Protecting your remodeling company from green litigation

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As the green construction and remodeling industry continues to grow, so does the opportunity for litigation. This month we talked to Chris Cheatham, LEED AP, about the latest news on the legal front in green construction.
Cheatham represented contractors, engineers and designers at the largest construction law firm in the country before launching his own practice focused on construction law. He is also the author and creator of the Green Building Law Update Blog [1], which he launched in 2008.

PR: How did you get started writing the blog?
Cheatham: When I was at the large construction law firm, there were 100 of us at the firm, and I looked around and realized I wasn’t any different than anyone. I wanted to make my impact on the law in a different way. I read a lot about green building, new green building projects, heard a lot about the LEED rating system, but I wasn’t hearing a lot about the legal issues stemming from green building projects.
So I started reading about it, researched the topic, took the LEED AP exam and then I started writing a few articles. I realized that the green building issues are changing so often that I wanted a different forum and that’s how I got to the blog.
 

PR: Last fall, there was a class action lawsuit announced against USGBC regarding the LEED system and performance of the buildings. What’s the progress on that and what could the effect be of that case going forward on remodelers and builders?
Cheatham: In early February, the plaintiff, Henry Gifford, filed an amended lawsuit. The case is no longer a class action lawsuit. It now includes four plaintiffs. The allegation is that the USGBC falsely advertised the energy performance of LEED-certified buildings. As a result, the plaintiffs claim they have lost out on business to LEED-accredited professionals and the USGBC.  
I think the lawsuit does bring up a bigger issue that the industry is grappling with and that is building performance. Are these green buildings, are these green homes, performing like they’re supposed to? Are they saving energy? I don’t think that’s something we have a good grasp on yet.

PR: And that’s obviously a big area of concern for our readers — potential litigation based on the performance of a home. Has there been any litigation on the residential side?
Cheatham: There hasn’t been that I’ve seen. But I do think the potential litigation risks increase with a home because of the various state consumer protection acts that protect homeowners. The consumer protection acts protect consumers more than standard laws protect (commercial) building owners.
It’s easier to develop a case under consumer protection act regulations alleging that your building’s not performing like it was supposed to and that there has been some sort of fraud by the contractor.

PR: What can builders and remodelers do to protect themselves in that situation?
Cheatham: First, contractors should avoid guaranteeing energy performance, particularly if the contractor is finishing the project and is not involved in how the home operates.
You never know how the homeowner’s going to use the home. Are they going to open the windows in the middle of the winter and turn on the heater? Are they going to have a computer mainframe installed? It’s just very difficult to anticipate and model how a homeowner is going to use a home and how much energy will be used.
Second, when a contractor installs complicated HVAC systems and technology, the contractor should ensure the owner knows how to use it. Of course, this requires a shift in contract language to account for this activity. From the outset, contractors can suggest  post-occupancy training.

PR: It doesn’t seem like there’s been a lot hitting the national stage in the area of green litigation, even on the commercial side. Are there any other cases that people should be paying attention to?
Cheatham: There isn’t a lot of litigation and that’s a good thing for the construction industry. You just have to really focus on your contract terms and make sure they explain who’s responsible for what parts of green building certification and what technologies are going to be used.

PR: One of the things you’ve been talking about lately on the blog is that builders are starting to challenge green building codes. What kind of impact could that have on the industry?
Cheatham: I think it’s a really interesting development. Challenges to green building codes or rating systems have now occurred in at least three states. In Minnesota, for instance, one builders association is trying to commandeer a green building system through litigation.
I think the challenges are motivated by the economy. A lot of these green building codes were written prior to the economic recession. There’s not as many new construction starts and homeowners do not want to pay a lot of money. They’re expecting good deals when they’re building new or doing renovations. I think you’re seeing the contractors out there questioning these green codes and rating systems because they may add additional costs to construction.  

PR: Any other words of advice for remodelers and builders that are out there trying to build green?
Cheatham: You need to educate yourself as a contractor regarding the owner’s motives. Why does the owner want this green building project? If you understand this motivation, then you can understand how big of a risk you are facing if the project somehow doesn’t meet the green requirements.
Does the homeowner expect better air quality for their children? Does the homeowner think if they have a LEED-certified home they can turn around and flip it for more money? These varying motives create different levels of risk for contractors.
So, understand your owner and educate your owner as you go through the process, so the owner really understands what they’re getting. Don’t just tell your owner that they are getting a LEED-certified home. Inform the owner about what that LEED-certified home should do and what different components are going into that home to make it green. If you educate your homeowner, they’ll expect more than just a green building plaque and I think that’s a good thing for the entire industry.