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Those specializing in construction and development issues gear up for next wrinkle

First LEED lawsuit has attorneys talking

Attorneys specializing in construction and development issues are gearing up for what could be the next big wrinkle in environmental litigation, a trend that EcoHome Magazine says could rival the popular “mold to gold” movement of five years ago.

The nation’s first Leadership in Energy and Environmental Design (LEED)-related lawsuit happened in late 2006 in the City of Crisfield, Md., a popular seafood destination along the Chesapeake Bay.

The developer of the $7.5-million Captain’s Galley restaurant and luxury condominium project was involved in a suit and countersuit with its general contractor. Shaw Development claimed it lost $635,000 in state tax credits after a nine-month delay by Southern Builders cost it the highly anticipated LEED certification.

The U.S. Green Building Council (USGBC), a non-profit organization based in Washington, D.C., started the LEED third-party certification program in 2000, growing it into the leading benchmark for the design, construction and operation of environmentally-friendly, or “green,” buildings in the U.S.

Project managers can register their project online, and during the construction phase must meet a meticulous set of rules in order to get points for the four different LEED levels, namely certification, silver, gold and platinum. Those earth-friendly rules affect everything from the kind of windows that will be installed in the building to the paint on the walls.

Shaw Development v. Southern Builders was eventually settled out of court, but the slowing economy had already taken its toll. Apartment rental fees at the Captain’s Galley were slashed as much as 50 percent, the restaurant closed and Shaw Development was forced to declare Chapter 11 bankruptcy in January to prevent the condominiums from being auctioned off.

“People should be looking out for this problem. It’s a big deal and its not going anywhere,” says Adam Stone, a construction attorney for Watkins Ludlam Winter and Stennis, P.A., in Jackson. “The big lesson from the Maryland case is that a standard American Institute for Architects contract probably doesn’t work on one of these buildings.”

Stone says that with the growing popularity of LEED-certified buildings comes new subsequent risks that will affect developers, building contractors and architects. “If you’re going to spend the amount of money you’re going to need to get LEED certified, then spend the money you need to have a lawyer look at everything to make sure,” he says.

“There needs to be a meeting where the developers decide upfront how many LEED points they need to get and then decide who is responsible for what on the certification process.” Most importantly, Stone says, the project managers need to also define who is financially responsible if the development fails.

In addition to LEED, the USGBC also runs a special training program that allows design and construction professionals to pursue their own certification as an Accredited Professional (AP). While Stone says he is not aware of many lawyers taking this course, he says that every major construction company has people signing up.

“The key to managing any type of risk is taking the situation and trying to allocate as many of those risks ahead of time,” says Shari Shapiro, a LEED AP and environmental attorney in Philadelphia, Pa. Shapiro, who frequently blogs on the subject, says there has been enough professional writing about green litigation that parties should be able to avoid conflicts. “The really important thing is you have to have good contracts,” she says.

“Make sure your teams are responsible in any area where you are trying to get a LEED point,” says Shannon Sentman, a real estate attorney in Washington, D.C., and spokesman for the USGBC, “Know what the local regulations and codes are and be aware that these are politically popular and many statutes can pass legislation really fast.” Sentman adds that having a LEED-certified consultant can help bridge any communication gaps during the project. “They keep their eye on the ball,” he says.

Contact MBJ staff writer/researcher Stephen McDill at stephen.mcdill@msbusiness.com .

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