Risks in designing for LEED certification

“Green” building is a hot topic for construction professionals, and the coveted LEED certification (Leadership in Energy and Environmental Design) is the gold standard in demonstrating a commitment to environmentally friendly building.

According to the US Green Building Council which developed the LEED system, LEED is an internationally recognized green building certification system, providing third-party verification that a building or community was designed and built using strategies aimed at improving performance across all the metrics that matter most: energy savings, water efficiency, CO2 emissions reduction, improved indoor environmental quality, and stewardship of resources and sensitivity to their impacts,”

Because LEED certification is relatively new, the legal implications of designing to obtain a specific LEED certification are still being hammered out. Potential risk in designing to a specific LEED standard is the failure of a building, once built, to meet the green criteria it was supposed to meet.

Case in point: Charlotte’s ImaginOn, a Children’s Theatre and Public Library facility. Designed as one of Charlotte’s first LEED buildings, ImaginOn is not meeting the green requirements it was designed to meet. This is due, in large part, to the popularity of the Center, which has led to an increase in operating hours and, of course, associated energy costs.

As noted in the Charlotte Observer, “the episode illustrates gaps between energy-saving potential and actual performance.”

Whether or not the increased hours should be considered as foreseeable, questions remain. Should such a situation be considered a breach of warranty? A changed condition? Or a little of each?

Until these matters get resolved in the Courts, it is wise practice to design with LEED goals but not certification or performance guarantees. All parties should recognize that circumstances may change which will prevent LEED certification or which will in other ways limit or eliminate any energy efficiencies which are anticipated.

Update:  For more risks in designing for LEED certification, check out my post: Legal risks in designing a Construction project for LEED certification (take 2)


Failure to Coordinate in Design-Bid-Build case costly mistake

In a recent Business Court decision, an architecture firm was hit with a $2.3+ million judgment stemming from the design and construction of the kitchen exhaust and HVAC ductwork systems in the Charlotte Bobcats Arena.

The project was a “fast track” project, and the architecture firm claimed they were only contracted to provide diagrammatical drawings of the arena’s ductwork system. Subcontractors on the project sued for their cost to perform extra work to remedy alleged design deficiencies. Post-trial relief is currently being sought by the architectural firm (including a motion for judgment notwithstanding the verdict, a new trial, or a new trial on the damages issue).

Whether or not such post-trial motions are granted, however, the case raises the very real issue as to architectural responsibility versus contractor coordination responsibility, especially in fast-track projects. This case highlights the risks to architects in failing to make their responsibilities and contractual limitations explicitly clear to both owners and contractors. The case also highlights the need to explicitly review shop drawings for coordination issues that might be present.

The case is Hunt Construction Group Inc. et al. v. City of Charlotte, North Carolina, and Ellerbe Becket Inc., case number 08-11915, in the Mecklenburg County Superior Court.

Exceptions to the Economic Loss Rule

As discussed in my last post, there are exceptions to the economic loss rule which will allow you to recover under for your damages (that is, your “injury”) under a negligence theory, even though you have a contract with the other party which may otherwise limit your recovery.

The four exceptions are:

(1) The injury is to a person or property of someone other than the promisee;

(2) The injury is to property of the promisee other than the property which was the subject of the contract, or was a personal injury to the promisee;

(3) The injury to the property is one in which the promisor is charged by law, as a matter of public policy, with the duty to use care in the safeguarding, as in the case of a common carrier, an innkeeper or other bailee.

(4) The injury was intentional on the part of the promisor, or was a conversion of the property by the promisor.

These are generally called the Ports Authority exceptions to the economic loss rule. Ports Authority v. Fry Roofing Co., 294 N.C. 73, 81, 240 S.E.2d 345 (1978), rejected in part on other grounds, Trustees of Rowan Tech. v. Hammond Assoc., Inc., 313 N.C. 230, 242, 328 S.E.2d 274, 281 (1985).

Be aware that if one of these exceptions does not apply, the economic loss rule may bar any negligence action, including an action for contribution or indemnity.

For example, where the owner sues the general contractor for construction issues, the general contractor cannot bring a contribution or indemnity action against his subcontractors, as there is a contract between them and only contractual remedies will apply. Kaleel Builders, Inc. v. Ashby, 161 N.C.App. 34, 42, 587 S.E.2d 470, 476 (2003).

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