranties. In addition, developers can face tort claims based on intentional or negligent construction and/or negligent misrepresentation. In order to add a level of protection against claims from consumers, developers should aim to diminish their exposure through contractural agreement.
One way that developers put themselves at risk of litigation is by over-promising and under-delivering. The implication of promises, or the actual promise, of attaining an extremely high level LEED Certification and then not achieving it can land a developer in court. One example of this the Colorado case of Keefe v. Base Village Owner LLC.
In this case, the developer allegedly claimed that its new residential condominium project would be LEED certified. In addition, he assured the public that the entire “Base Village” would become a LEED certified neighborhood. The condominium project failed to achieve LEED certification and the developer settled with the claimants.
Consumers are not the only ones that can win a liability suit if promises are not kept with regards to achieving LEED certification. One such case is of Destiny USA which is a large development of a commercial mall structure in Syracuse, New York.
The developer used limited tax-exempt “green bonds” program for private projects which were obtained based on promises to incorporate sustainability. He failed to provide the sustainable features that were the very foundation of the bonds being issued in the first place and claimed that the market conditions had changed and he could not comply. In this developer’s case, the IRS decided that the initial promise to enact the sustainability features was enough to hold up the tax-exempt status of the bonds in question. He utterly avoided incremental debt service liabilities on the entire $228 million bond issuance equaling tens of millions of dollars.
Other liability risks involve what is been called, ‘greenwashing’, which refers to marketing practices that tout a product using labels like ‘certified’, ‘green,’ ‘sustainable’ and ‘eco-friendly’ without any substantiation. New environmental marketing regulations say that sustainability advertising has to have reliable, competent evidence to support the claims. Anything less will be considered deceptive advertising practices.
Some experts are recommending that developers do not use any third party environmental certifications in their marketing campaigns. This is especially true if there may be any implication that there can be widespread environmental benefits that are not yet demonstrable. Marketing the fact that an LEED certification goal has or will be met isn’t necessarily a safe legal course. What developers may find is that public expectations of LEED certification benefits may outweigh the reality of what can be delivered.
Litigation referring to the economic benefits and green-performance of LEED projects will continue to arise as the industry experiences growth. Over-promising, failure to achieve LEED certification goals and consumer litigation threats loom over green building developers and owners on a scale that hasn’t been seen before. It is important for these professionals to learn how to manage and diminish their risks in this ever-evolving industry.
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