JULY 2008

Pending green construction legislation in New Jersey raises legal questions

More than a dozen bills working their way through the New Jersey legislature aim to make green building the law the of the land in the Garden State. But, codifying the fast-growing and, so far, entirely voluntary, trend toward eco-friendly buildings could lead to unforeseen consequences for all parties involved, warned James A. Kosch, an environmental attorney in LeClairRyan’s Newark-based Tort Defense Group.

“When you have a flexible, voluntary standard and make it mandatory, you put both the government and the developer in a box,” he said.

“Government mandates are imperfect because they codify only a point in time. Meanwhile, economics, engineering and taste move on.”

Now under consideration by the legislature, the raft of bills would, among other things, require developers to offer solar power to residents of certain high-density housing developments; allow municipal planning boards to weigh the “greenness” of projects when deciding the fate of proposed master plans; and mandate that new state buildings and units of affordable housing be built to uniform green standards. Given today’s concerns about skyrocketing energy prices and global warming, Kosch said, such measures clearly are well-intentioned. But heavy-handed legislation, he argued, could raise costs and thus force developers to scuttle worthy projects, or stifle innovation by setting in stone government-favored approaches to the fast-evolving trend of green design.

Despite, or perhaps because of today’s enthusiasm for all things green, lawmakers should think carefully about the law of unintended consequences. It also is incumbent upon developers and their attorneys, to question the claims of the green movement when doing the complex cost-benefit analysis required for any project. “The U.S. Green Building Council, for example, makes some very strong claims about the benefits of green building,” Kosch said. “Some are measurable-water use, energy, for example, but then the council also talks about ‘increased productivity’ and ‘better quality of life.’ These are in the eye of the beholder.”

In addition to the pending legislation, Kosch explored how the trend toward green building has created manifold challenges and unanswered questions for the legal profession. Standard real estate agreements, for example, do not spell out which party is liable for guaranteeing that a project wins a promised “gold” or “silver” rating by organizations like the U.S. Green Building Council, known for its LEED rating system. Should it be the architect? The construction manager? An environmental consultant?

Solar panels might work well at a project surrounded by low-rise buildings, he said, but what if the owner of a neighboring building wants to add a few floors and thus blot out the sun? “Do I need to get an air and light easement against my neighbor?” he asked. “If I’m generating excess electricity, what kind of energy sale agreements should I negotiate with the local utility?”

Indeed, Kosch summed up, the green building trend has brought with it a host of new questions related to insurance, water reuse, energy generation, tax credits, economic incentives and more. “We are at the very beginning of this. There is no standard language. Each deal must be looked at separately,” he advised.