Green Building Basics For Real Property Lawyers (With Checklist)

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1 Green Building Basics For Real Property Lawyers (With Checklist) Leslee M. Lewis Leslee M. Lewis is a Member of the law firm Dickinson Wright PLLC, practicing in Grand Rapids, Michigan. Her background combines over 13 years of sophisticated real estate, financing, and corporate law experience. Ms. Lewis advises publicly and privately held companies, developers, and nonprofits on development, construction, acquisition, leasing, financing, contracting, and corporate matters, with a concentration in adding value through diverse knowledge, personal commitment, and on-site service. She is also lead counsel to national banks in large loan originations. She has formed and qualified numerous charitable organizations, frequently contributes to various publications, and is editor of the Dickinson Wright Real Estate Newsletter. She can be reached at llewis@ dickinsonwright.com. She would like to thank Sam Pobst of Eco Metrics LLC, a consultant on one of the first 50 LEED platinum buildings in the country and a valuable resource for the article. Greener pastures for green buildings. The term green (meaning environmentally friendly) has been flung about for years in nearly every conceivable consumer context, with seemingly little uniform significance. Divergent claims to greenness made without uniform standards initially resulted in skepticism and confusion, and caused some folks to ignore the green movement completely. Don t ignore it now. Green building has marched squarely into the lives of unsuspecting real property lawyers and their clients. If green building was once a hallmark of individual concerned citizens, governments, and schools, it is telling that it has now infiltrated Wal Mart and Starbucks. According to the Urban Land Institute/PricewaterhouseCoopers 2007 Emerging Trends in Real Estate Survey, green building has hit your client s radar as a real estate development issue. Why? Green building offers: Potential short- and long-term energy, water, waste, maintenance and other operational cost savings; Added property value (as investors, banks, buyers and insurers are also taking note); Tax rebates, exemptions, and other governmental incentives; Desirable perception as an environmentally and energy conscious leader; Potential improvement in health, absenteeism, morale, retention, comfort, and productivity of building users/occupants (based on improved light, air quality, and thermal comfort); Reduced strain on natural resources and infrastructure. But if you think green building is a playground only for consultants, architects, engineers, and building managers, think again. Manual On Commercial Lease Drafting 281

2 282 Manual On Commercial Lease Drafting WHAT YOU NEED TO KNOW ABOUT GREEN BUILDING Green building standards are quickly penetrating zoning, tax, and building laws and ordinances nationwide. What was once only pleasant leadership rhetoric by the federal government and a handful of states, to build their largest new construction projects green, is now more and more either a mandate or an incentive to the masses. Green carrots and sticks are rapidly making their way into federal executive orders, state laws, and local codes and ordinances. When your client approaches you with a development or construction project, you are missing the boat if you miss the green. LEED Certification And National Green Building Standards There are several voluntary national certification programs for green buildings, which vary in philosophy and level of challenge. These programs do not act as mere energy codes. They challenge participants to prove to a certifying body that their building makes the points in categories such as water efficient landscaping, heat island reduction, recycling, and indoor air quality. Depending upon the program, the design, materials, construction process, or building operation are implicated in earning certification. The most recognizable of current certification programs is LEED. LEED Following the United Kingdom s 1990 example, the US Green Building Council ( USGBC ) launched the Leadership in Energy and Environmental Design ( LEED ) green building evaluation and certification program in LEED standards were generated (and are still updated) by a consensus process among USGBC membership, which spans a number of stakeholder groups. Each LEED program focuses primarily upon six assessment areas: Sustainable sites; Water efficiency; Energy and atmosphere; Materials and resources; Indoor air quality; and Innovation. Having a LEED-certified building means planning for and submitting to a third-party validation process. LEED certification is earned at one of four progressively more challenging levels: Certified, Silver, Gold, or Platinum. While LEED Certified buildings number in the thousands, there are still less than 100 LEED Platinum buildings in the United States. LEED s various programs are tailored to specific types of projects, such as New Construction, Existing Buildings, Schools, etc. A sample LEED Project Checklist follows this article. Green Globes While LEED may now be the most prominent green building standard in the United States, it is certainly not the only one. Green Building Initiative s ( GBI ) Green Globes standard was launched in While similar in categories and rating systems to LEED, Green Globes intends to be less costly, more accessible to the masses (LEED is designed to reach the top 25 percent of all building projects), and more focused on the life cycle of the building. GBI awards one to four Globes to green buildings. Model Green Homebuilding Guidelines In late 2005 the National Association of Home Builders ( NAHB ) also released Model Green Homebuilding Guidelines. These guidelines compete with LEED and focus on lot preparation and design, resource efficiency, energy efficiency, water efficiency and conservation, occupancy comfort, indoor environmental quality, and operation and maintenance of the home. Standard 189.1P The USGBC, American Institute of Architects, American Society of Heating and Air Conditioning Engineers, and the Illuminating Engineering Society of North America have very recently collabo-

3 Green Building Basics 283 rated on Standard 189.1P. This will be an ANSIcertified standard for baseline design, construction, and operations performance for new construction and major renovations of commercial buildings. Unlike voluntary green building certifications, this standard is intended to affect mainstream construction, green or not. Once published, it is expected to be incorporated into U.S. building codes and to become a threshold standard to obtain a certificate of occupancy for an affected building. It will likely also become a prerequisite for LEED certification. Standard 189.1P completed its second public review on April 7, 2008 and AHRAE assembled a project team of its members on December 4, 2008, to prepare a revised draft of the standard. Worldwide Standards Other countries the United Kingdom, Canada, Mexico, Australia, Japan, India, a number of European Union Countries and China to name a few also have green building standards. Some of these are similar to LEED, and some are very different, but none are truly global. Seek local assistance in any international green building project. Prevalent Zoning, Tax, And Building Law Provisions Green building is not just voluntary and there are already a number of incentives for green building. Below is a sampling of green building provisions you may see as you look at applicable zoning, tax and building laws nationwide. Mandates Federal, state, or local mandates can include the following: A requirement that certain government-funded projects comply with specific certification levels under national green building standards (e.g. LEED Silver); Local ordinances requiring new construction or renovations of a certain type or size of building (currently often a 5,000 or 10,000 square foot threshold, and sometimes commercial buildings only) to comply with their own or a national green building standard; Local ordinances requiring permit applicants, in connection with new construction or renovations of a certain type and/or size of building, to complete green building checklists and/or to have a green building consultant on the project (whether or not applicants actually plan to seek green building certification); State or local laws requiring construction to quantify and meet greenhouse gas or emission standards; and State or local mandatory fees financing green building funding and education. Incentives Incentives for building green can include: Local expedited permitting processes for green buildings; Local building/zoning fee reductions or waivers for green buildings; Zoning density bonuses or other incentives for new urbanism design, green space preservation, or green buildings meeting certain local or national green building standards; State or local tax incentives, credits, or rebates, property tax exemptions, low interest loans or grants for green buildings meeting certain local or national green building standards; and State or local free education or technical assistance for green building compliance. Helpful Resources Green building laws, like most everything else, are almost guaranteed to change and to vary from place to place. While it should not replace your normal due diligence, consider referencing the green building search tool offered by the USG- BC if you work with a number of different states or communities. This handy online tool allows you to search the USGBC s compiled database of green building mandates and incentives using a number of criteria. If you plug in the state or community

4 284 Manual On Commercial Lease Drafting name or the mandate or incentive type, you can find a thumbnail sketch of applicable green building requirements and incentives. You may find this resource at SearchPublicPolicies.aspx?PageID=1776. THE GREEN BUILDING CERTIFICATION PROCESS In the most generic of terms, when an owner decides to attempt a green building certification and has decided upon its objectives (energy savings, improved interior environment, and so on), it works with its architect, engineer, designer or consultant on a green building project checklist summarizing the various green building credits it wishes to obtain. Project plans and specifications are developed and include protocols for design and operations (for example, for recycling, green cleaning, maintenance), which are intended to qualify for these credits. Sometimes the project is registered with the certification body and design plans can be submitted to the certification body for early review. Everyone Needs To Be Involved Even before the project is underway, contractors and maintenance personnel must be involved in, and buy into, the green building process to assure that the protocols are followed and not accidentally sabotaged in construction and operations. Often this requires diligence by the project manager, consultant, owner, architect, contractor, and operations and maintenance personnel. Detailed evidence of green building standard compliance (down to receipts for materials) is compiled and submitted for certification. Sometimes credits are disputed, appealed or lost, and changes need to be made in order to attain the desired certification. Why is this important to you? In every contract you draft or review, and in the counsel that you give to your client, you can better serve your client by advising what impact green building and the green building certification process may have on the project, players, timing, value and costs. When you know the process, you can give wise counsel and ask informed questions. For example, is green building required in this instance? Does it make economic sense based on up-front costs, future cost savings, or other benefits if it is not required? Are special incentives, permitting preferences, fee refunds, grants or tax rebates available? If green building is planned, does the construction contract require that the contractor and its subcontractors comply with green building standards within the contract price and completion date? Will training, long term policy changes or oversights be needed? If a lease is involved, how are the capital costs of green building allocated? Are the certification costs (generally $5,000 -$10,000 to the certification body, plus any consultant fees and extra costs) and duties clearly allocated and covered by someone with appropriate expertise? Given charities relative ease in raising capital funds and the likelihood that green building may reduce future operating costs, is green building certification appropriate in a grant contract? The more you know about green building, the more questions you can ask and the better guidance you can give your client. THE FUTURE Over the course of less than 10 years, green building in the United States has gone from a nice colloquialism to an intriguing and accepted standard among community leaders. It has spurred significant changes in construction practices, building and landscape design, available building products, and owners, occupants, investors, and the real estate industry s expectations for buildings. Industry observers predict that green building will soon be the rule rather than the exception a demanded retrofit, much like wiring for information technology in the 1980s and 1990s. That prediction is not much of a stretch with the planned release of Standard 189.1P, an ANSI-accredited green building standard developed as a greening threshold for building codes nationwide. Green building seems to have found its greener pastures.

5 Green Building Basics 285 Appendix LEED for New Construction v2.2 Registered Project Checklist (This Form is reprinted with the permission of the U.S. Green Building Council, USGBC. All Rights Reserved) Project Name: Project Address: Sustainable Sites 14 Points Y Prereq 1 Construction Activity Pollution Prevention Required Credit 1 Site Selection 1 Credit 2 Development Density & Community Connectivity 1 Credit 3 Brownfield Redevelopment 1 Credit 4.1 Alternative Transportation, Public Transportation Access 1 Credit 4.2 Alternative Transportation, Bicycle Storage & Changing Rooms 1 Credit 4.3 Alternative Transportation, Low-Emitting & Fuel-Efficient Vehicles 1 Credit 4.4 Alternative Transportation, Parking Capacity 1 Credit 5.1 Site Development, Protect or Restore Habitat 1 Credit 5.2 Site Development, Maximize Open Space 1 Credit 6.1 Stormwater Design, Quantity Control 1 Credit 6.2 Stormwater Design, Quality Control 1 Credit 7.1 Heat Island Effect, Non-Roof 1 Credit 7.2 Heat Island Effect, Roof 1 Credit 8 Light Pollution Reduction 1 Water Efficiency 5 Points Credit 1.1 Water Efficient Landscaping, Reduce by 50% 1 Credit 1.2 Water Efficient Landscaping, No Potable Use or No Irrigation 1 Credit 2 Innovative Wastewater Technologies 1 Credit 3.1 Water Use Reduction, 20% Reduction 1 Credit 3.2 Water Use Reduction, 30% Reduction 1 Energy & Atmosphere 17 Points Y Prereq 1 Fundamental Commissioning of the Building Energy Systems Required Y Prereq 2 Minimum Energy Performance Required Y Prereq 3 Fundamental Refrigerant Management Required

6 286 Manual On Commercial Lease Drafting *Note for EAc1: All LEED for New Construction projects registered after June 26 th, 2007 are required to achieve at least two (2) points under EAc1. Credit 1 Optimize Energy Performance 1 to % New Buildings or 3.5% Existing Building Renovations 1 14% New Buildings or 7% Existing Building Renovations % New Buildings or 10.5% Existing Building Renovations 3 21% New Buildings or 14% Existing Building Renovations % New Buildings or 17.5% Existing Building Renovations 5 28% New Buildings or 21% Existing Building Renovations % New Buildings or 24.5% Existing Building Renovations 7 35% New Buildings or 28% Existing Building Renovations % New Buildings or 31.5% Existing Building Renovations 9 42% New Buildings or 35% Existing Building Renovations 10 Credit 2 On-Site Renewable Energy 1 to 3 2.5% Renewable Energy 1 7.5% Renewable Energy % Renewable Energy 3 Credit 3 Enhanced Commissioning 1 Credit 4 Enhanced Refrigerant Management 1 Credit 5 Measurement & Verification 1 Credit 6 Green Power 1 continued Materials & Resources 13 Points Y Prereq 1 Storage & Collection of Recyclables Required Credit 1.1 Building Reuse, Maintain 75% of Existing Walls, Floors & Roof 1 Credit 1.2 Building Reuse, Maintain 100% of Existing Walls, Floors & Roof 1 Credit 1.3 Building Reuse, Maintain 50% of Interior Non-Structural Elements 1 Credit 2.1 Construction Waste Management, Divert 50% from Disposal 1 Credit 2.2 Construction Waste Management, Divert 75% from Disposal 1 Credit 3.1 Materials Reuse, 5% 1 Credit 3.2 Materials Reuse,10% 1 Credit 4.1 Recycled Content, 10% (post-consumer + pre-consumer) 1 Credit 4.2 Recycled Content, 20% (post-consumer + pre-consumer) 1 Credit 5.1 Regional Materials, 10% Extracted, Processed & Manufactured Regionally 1 Credit 5.2 Regional Materials, 20% Extracted, Processed & Manufactured Regionally 1 Credit 6 Rapidly Renewable Materials 1 Credit 7 Certified Wood 1 Indoor Environmental Quality 15 Points Y Prereq 1 Minimum IAQ Performance Required Y Prereq 2 Environmental Tobacco Smoke (ETS) Control Required Credit 1 Outdoor Air Delivery Monitoring 1 Credit 2 Increased Ventilation 1 Credit 3.1 Construction IAQ Management Plan, During Construction 1 Credit 3.2 Construction IAQ Management Plan, Before Occupancy 1 Credit 4.1 Low-Emitting Materials, Adhesives & Sealants 1 Credit 4.2 Low-Emitting Materials, Paints & Coatings 1

7 Green Building Basics 287 Credit 4.3 Low-Emitting Materials, Carpet Systems 1 Credit 4.4 Low-Emitting Materials, Composite Wood & Agrifiber Products 1 Credit 5 Indoor Chemical & Pollutant Source Control 1 Credit 6.1 Controllability of Systems, Lighting 1 Credit 6.2 Controllability of Systems, Thermal Comfort 1 Credit 7.1 Thermal Comfort, Design 1 Credit 7.2 Thermal Comfort, Verification 1 Credit 8.1 Daylight & Views, Daylight 75% of Spaces 1 Credit 8.2 Daylight & Views, Views for 90% of Spaces 1 Innovation & Design Process 5 Points Credit 1.1 Innovation in Design: Provide Specific Title 1 Credit 1.2 Innovation in Design: Provide Specific Title 1 Credit 1.3 Innovation in Design: Provide Specific Title 1 Credit 1.4 Innovation in Design: Provide Specific Title 1 Credit 2 LEED Accredited Professional 1 Project Totals (pre-certification estimates) Certified: points, Silver: points, Gold: points, Platinum: points 69 Points

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