When green building and LEED certification became a growing trend, many assumed that litigation related to these trends would grow as well. In fact, there have been few reported cases to date arising specifically from green building and LEED certification issues. One area of major concern has been what happens if a building fails to achieve the owner’s desired level of certification? Does the design professional, contractor, or LEED consultant bear any liability for the owner’s losses (tax credits, financing, property value) resulting from the failure to achieve the desired certification?
In what is considered the first green building lawsuit, Southern Builders, Inc. v. Shaw Development, LLC, Case No. 119-C-07-01145 (Circuit Court of Somerset County, Md. 2006), the owner desired to achieve LEED Silver certification in order to receive more than $600,000 in state green building tax credits. The contractor filed a mechanics’ lien against the project. In its counterclaim, the owner alleged that the contractor was responsible for the loss of the state tax credits due to failure to achieve the certification. Unfortunately for legal analysts, the case settled out of court. Nevertheless, the case serves as a reminder that there are many risk allocation issues present in green building projects that may not be receiving the necessary attention from the parties and their lawyers. The risk of failing to achieve a desired level of certification is certainly at the top of that list.
As reported by Chris Cheatham in his Green Building Law Update, Shaw’s condo project has fallen on hard times. Of course, condo sales have been in a slump across the country, but how much of the project’s demise was a result of the failure to achieve LEED Silver and the resulting loss of tax credits?