Law Times

Law Times • January 19, 2015 Page 11 www.lawtimesnews.com It's not easy being green Environmental attributes can be source of litigation By marg. Bruineman For Law Times hile being green is a whole lot more popular since Kermit the Frog coined the phrase, it still isn't easy. The latest trend is to focus on green buildings exploiting natural energy and using reus- able materials in an efficient way. The problem, according to lawyer Joel Watson, is the plan may not end up being a good match with the ultimate use of the building. "Before going green, you have to understand the relationships are still there and they all have different end goals," says Wat- son, a litigator who also serves as Shibley Righton LLP's risk manager. "Green buildings bring a particular set of challenges . . . . That is because some of the energy savings objectives of an owner are in conf lict with the livability, usability of a client. In some cases, green design does not, in fact, achieve energy sav- ings and costs more in the end because the design doesn't fit the use." While the focus of the design may be on Leadership in En- ergy and Environmental Design standards, it may not accom- modate some of the needs of the tenant. While a glass wall and ambi- ent light can be effective in open spaces, if the space is parcelled into offices, the user can be sub- ject to extreme heat during one part of the day and extreme cold during another and have to use fans and heaters that drive up the electrical costs. So whether the negotiations are between the property owner and the builders and designers or the tenant, Watson says it's important to get away from the boilerplate contracts and draft one from scratch in order to take into account the unique aspects of a green building and address the challenges involved. "The restrictions of a LEEDS building have to be contemplat- ed," says Watson. "You have to step back and say, 'Does this provision really address this dynamic?'" It's also important to avoid promises of any kind of LEED certification. Instead, prom otional material might de- scribe the particular components that ref lect elements of green con- struction. An increase in the number of green designs means a possible backlog for certification. But more importantly, changes in a green design or in the material used could compromise certifi- cation, which could have impli- cations for liability on the part of the designer and the builder. Also, a failure to meet energy conservation and performance thresholds could be problem- atic. While there isn't yet a great deal of Canadian case law deal- ing with green buildings, Toron- to commercial and real estate lawyer Mark McMackin points to some early warning signs. In the U.S. case of Destiny USA Holdings LLC v. Citigroup Global Markets Realty Corp., an old mall complex underwent significant restoration that in- volved state-of-the-art green technology. In 2009 during the asset- backed commercial paper scandal that plagued several fi- nancial institutions, the lender pulled the plug on the proj- ect while it was in progress. It claimed unmet leasing targets and excessive cost overruns. The developer sued the bank, claiming it had breached the loan agreement. The court found an injunction forcing the lender to continue financing the project was appropriate, deter- mining that both the green fea- tures and financing were unique and the project was important to the community. "The search for novel con- struction materials poses a dou- ble risk," says McMackin. "There may be excessive d elays associated with locating these materials which are of- ten in demand given the rise in green building. Architects also could be held liable concerning unanticipated defects arising from their use in the building or substandard materials which might hamper the developer obtaining the desired certifica- tion." Just what green building means should also be clear to all of the parties from the start. Mc- Mackin suggests the language in the contract should be very clear to avoid the increased risk green buildings can present. And he suggests including a detailed addendum outlin- ing the expectations of the de- sign component. It could set out the definition of the mean- ing of green and green build- ing and carve out a role for a green building facilitator whose responsibility would be to co- ordinate and facilitate project design specifically as it relates to the completion of the green component. "Perhaps the most impor- tant aspect of green building, however, lies in managing client expectations and in ensuring that trades are sufficiently well versed in green building materi- als and technologies to execute the project," says McMackin. He warns there's potential for a lawsuit against the contractors over unmet performance crite- ria. Cases from the United States suggest the courts may consider it a breach of contract if the building fails to get certifica- tion. They may also find negli- gence based on what an owner might consider to be substan- dard design or installation of the components. LT FOCUS Recognizing the best in Canadian deal-making Recognizing excellence in deal-making Come and celebrate at the 8th annual Canadian Dealmakers awards gala. This event brings together the who's who of corporate executives, deal teams and advisors to recognize dealmakers who have impacted their industry and have strategically positioned their business for innovation, growth, globalization and diversification. Join us at the Canadian Dealmakers awards ceremony on March 5, 2015 at the Royal York Hotel in Toronto. To purchase a table, please contact us at CarswellMedia.Sales@thomsonreuters.com or call 416-649-8841 Learn more about the program and view past winners at www.canadiandealmakers.ca The awards are chosen by a distinguished panel of business leaders: Brent Belzberg Senior Managing Partner, TorQuest Partners Marc-André Blanchard Chair & CEO, McCarthy Tétrault LLP Denyse Chicoyne Board Director for TMX Group, Richelieu Hardware Ltd. and Industrial Alliance George F. J. Gosbee Chair & CEO, Alta Corp Capital Inc. Donald R. Ingram President & CEO, CamCar and Associates Robert Kennedy Dean, Ivey Business School at Western University John H. McArthur Dean Emeritus, Harvard Business School L. Jacques Ménard, C.C., O.Q. Chairman, BMO Nesbitt Burns and President, BMO Financial Group, Quebec Gregory J. Smith President & CEO, InstarAGF Asset Management Inc. L. Scott Thomson President & CEO, Finning International Inc. Frank Vettese Managing Partner & Chief Executive, Deloitte Canada Paul Waldie Editor, Report on Business, The Globe and Mail Signature sponsor Founding partners Gold sponsor Silver sponsor Bronze sponsor Net proceeds go to support Untitled-6 1 2015-01-13 3:08 PM W

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