The sudden popularity of all things green is exposing builders
— whether they know it or not — to new legal
risks. There are risks associated with drafting the contract,
navigating the permit approval process, and resolving disputes
over projects that fail to achieve their sustainability
As a builder, your main line of defense is a well-written
contract — one that spells out what the project is
trying to achieve and who is responsible for achieving it.
These are important parts of the agreement and need to be
negotiated in advance during frank discussions among the
architect, the contractor, and the client.
It’s not enough to say the project will be green
— the contract must specify the particular standard
you want to meet. This could be LEED, GreenPoint Rated, NAHB
Green, or some other standard that you and the clients
In some cases, owners are planning to get tax credits or other
financial incentives for building green. It’s
important to know which incentives they’re considering
because the government may mandate a particular standard. For
example, some municipalities require LEED certification or the
equivalent to qualify for tax credits.
Who Handles the Paperwork?
There is a formal process for receiving a green certification.
To obtain LEED certification, for instance, someone associated
with the project must pay a fee and submit a specific set of
documents to the U.S. Green Building Council. The construction
contract should specify who will pay the fee and who will
handle the paperwork.
Typically, the owner is responsible for paying the fee and the
designer or the builder is responsible for filing the
paperwork. But these are not hard and fast rules, so if you do
not intend to be responsible for the fee or the paperwork, you
need to establish that up front with the owner and make sure
that it’s noted in the contract.
Be Careful What You Promise
Be very cautious about the language you use when discussing or
drafting contracts for green building projects. Make it clear
to the client that you do not “guarantee” or
“warranty” that the project will achieve a
As an example of what can happen when the contract is not
clear on this point, consider the recent case of Shaw
Development vs. Southern Builders, a lawsuit involving the
construction of a luxury condo development. Southern Builders
signed a contract that said it would construct an
environmentally sound “green building” in
conformance with a “Silver certification level
according to the USGBC’s LEED rating
The developer was counting on getting a tax credit from the
state — a credit that required the project to be LEED
Silver certified. When the projected failed to receive the
necessary certification, the developer sued the builder.
Although the suit was settled out of court, it was clear that
the contract language had been a problem.
The builder would have had a much stronger case if the
contract had said he would “seek” or
“aim for” a LEED Silver certification. Saying
that a project will “conform” to a particular
green building standard implies a guarantee to achieve
New Materials and Methods
The designers and builders of green projects are sometimes
asked to use materials and methods that don’t yet have
a track record in the construction industry. You certainly
don’t want to refuse to use them — but you
may want to consider getting an explicit waiver from the client
acknowledging the risks associated with using untried
Trade contractors. Since subcontractors may play a
significant role in achieving green certification for the
project, make sure they are on board with the green building
process. For example, the hvac contractor may need to provide a
certain amount of air exchange or have the system tested to
prove that it performs to a particular standard. The painter
might have to use different products than he is accustomed to.
And everyone on site may be required to separate waste
materials so they can be recycled.
Whatever the exact requirements for green certification, you
need to reference them in your subcontracts so the subs know
what they have to do and are legally responsible for doing it.
As a matter of good business practice, you should remind them
that this is a green building project and that there will be
certain things they have to do on this job that they
don’t do on others.
Green building regulations are being enacted all over the
country, sometimes as local ordinances and sometimes as part of
the state code. As with anything in the building codes, you the
builder are responsible for knowing and complying with the
This part of the law is changing rapidly. Consider going over
your contract with an attorney to make sure it allocates
responsibility for complying with the green building
regulations that apply where you build. For instance, large
projects may be required to undergo energy modeling or
commissioning, which is the process of verifying the
performance of the building. These services are expensive, and
you need to make sure that the contract specifies who will pay
Shari Shapiro, a LEED Accredited Professional, is an
attorney at Obermayer Rebmann Maxwell & Hippel in