Within the LEED certification process, legal concerns are notable, although not always at the forefront.  No one interested in “greening” their building is interested in litigation, lawyers, and most of all, the costs that accompany the two.  As a result, in the interests of not sullying a project’s image, the incentives to work issues out at the negotiating table are great. But legal implications in green building are certainly present, especially ones arising out of poor contract drafting.

As general interest in LEED continues to grow, disputes have begun to arise out of standard-form construction contracts that do not contain risk-allocation provisions for LEED certification aspects of the project.  The dispute between Southern Builders and Shaw Development illustrates this scenario perfectly.[1] After Southern Builders, the general contractor, filed a mechanic’s lien against the project, Shaw Development counter-sued claiming $635,000 in damages for lost tax credits because the project failed to achieve LEED Silver certification.  The parties used an American Institute of Architects (AIA) industry-standard agreement that contained the following language regarding project’s green goals:

“Project is designed to comply with a Silver Certification Level according to the U.S. Green Building Council’s Leadership in Energy & Environmental Design (LEED) Rating System, as specified in Division 1 Section LEED Requirements.”

In no other part of the contract did the parties clarify exactly who would be responsible for achieving that level of certification. While the parties eventually settled, the dispute provides a useful lesson in contract drafting and risk management.  As it stands, owners, developers, contractors, sub-contractors, and consultants could be left on the hook with standard form contracts that do not more specifically allocate risk for the parties incorporating LEED certification into the project.[2]