Green Building & Environmental Trends : Green Building & Construction LEED AP Consulting : Rich Cartlidge : Environmental Trends, Urban Development

     Green buildings are unique in many ways but share one common trait with traditionally constructed buildings, without tenants they are of little use to their owners. With tenants comes the need for leases and with green buildings a green lease is a necessity. A green lease is needed from the owner's perspective to ensure that their investment is protected and from the tenant's perspective to ensure that the owner constructs and operates the building in a manner that ensures energy efficiency. Traditionally there have been two types of leases used in the leasing of commercial property, triple net leases and gross leases. A triple net lease is a lease where the tenant pays their monthly base rent, a portion of the building's energy costs, real estate taxes and insurance costs proportionate to their percentage occupancy of the building, and their proportionate share of the buildings public area maintenance. A triple net lease provides no incentive to the owner to increase energy efficiency as the tenants are already paying these costs. On the other hand a gross lease where the tenant pays a monthly rent which covers the tenants insurance, real estate taxes, and public area maintenance.

     In buildings which utilize a gross lease the owner would be well advised to take measures to increase the buildings energy efficiency as they will directly benefit from any savings. However, owners continue to fight measures such as those proposed by New York City which would require energy efficiency increases.

So what exactly should a green lease address? The following list while by no means exhaustive provides a good starting point for owners considering implementing green leases:

1. Require tenants to use energy efficient lighting fixtures which include occupant sensors and not to override these sensors if installed by the owner.
2. Require tenants to use low flow fixtures to reduce water use.
3. Permit entry by the owner's agents to monitor building systems on an ongoing basis to ensure that they are operating at their highest possible efficiencies.
4. Require tenants to utilize low Volatile Organic Compound (VOC) paints, adhesives, and cleaning supplies to ensure the highest possible indoor air quality.
5. Implement waste management policies which incorporate recycling programs to minimize the amount of waste sent to landfills.
6. Require that any tenant build-outs are conducted in a manner which will permit upgrading of building systems in the future if more energy efficient systems become available.
7. Ensure that provisions are in place which clarify what the owner's and tenants rights and cost burdens will be if energy efficiency measures are implemented in the future which either interfere with the tenant's use and enjoyment of the building or which require large capital expenditures by the owner but which pass tangible financial benefits onto the tenant.
8. A clause which allows the owner to terminate the lease if the tenant's use of the building is inconsistent with its design as a sustainable building.

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Several months ago my friend Shari Shapiro wrote a blog post Green Building Litigation--Whither the Lawsuits? Now many builders across the nation are wondering whither the green? An article by the Wall Street Journal, Green Builders Await the Green sheds light on a problem that those of us involved in the green building industry have been acutely aware of for some time...the government is dragging its feet on disbursing the green earmarked for green projects. The General Services Administration was allocated 5.5 Billion dollars under the American Recovery and Reinvestment Act, 2 Billion dollars of which was supposed to be distributed by the end of 2009. Now only two weeks away from the end of the year only 1.5 Billion of that 2 Billion dollars has been distributed! Even more striking, only 89 million dollars has been paid out thus far! So what exactly is taking so long for the green to reach the pipeline?

Are you a contractor who is vying for a part of the 4 Billion dollars that have yet to be allocated? Will 2010 see an explosion of green growth as project currently in the planning stage progress to construction? Will 2010 be the year of green litigation?

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Recently here at GBET we have been discussing green building and the economy and more specifically green building and ROI. As an advisory board member of Build2Sustain I am very hopeful that green building will continue to prosper through increased transparency. A recent article posted on Reuters and published by GreenBiz focuses on a report released by Rob Watson. The report makes several interesting findings which if accurate are truly exciting and emphasize the need for attorneys, contractors, and developers to begin participating in green projects before they are left behind. Among the key findings of the report:

The estimate of reduced vehicle miles traveled (VMT) has grown to 780 million VMT to date versus 400 million in 2008. By 2030, the annual gasoline savings are expected to equal current U.S. imports from the Middle East.

• Total water savings from LEED through 2009 is estimated at 15 billion gallons, comprising 0.5% of annual non-residential water use. By 2030, LEED results in nearly 1.3 trillion gallons of saved water, equivalent to 30% of current annual non-residential water use.

• Annual carbon dioxide savings from LEED buildings is approximately 2.9 million tons from energy efficiency and renewables, a figure that is expected to grow to 130 million tons per year by 2020 and almost 320 million tons annually by 2030.

• Based on average materials costs, green building materials represented approximately $7 billion in cumulative spending through 2009, which is expected to reach a cumulative $230 billion by 2030. Moreover, the embodied energy in buildings that are renovated instead of demolished is expected to save as much energy in 2030 as we import this year from Saudi Arabia. In addition, an average of over 60% of construction and demolition waste was diverted from LEED projects, totaling 25 million tons to date.

• An average of at least 580,000 employees are currently enjoying improved indoor environments in LEED buildings at present, and the "green building workforce" is expected to approach 29 million by 2020 and almost 64 million by 2030. The productivity benefits from LEED buildings to date range from $230 to $450 million.

 

As the United States continues to participate in climate change discussions and to contemplate implementing a carbon trading system through legislative efforts in Washington the estimated carbon dioxide savings from a green building could become even more important in the future. If you are not currently participating in green projects I encourage you to do so. Further, if you are afraid of participating in green projects I would love to hear your reasons.

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This week The National Business Review, a New Zealand publication, ran an interesting piece regarding sustainable buildings and their impact on a company's bottom line. The article which focuses on Green Star rated buildings which are certified by the New Zealand Green Building Council raised several interesting points which green building advocates here in the United States and particularly those who have been following the underperformance of LEED certified buildings are well too aware:

Eighty percent of people believe sustainability is important but only 10% believe they fully understand what it means

Companies have a fear of short term underperformance, and how they will tell their investors in three, six or twelve months that they haven’t met the targets for those periods. But what about in three, six or 12 years – then how would they tell investors they lost larger amounts of money because of not making long term sustainable decisions?

Green buildings might cost more upfront but the evidence suggests that in the long term they will help companies save money and add to their bottom lines. In today's economy it is all too easy to look at short term capital expenditures and to lose view of the bigger picture and the potential for long-term ROI. What are you doing to help individuals understand what sustainability means and to show them the potential for long term ROI?

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According to an article in the Baltimore Sun the outlook for green buildings in our current economy is perhaps not as dreary as many fear. Enterprise a Columbia, Maryland based affordable-housing financier has revealed they intend to spend more than $4 Billion on the green construction and renovation of affordable homes. The article had several interesting quotes:

The utility savings alone -- an average of about $4,850 over the lifetime of a residence -- are more than the about $4,500 it takes to comply with Enterprise's green-building criteria, the group said. Enterprise leaders launched a green-building initiative five years ago to encourage such work and has been studying the results.

"This is the right direction," said Dana Bourland, vice president of Enterprise's green initiative. "Not only are there financial savings, but there are health benefits and lower carbon emissions. ... We just can't afford not to make sure everything we do its green."

What is particularly interesting about these quotes is the fact that Enterprise has been studying the results of their green building initiative for five years and believes that the results merit a truly impressive investment. What is equally interesting is that there is no mention of a green certification but rather what appears to be a homegrown green-building criteria. Is green building stripped of its fancy labels and certification the wave of the future? Will it be affordable housing which provides the data to demonstrate that green building makes financial sense?

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We all know that the economy is in bad shape and that the prospective for new construction starts is dim. So what exactly does this mean for the future of green building here in the United States and across the world? Here in the United States there is an increasing trend towards being "greener" and more eco-conscious, which means that many individuals are willing to pay a premium for green features. This willingness of American consumers to pay a premium for green design and construction means that builders have an incentive to build these types of structures. However, a recent article in an Israeli paper Haaretz suggests that green buildings do not carry the same premium abroad.

"I don't want to be the one to tell you," said one apartment purchaser on an Internet forum, "but as someone who has already bought an apartment in the Kfar Sava Hayeroka neighborhood ("Green Kfar Sava"), and I believe I represent the opinion of 90% of the purchasers, it doesn't matter if there is special garbage collection or solar-powered lighting. The reason people buy in the neighborhood when it comes down to it is location, prestige and a good price. You won't find 'greens' among us."

"A contractor would prefer to build a large, spacious lobby or a pool in the building, so the benefit from an upgrade will be visible and the customer will pay accordingly," said Yisrael Kurtz, an urban economic consultant specializing in eco-friendly construction who is also one of the managers of Geo-Green, a subsidiary of the Geocartography Knowledge Group polling and research firm. "In eco-friendly construction, the contractor doesn't know what he will get out of it and if he can charge more, which is a major hurdle for builders in Israel and abroad."

"Currently there is uncertainty and ignorance among contractors and consumers on the subject," Kurtz said. "Therefore it is impossible to conclusively determine the value of a 'green' apartment in Israel. At the Kfar Sava Yeroka project, for example, the apartments are selling for 10% more than second-hand units in the center of the city, but it's possible the higher prices are not the result of 'green' construction but because of high demand for the location and for the project as a result of the lack of new projects in the city."

 What I found most interesting is the fact that the article suggests that consumers and contractors are ignorant on the subject of green building. As much as I criticize LEED and the USGBC for their lack of leadership on the energy performance front they have done a greater good for the green building movement here in the United States by educating the public and the building trades about the benefits of green building.

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Poorly performing buildings are perhaps the greatest threat to green building certification systems such as LEED. In an effort to combat these poorly performing buildings a new danger is being created.The USGBC wants to tackle poorly performing buildings by increasing the amount of data available and as part of that goal has laid out their  plan for doing so here.(PDF) LEED is certainly moving in the right direction by seeking to make more data available in regards to building's performance. However,  a building labeling system such as that being floated by both the USGBC and as part of the Waxman-Markey Climate Bill could derail the momentum of the green building movement and spur litigation.

To be effective a green building labeling system must cover ALL buildings and not just the newer, LEED certified buildings. Whether this label is an actual physical label attached to the building or a "virtual" label where information is stored online and made accessible over the web remains to be seen. A physical label would be less susceptible to fraud but also raise the potential for discrimination.

Preston over at Jetson Green summarized the framework for a labeling system under the the Waxman-Markey Bill as follow:

• The Administrator of the EPA shall create the labeling program to apply to both the residential and commercial markets. 
• The purpose of the labeling program is two-fold: (1) to enable and encourage knowledge about building energy performance of both owners and occupants, and (2) to inform efforts to reduce energy consumption nationwide. 
• The Administrator is to consider already existing programs, such as Energy Star and the HERS index, while developing a model label. 
• The Administrator will create a report telling Congress which building types have measurement protocols and labeling requirements with energy performance data (and which don't). 
• The Administrator is to propose measurement protocols and detail how to complete performance labels.
• The Administrator will provide a final rule detailing measurement protocols and requirements for applying the protocols. 
• The Administrator shall propose a model building energy label within one year after the date of enactment, and the label will show achieved performance (and, interestingly, will not preclude designed performance data).  
• The Administrator will then publish a final rule containing the label applicable to covered projects. 
• The Administrator will coordinate with Zero Net Energy Commercial Buildings Initiative to provide labeling demonstration projects for all sorts of different building types. 
• The Administrator will work with state energy offices or other state authorities to implement the program, and will also work with these officials to encourage use of the labeling program at the local and county level. 
• States are to implement the label in such a way that the information is available to owners, lenders, tenants, occupants, or other relevant parties that can utilize the information.
• Three years after the date of enactment, the Administrator will report to Congress on the effectiveness of the program and the need for any legislative changes. 
• The Secretary of Energy and the Administrator will use the program in their agencies and try to get other agencies to implement the label. 

 A building labeling system will surely create litigation. Whether the litigation will involve the actual labels themselves or the methodology and regulations established by the government in the label's implementation remains to be seen. What are your thoughts?

A big thanks to Preston and Jetson Green for their excellent coverage of this topic.

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I have previously written about Chinese drywall from a quality control and construction standpoint and predicted that if the tests being conducted by the EPA or independent labs were able to demonstrate that the drywall was responsible for health problems it would truly open the litigation floodgates. In light of the Chinese drywall litigation being led in large part by Scott Wolfe and a conversation I had with Mark Rabkin of Althans Insurance I have been pondering the similarities between Chinese drywall and asbestos.

Unlike asbestos whose hazardous properties were unknown and whose dangerous effects have a relatively delayed onset the problem with the Chinese drywall was discovered quickly. While the exact health consequences of exposure to Chinese drywall have not been conclusively demonstrated I personally am fairly certain that anything that can corrode and eat through metal electrical, and air conditioning components cannot be good for the body. Individuals have complained of rashes, bloody noses, and respiratory infections.

Whether or not Chinese drywall poses short or long term health effects remains unknown at the current time. When does the statute of limitations start running for an physical injury stemming from Chinese drywall? Is Chinese drywall a one of a kind problem or is the U.S. housing industry going to see more building material problems as the result of outsourcing?

The Chinese drywall litigation has been placed on the fast track which the judge seeking to resolve the issue as soon as possible.

"Fast-tracking is an understatement. It's a rocket docket. And he means business," said attorney Ervin Gonzalez, a class-action specialist with Colson Hicks Eidson in Coral Gables, Fla., who also is on the plaintiff steering committee. "He wants the first case tried by the end of the year, and he wants an inspection of every home. He wants to be able to get to the bottom of the problem."

For an interesting and well written article examining the drywall problem and the problems it poses to homeowners please refer to the following article by the Wall Street Journal.

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As many of you know I am currently preparing for the Florida Bar Exam which starts in just 8 days! As a result of studying for this wonderful exam I will be taking a short break from the blogging and tweeting worlds. However, I do not want to leave my readers hanging so I am going to refer you to several excellent blogs written by individuals who I highly respect. In no particular order those blogs are:

1. Matthew DeVries Best Practices Construction Law
2. Christopher Hill's Construction Law Musings
   
3. Shari Shapiro's Green Building Law Blog
   
4. Stephen Del Percio's Green Real Estate Law Journal
   
5. Chris Cheatham's Green Building Law Update
   

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Living in Florida there has been no shortage of news about the Chinese drywall and the problems it has caused. While the problems Chinese drywall has caused have been well documented and appears to be a widespread problem with an identifiable source it has caused me to wonder whether this problem is a sign of problems to come. On April 30th Lisa Jackson of the EPA wrote Gov. Christ of Florida a letter stating that the EPA was conducting an ongoing analysis of the drywall samples sent to the EPA labs and was developing a program for air quality sampling.

The Chinese drywall when exposed to high heat or high humidity (both of which are a part of daily life in Florida and much of the South) releases hydrogen sulfide, carbonyl sulfide and carbon disulfide which cause copper corrosion (rapidly deteriorating air conditioning coils and electrical components are common problems) as well as a potential health threat.

Several class action law suits have been filed against foreign manufactures of the drywall. The Chinese drywall problem has caused me to think of what other problems may arise from poor quality control of construction materials. Imagine the problems that could arise if Chinese drywall was used in a LEED certified project! One of the major selling points of LEED certification is the enhanced indoor air quality and corresponding occupant well-being. A building built with Chinese drywall might initially have excellent air quality but after being exposed to heat and humidity could deteriorate to the point where the building becomes unusable. Imagine how that lawsuit would play out! Is the Chinese drywall problem an isolated incident or will we see a wave of future problems arising from quality assurance problems and materials being incorporated into LEED projects?

For more information regarding the EPA's role in the drywall investigation consult this article by the Tampa Bay Business Journal.

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