Wednesday, February 15, 2017

Keeping 'Green' Contracts Clear



The green building industry is arguably more popular than ever. The number of certified green buildings grows every day across all sectors of the building industry. Unfortunately, the contracts for sustainable projects are sometimes behind the times. Standard construction contracts are often not tailored to address the numerous issues and nuances that may come up on sustainable projects. This potentially puts all contracting parties at greater risk of uncertainty if disputes arise on the job site. Preparation on the front end of a green building is usually the best way to alleviate problems later on, and it starts with the contract. This is true whether the project is one for new construction or for renovations or retro-fitting.

First, the contract should be as clear and specific as possible about what the green goal is. Simply using terms like "green building," "sustainable building" or "high-performing building" are not enough, because it is unclear what the precise goal is. For example, the goal may be to reduce electricity costs, and the owner may have a specific energy saving cost or usage goal in mind. That should be identified in the contract. In addition, an owner may require a third-party green rating certification. That could mean LEED certification, but LEED alone has multiple levels. Or, it could mean Green Globes, the WELL Building Standard, or a handful of other third-party rating agencies. If so, then specificity is needed. If the goal is not achieved, there will be no confusion as to what the goal was. Related to this issue is which party will bear the costs for certification fees, inspections and tests that may be necessary to the green certification. Again, this is best addressed in the contract.

Second, the contract should reflect who is responsible for achieving the project's green goals. That might be a design professional like the architect or an engineer. Or it may be general contractor, sub-contractors, suppliers, a sustainability coordinator or a combination of construction professionals. Each segment of the construction project should be aware of what responsibilities it is undertaking in the green building process. The person or entity that is responsible also may want to get paid more for taking on the added risk.

Making Guarantees

All contracting parties should be aware of what guarantees they are making or receiving in terms of sustainable performance or certification. For instance, if a contract requires LEED Gold certification, but the final product does not achieve that, the contract should be clear about what the repercussions are. Similarly, the contract can address what happens when a component such as a solar energy system or a HVAC unit does not achieve the level of performance a contractor or otherwise represented.

An alternative to a guaranty is a performance bonus or bonuses based on the certification or performance levels achieved. In other words, a contract will describe a base fee for services on the project and then allow for additional compensation depending on the level of certification the building gets or based on the level of performance of the building after occupancy. This is helpful because it can be difficult to guaranty these levels on certain projects. Green building warranties may also be provided, but carry greater obligation or risk to the warranty provider.

The parties can also tie final completion benchmarks to the achievement of the sustainable goal, depending on the type of project. Money may be held back on a project pending the receipt of the green rating. However, when a rating will be bestowed by the rating agency is not always certain, and cannot be entirely controlled by the contracting parties.

A contract can also address the types of damages that may be obtained if the project fails to achieve the agreed-upon sustainability goals. For example, if the purpose of building green was to achieve certain tax credits, and those credits

are not achieved, they may become the measure of damages. Damages may be more difficult to ascertain in other performance metrics. Contracting parties may also want to consider capping those damages, or setting forth a method to measure them.

When it comes to green building contracts, there is no one size that fits all. Goals, methods, specifications and components can greatly vary. However, all parties involved in a sustainable building project have added incentive to consider and address the unique issues that may appear. Reliance on the standard building contract may not suffice. If the issues are not properly addressed upfront, the chances for dispute and litigation will significantly increase. As the old saying goes, an ounce of prevention is worth a pound of cure.

Mark J. Stempler is a Florida shareholder with the law firm Becker & Poliakoff. He is board certified in construction law, is certified as a LEED Green Associate and focuses his practice in the areas of construction litigation, government law, and civil litigation. He may be reached at mstempler@bplegal.com.

Tuesday, October 18, 2016

The Sunshine State Faces Important Solar Choice

By Mark J. Stempler, Esq.

The solar debate in Florida is coming to a crossroad, as voters must make another critical decision about the use and expansion of solar energy in the state.

Last month, voters overwhelmingly approved a tax exemption for solar equipment installed on residential and commercial property.  The approved amendment also allowed businesses to get solar equipment exemptions on a separate tax assessment.  The amendment approval made it more affordable and desirable to install solar equipment.

On November 8th, another solar question will appear on the ballot, but there is controversy.  If approved, Amendment 1 will allow, for the first time ever in Florida, third-party leasing of solar equipment.  Most solar energy that is generated from homes or businesses comes from solar panels. In many cases around the country, the panels are not owned by the home or business owners, but by third parties who can profit from the energy created by those panels.  That third-party leases the panels to the home or business owner.

This is usually a good plan, because a leasing the equipment is cheaper than buying it, and the home or business owner benefits through a reduction in their electric bills.  The third-party provider gets revenue from the leases and the energy produced.

A careful reading of the summary of the ballot measure, however, has eclipsed the enthusiasm of some solar energy supporters.  The sentence at issue says:

State and local governments shall retain their abilities to protect consumer rights and public health, safety, and welfare, and to ensure that consumers who do not choose to install solar are not required to subsidize the costs of backup power and electric grid access to those who do.

This would allow utility companies to charge solar users more money to pay for the energy infrastructure the utility companies must maintain.  The utility companies point to the fact that if the sun is not shining, solar energy is not being produced but the utility companies have to keep supplying energy (powered by fossil fuels) through its established infrastructure. There is a cost to that.

The concern is that cost will be passed on to solar-paneled homes and business, which will nullify any cost savings from the use of solar energy.  Although the switch to solar carries environmental benefits, most consumers make the decision to switch to solar based on a cost analysis.  If there is no cost benefit, then most people will chose not to switch to solar.

If the amendment is rejected, then what?  Perhaps the elected leaders of Florida will come up with a solution, but it is hard to rely on
that based on precedent.

Florida voters will face a tough decision in November, but they have yet to see an easy solution.

Wednesday, September 21, 2016

How to Save the Planet? Start with $90 Trillion

By Mark J. Stempler, Esq.

According to a recent report by the United Nations, in order for planet Earth to best prepare for the effects of climate change, it will need to raise $90 trillion in public and private capital during the next 15 years.  There it is, a quick and easy fix.  Well, obviously not.

But, this raises many important questions, including: a) what will that money be used for, and b) where will it come from?  Neither question is easy to answer, but ideas are abundant.

Every county in the world must consider sustainability measures in every function and at every turn. From lowering emissions generated by or from industries and buildings and automobiles, to reductions in uses of fossil fuels and increased use of renewable energy, to sustainable farming, just to name a few, policies must be in place to encourage and ensure that sustainability becomes the standard, or the new normal.

Paying for this $90 trillion fix is a big hurdle, to say the least.  Government funding would be one way to do it, but most governments around the world do not have the means or the political will to solely carry the burden.  Which leads to the second, and likely more viable option, private financing.

The wheels or private financing are already spinning.  Consider green bonds, which are issued privately and publicly to fund the development sustainable investments, such as the development of brownfield sites, energy efficiency, sustainable buildings or agriculture, etc.   The green bond market is rapidly expanding, and was worth an estimated $42 billion dollars in 2015, according to the Claim Bonds Initiative.  The bank HSBC predicts that may grow to nearly $160 billion this year. There are also numerous funds and initiatives that seek to raise money and spend it on similar ventures.

Former U.S. Treasury Secretary Henry Paulson wrote a strong op-ed in the New York Times about the need for private investment in the world's sustainable future.  He points out that in numerous countries, including China, India and Mexico, private firms are financing green projects domestically and abroad.  In fact, China has been and continues to be a global leader in sustainable growth and projects.

Though people can argue about the cause, for reasons most scientists do not understand, it is clear the world is changing.  We are already seeing the effects, as described before in this blog.  The growth of public and private financing for sustainable initiatives is likely the best path forward to better protecting our planet.  We are already witnessing a strong desire in the private sector to finance green projects, but much more is needed to make a global difference.

Legislative action to encourage private investment will become critical in encouraging that type of expansion.  Most green bonds qualify for tax-exempt status.  Additional incentives are needed to convince investors that sustainable investing makes financial sense.  Further, additional incentives are critical to the implementation of the green projects.

Monday, August 29, 2016

The State of Solar in the Sunshine State

By Mark J. Stempler

Florida is renowned for its sunshine, but its ability to harness the sun’s power has long been eclipsed.  Florida ranks 14th out of 50 states in terms of solar capacity installed, yet is third in the nation for rooftop solar potential, according to the Solar Energy Industries Association.    On August 30, Florida voters have an opportunity to expand the state’s solar energy potential. 

On the ballot is Amendment 4, known as the “Florida Tax Exemptions for Renewable Energy Measure.”  If approved, it will make solar equipment exempt from residential and commercial property and real estate taxes.  Homeowners already get the exemption, but this amendment would extend it for  twenty years.  For example, if your home is valued at $100,000, and you install $15,000 worth of solar equipment, the taxable value of your home is still $100,000.  The amendment would also, for the first time, allow businesses to get solar equipment exemptions on the ad valorem tax on businesses’ tangible personal properties, when it is assessed.  Creating and extending those exemptions should make solar energy equipment more affordable and desirable to install.  According to a study by SolarPowerRocks.com, Florida is ranked 25th in the U.S. in terms of the solar incentives it offers.

Amendment 4 passed the Legislature unanimously and has generally received bi-partisan support from a host of organizations.  The benefits of solar and other renewable energies are vast.  They use can reduce greenhouse gas emissions, improve air quality, diminish reliance on fossil fuels, and reduce the consumption of water associated with traditional power production.  Those benefits have significant value.  A recent study from the U.S. Department of Energy concludes solar power could result in $400 billion in environmental and public health benefits in the U.S. by 2050. 
Solar can also benefit Florida’s work force.  If demand for solar products rises, the more than 450 solar companies here will be able to expand their businesses, and solar companies outside the state may be encouraged to come to Florida and expand the industry.  This may result in new job opportunities and will improve the state’s economy.

While Amendment 4 is a strong step forward, it is not the ultimate solution.  Florida has lagged behind in solar energy for numerous reasons.  Some blame the utility companies who want to protect the generation and selling of energy.  Some blame the state’s lawmakers for failing to create policies to promote the use of solar.  Some blame lack of public interest, due in part to the upfront costs traditionally associated with the installation of solar equipment. 

While the costs for installing solar and other renewable energy equipment are typically seen as a hurdle, costs have been declining significantly during the last several years.  Now they can be more quickly offset and surpassed by the savings in energy bills that follow.   To ease the burden of the upfront costs, programs like PACE (Property Assessed Clean Energy) can provide up to one-hundred percent financing for eligible projects, which help owners pay for the systems over time. 
Customers in many states have additional alternatives to reduce the cost burden, such as power purchase agreements.  But not in the Sunshine State.  

In a power purchase agreement, an installer or developer pays for the design and installation of a solar or alternative energy system at no or minimal cost to the home or business owner.  The developer then sells the power generated by the system to the owner at a fixed rate that is usually cheaper than the rates of the local power company.  That can offset the customer’s purchase of electricity from the grid.  In Florida, only certain utility companies can sell power by law, and if a solar power producer wants to sell energy, it must sell to one of the approved utilities.

Amendment 4’s tax exemptions will help home and business owners down the path toward renewable energy.  But additional action is needed from the public and its elected officials to help Florida toward the solar powered light at the end of the tunnel.


Monday, April 4, 2016

Clean Green to Improve Your Health


Sustainable building is not only focused on improving the environment, it is also focused on improving your health.  Studies from the U.S. Green Building Council show that most Americans spend most of their lives indoors.  Whether its at the office, the home, a restaurant, a library, the gym, or anywhere else inside, we breath a lot of indoor air.  Indoor air quality (or IAQ) issues are important.  And it's not only a health issue.  Workplace productivity has been reported in a study to improve when workers are breathing in better quality air.  

While there are numerous green building methods that can improve IAQ, maintaining the space after its built is equally important.  That includes cleaning.  High concentrations of cleaning chemicals can stay in the air or on surfaces for long periods of time. Products like Simple Green's all purpose cleaner and ECOS Glass Cleaner are said to be less harmful chemically than traditional cleaners.  Here is a link to a great article on some other cleaners and their benefits.  Consider using them in your indoor space.



Thursday, March 10, 2016

Florida Voters to Decide Solar Tax Breaks

By Mark J. Stempler, Esq.

There may be daylight for the expansion of solar energy in the Sunshine State.  In August, Florida voters will have a chance to decide whether to give businesses tax breaks when they install solar panels on their buildings.  Florida legislators unanimously passed the proposed amendment.  They also passed a companion bill that would give the Legislature until 2017 to establish the rules to implement the tax credits, it they are approved.

The tax credits would exempt the assessed value of renewable energy devices from property taxes, and exempt the products from the tangible personal property taxes, by 2018.  The ballot question will appear on the August 30 primary ballot.  It could have been placed on the ballot for the general election in November.  Some proponents say they applaud the move, worrying that putting on the November ballot could cause voter confusion.

There is some concern, however, that small voter turnout for the August vote could fuel challenge to or provide an argument to delay the measure's implementation, if it passes, during the following Legislative session in 2017. Stay tuned!

Tuesday, February 9, 2016

From Potty to Power - The Most Sustainable Commode Ever?

By Mark J. Stempler, Esq.

The power of human waste may finally be harnessed for household use!  That may not sound appealing, but a new toilet might be able to generate energy to charge your cell phone, water your yard and plants, and even fertilize your landscaping.  And no, this is not a late night infomercial hosted by Troy McClure.

Cranfield University in England is developing the Nano Membrane Toilet, which is said to treat human waste without external energy or water. The toilet has the potential to produce extra energy that can be used to charge mobile phones and other low voltage items.  It can also produce filtered, non-potable water that can be used for irrigation, while the waste can be converted into fertilizer through recovery of nitrogen based nutrients.

Here is how it will work, according to the researchers.  The toilet flush uses a unique rotating mechanism to transport the mixture into the toilet without demanding water whilst simultaneously blocking odor and the user’s view of the waste.  Solids separation (feces) is principally accomplished through sedimentation. Loosely bound water (mostly from urine) is separated using low glass transition temperature hollow-fiber membranes. The unique nano-structured membrane wall facilitates water transport in the vapor state rather than as a liquid state which yields high rejection of pathogens and some odorous volatile compounds.

A novel nano-coated bead enables water vapor recovery through encouraging the formation of water droplets at the nano-bead surface. Once the droplets form a critical size, the water drains into a collection vessel for reuse at the household level in washing or irrigation applications.
Following release of unbound water, the residual solids (around 20-25% solids) are transported by mechanical screw which drops them into into a coating chamber lined with a replaceable bag. Once inside the coating chamber, the solid matrix is periodically coated with a biodegradable nano-polymer. The nano-polymer coating serves to block odor and acts as a barrier to pathogen transport. The toilet will be powered using a modular hand crank or bicycle power generator supplied for household use that can also power other low voltage items, like cell phones.

The project to develop the Nano Membrane Toilet is actually sponsored by the Bill and Melinda Gates Foundation and its "Reinvent the Toilet Challenge".  The toilet can be used just about anywhere, but could have significant benefits in homes or areas without access to running water, modern plumbing or sewage systems. Also, it has the potential to significantly contribute to water conservation efforts.

Here is a link to a video to see how it operates.  Whether it will actually work as well as its creators say is unknown, but it sounds like a interesting and innovative step in toilet technology designed for a sustainable future.