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Green Builders Need Legal Council to Limit Risks

Green home builders need to look at some of the legal issues associated with this growing movement in residential construction to manage the expectations of their customers and avoid unnecessary risks to their business, according to panelists at the NAHB Green Building Conference last month in St. Louis.

Acknowledging that this is an exciting time to be building green, the panelists said that their goal was to highlight some of the potential legal issues that building green might generate so that builders can pursue opportunities in this specialized field with the confidence that that they are not taking on undue risk.

"As with other aspects of your business, the key is to accept risk knowingly" advised David Jaffe, NAHB's staff vice president for construction liability and legal research.

On a wide range of issues - including lending and tax incentive programs, the certification process, innovative building products and unintended warranties - green builders need to be diligent in considering the things that can go wrong from a legal standpoint, the panelists said.

"Team up with legal counsel" on these issues, advised Jaffe. "You need a professional to work with you, this is a worthwhile cost of doing business." For instance, he said, for a builder who is seeking to identify himself as green, "if one risk is I don't get certification, that's one of the risks I want to know about."

Brian Anderson, a lawyer with Axley Brynelson LLP in Madison, Wis., told conference-goers that clients such as the Wisconsin Builders Association and lenders involved in green building projects have been coming to his firm for help in identifying risks and addressing specific issues in their contracts and negotiations. Many of the issues involved with green building can be "annoying," he added, because they are not precisely defined and open to interpretation.

A green building promise, Anderson said, can turn into an unexpectedly unpleasant reality for builders who haven't thought things through:

What happens when a contractor who has agreed to maintain a green roof for two years goes out of business in six months?

What is there to prevent a builder from having to pay for a flawed design in which a backyard geothermal heat system sucks up the heat for a water and sewage system to an out building so that the water freezes and the pipes have to be dug up?

What recourse is there for a lender who provides financing at a discounted interest rate for green residential development that subsequently fails to get certification?

What happens when the claims of a general contractor on the health benefits of the indoor air quality of a home persuades a family with asthmatic children to buy but their medical condition worsens after they move in?

What's to prevent another developer from blocking exposure to the sun or wind that a builder needs to provide energy for his green homes?

"You need to aggressively look at these issues," said Ujjval Vyas, of the Alberti Group, LLC. "You cannot ignore the risk, all for the laudable outcome of sustainability.Builders also need to be aware of possible conflicts between their warranties and products that have been rated and have met certification requirements."

To manage risk, builders need to be specific about what they mean when they say their home is green, Vyas said. How the home will perform needs to be understood by all of the players in the project. And "lawyers acting as counselors are crucial to making green building viable," he added.

Green builders need to be careful about their interactions with design professionals, he said, and how those designers interact with their customers so that realistic expectations are set for the final product.

For example, the environmentally active buyers of a large custom home are excited that their home is going to be a showpiece of green design and will put them in the vanguard of the sustainability movement. They insist on certification, but there is no energy performance rating for the home. "The mismatched expectations will keep you in court for a long time," said Vyas. "Even if you were completely in the right, it will cost you."

Disputes over indoor air quality, he warned, can be even costlier because they will involve an injured person, not property.

Green builders also need to check their warranty language and the warranties they receive from others, he advised, because "new technologies are generating new risks," creating potential problems in building processes and procedures, product performance, product installations and building systems integration, and combing old technologies in new ways.

Builders also need to be aware of possible conflicts between their warranties and products that have been rated and have met certification requirements. "Am I excluding what's been certified?.. If the home owner believes the warranty takes away all that was promised or represented, this could be a problem."

For more information on legal resources available from NAHB, e-mail David Jaffe, or call him at 800-368-5242 x8317; or contact David Crump, x8491.