What Counsel Should Know About Green Building
- 3. What
Counsel
Should
Know
• Agenda
• Suretyship 101
• DC GBA “Performance Bond”
• DC GBA Best Worst Case Scenarios
• Green Regulatory Alternatives
• LEEDigation
Copyright
©
2009,
Chris
Cheatham.
All
Rights
Reserved.
- 4. [TITLE
OF
Suretyship
101
PRESENTATION]
Mandatory, unintelligible definition:
Suretyship is a “contractual relationship
whereby one person engages to be
answerable for the debt or default of
another.”
-Sterns, The Law of Suretyship 1 (1951)
Copyright
©
2009,
Chris
Cheatham.
All
Rights
Reserved.
- 6. Two key surety rules:
(1) Debtor is responsible to satisfy
obligation to pay or perform
Creditor!
Debtor! Surety!
- 7. [TITLE
OF
Suretyship
101
PRESENTATION]
• ut what if Debtor fails to pay or
B
perform?
Creditor!
Debtor! Surety!
Copyright
©
2009,
Chris
Cheatham.
All
Rights
Reserved.
- 8. Two key surety rule:
(2) Debtor fails, Surety performs,
Surety reimbursed by Debtor
Creditor!
Debtor! Surety!
- 9. Suretyship
101
What does surety get?
1. Premium paid by debtor
2. Debtor’s duty of reimbursement
(indemnification agreement)
Copyright
©
2009,
Chris
Cheatham.
All
Rights
Reserved.
- 10. Bonds
in
Construction
Suretyship
101
Performance Bond:
Surety Guy
promises
Developer Guy!
Developer Guy
that
Contractor Guy
will build
according to
plans and specs.
Contractor Guy! Surety Guy!
Copyright
©
2009,
Chris
Cheatham.
All
Rights
Reserved.
- 11. 1. Green Roof Leaks!
3. Surety Pays !
2. Contractor Developer or
Defaults! Rebuilds!
- 12. Suretyship
101
• Fact: Sureties are already bonding
green building projects
• Fact: Sureties are just now assessing
inherent green building project risks
• Fact: No major surety has specific green
building bond
Copyright
©
2009,
Chris
Cheatham.
All
Rights
Reserved.
- 13. [TITLE
OF
D.C.
Green
Building
Act
of
2006
DC
GBA
“Performance
Bond”
PRESENTATION]
January
1,
2012
• Washington, D.C. -
Green Building Act of 2006
Section 4 - starting January 1, 2012, private projects
•
greater than 50,000 square feet must be LEED certified
Copyright
©
2009,
Chris
Cheatham.
All
Rights
Reserved.
- 14. [TITLE
OF
DC
GBA
“Performance
Bond”
PRESENTATION]
Green building regulations require
enforcement mechanisms
“(b) On or before January 1, 2012, all applicants for
•
construction governed by section 4 shall provide a
performance bond”
“(g) All or part of the performance bond shall be
•
forfeited to the District and deposited in the Green
Building Fund if the building fails to meet the
verification requirements described in sections 3 and 4.”
Copyright
©
2009,
Chris
Cheatham.
All
Rights
Reserved.
- 15. [TITLE
OF
DC
GBA
“Performance
Bond”
PRESENTATION]
Surety and Fidelity Association of
America and Surety Bond Producers:
Letter to Government of D.C., August 13, 2007
•
“The new law incorrectly uses the term ‘performance bond.’ In
•
short, the performance bond assures that the construction
contract, and therefore, the project will be completed.”
The bond in the Green Building Act “seems to function more in
•
the manner of a license or compliance bond, which typically
guarantees compliance with a law or code.”
Copyright
©
2009,
Chris
Cheatham.
All
Rights
Reserved.
- 16. DC
GBA
“Performance
Bond”
Arlington County -
Bonus Density Program
• If developer declares intent for
LEED – get FAR variance
• Enforcement Mechanism: Bond
• Key differences
Copyright
©
2009,
Chris
Cheatham.
All
Rights
Reserved.
- 19. DC
GBA
Worst
Case
Scenario
But…
The Vancouver
Green
Mandates
+
Enforcement
Mechanism
=
™
Copyright
©
2009,
Chris
Cheatham.
All
Rights
Reserved.
- 20. Vancouver
DC
GBA
Worst
Case
Scenario
Mandated
Green
Roofs
And
Insurance
But…
Green
Mandates
+
Enforcement
Mechanism
Insurers
Refused
To
Issue
Insurance
=
™
Copyright
©
2009,
Chris
Cheatham.
All
Rights
Reserved.
- 21. DC
GBA
Worst
Case
Scenario
But…
“No coverage means no new residential
developments. This has left developers caught
between the possibility of being mandated by
Green
Mandates
city governments on one hand and shut out by
insurers on the other.”
+
Enforcement
Mechanism
=
™
Copyright
©
2009,
Chris
Cheatham.
All
Rights
Reserved.
- 23. For
Green
Regulations
Green
Regulatory
Alternatives
Look
to
Arlington
County
But…
“No coverage means no new residential
developments. This has left developers caught
between the possibility of being mandated by
Green
Mandates
city governments on one hand and shut out by
insurers on the other.”
+
Enforcement
Mechanism
Specific
LEED
Proffers
=
™
Bonus
Density
Program
Copyright
©
2009,
Chris
Cheatham.
All
Rights
Reserved.
- 25. LEEDigation™
Energy Efficiency
“Architects and consulting engineers
signed contract that stated that projects
would ‘reduce operating costs by 50 percent’
over schools of similar size. Energy usage is
comparable to other schools recently
designed and constructed. School system is
publicly embarrassed, disappointed and
blamed as being ‘hoodwinked’ by architect
and engineers. School system brings claim.”
“Don’t Let Green Design Cause Red Ink,” Frank Musica
Copyright
©
2009,
Chris
Cheatham.
All
Rights
Reserved.
