Captain’s Galley became a memorable project, not only because it was one of the first in Maryland to incorporate the LEED rating into the contract documents, but because it became one of first anywhere to result in litigation arising, in part, from the general contractor’s alleged failure to comply with the environmental design standards.  In the suit filed in the Circuit Court for Somerset County, the developer, along with other claims, sought damages for the loss of the tax credits as a consequence of the alleged failure of the building to meet the contractually specified LEED standards.

            As the contractual adoption of environmentally related requirements becomes more common, as the result of increasing financial incentives, market forces driven by sustainable building benefits, and government mandates, issues as to whether the finished produce comports with the applicable standards will surely follow.  Potential liability flowing from green building standards can be expected to become an increasingly important issue in everything from the clarity of design documents, to inspection and supervision responsibilities, to standards of care, to insurance coverage, to warranty obligations, to the propriety of the certification procedure.

           The LEED rating system established by the U.S. Green Building Council is the best known and contains the most often cited criteria for sustainable building development.  Its credit system covers a wide range of design and construction procedures, and is intended to promote buildings that are both environmentally responsible and provide a healthy environment for occupants.  Site credits promote such activities as managing storm water by reducing runoff and conserving natural vegetation, providing alternative transportation, reducing light pollution.  Water efficiency credits can be earned by creating a water efficient landscape, adopting innovative wastewater technologies, and reducing overall water usage.  Energy credits are aimed at controlling energy waste, atmospheric conditions, and building impact through such methods as on-site renewable energy and enhanced refrigerant management.  Materials credits encourage the use of renewable, recycled and recyclable components.  And indoor air quality credits apply to such categories as ventilation, monitoring, the use of low-emitting materials, thermal comfort, and the availability of daylight and views.

            Another widely recognized program, Green Globes, sponsored by the Green Building Initiative, which establishes a rating and certification system through an assessment protocol, software tools, and use of profession assessors in the categories of energy, indoor environment, site impact, water, resources, emissions, and environmental management.

            A project that intends to meet any of the LEED or Golden Globes requirements must have both specificity in the contract documents, and qualified construction oversight and supervision.  The consequences of non-compliance can be enormous, especially if the applicable standards are used to determine (1) the availability of a tax credit; (2) comply with a government mandate; or (3) form the basis for the project’s ultimate marketing and representations as to product that will be delivered.

            There is also the growing prospect of more government mandated compliance.  Last year, the Maryland General Assembly passed legislation which adopted environmental requirements for new state buildings and public schools, and utilizes both LEED and Golden Globes standards.  This will result in new contractual obligations and performance standards for contractors involved in state construction.

            Finally, the positive image and desirability of sustainable construction continues to grow.  From companies wanting to offer competitive work environments to employees, to owners seeking energy efficiency, to simple consumer environmental awareness, market forces are pushing the green building revolution.  With that comes the potential for liability based on new and evolving standards of due diligence in ensuring that the design and construction are as green as intended.

Several states have established task forces to study mold and its effect on buildings and indoor air quality.  However, the intelligent dialogue required for the development of proper standards for mold exposure and remediation has, in large part, been drowned out by extreme voices.  On the one hand are those who summarily dismiss the issue as the fabricated product of a conspiracy between tort lawyers and a developing cottage industry of mold remediation consultants.  On the other are those readily prepared to broadly attribute a wide variety of medical conditions to the unhealthy environment of “sick buildings.” 

While it is true that mold is an ancient life form that has, throughout history, been the constant companion of humanity, its recent prominence as an indoor health issue is explained by two features of modern building techniques – the use of materials containing high concentrations of cellulose and other fibers upon which molds feed, and the employment of insulating materials and methods that restrict ventilation.  Given the inviting food source provided by present day building material, all that is required for vigorous mold growth and amplification is the presence of water and a building assembly that prevents the moisture from escaping or drying out.

One need not establish any causal connection between the presence of mold and health issues in order to recognize the need for proper mold removal.  Indeed, putting health matters entirely aside, molds deteriorate the building materials on which they feed, necessitating the repair of affected components.  Where structural elements are involved, this can become a matter of building stability as well as function.  Additionally because of the manner in which they digest materials, molds give off undesirable odors and diminish aesthetic appearance, thereby degrading the indoor environment and decreasing property values.

While the precise health consequences of indoor mold exposure remain the subject of study and debate, particularly as to the effect of its production of mycotoxins, it is undisputed that molds are recognized allergens and reproduce by means of airborne spores.  A portion of the population will have some allergic response to certain molds.  This may manifest itself as rhinitis, sinusitis or asthma, and highly sensitive individuals, and those with pre-existing respiratory problems, may develop more serious symptoms.  Additionally, persons with severely compromised immune systems may be a risk for fungal infections form some pathogenic molds.

Buildings do not have mold problems unless they have water problems.  Accordingly, building exterior envelopes and plumbing and mechanical systems need to be designed, constructed and maintained in a manner that protects vulnerable components form moisture.  Moreover, once water intrusion results in mold growth, the water source must be eliminated and methodologies need to be in place for mold removal.

In the absence of statutory regulation, various industry guidelines that have been used to govern the scope of mold remediation projects, including the Environmental Protection Agency’s Guideline on Mold Remediation in Schools and Commercial Buildings.  In general, it is recognized that hard and non-porous surfaces can usually be cleaned, while absorbent or porous materials, such as wallboard, carpet, and ceilings may require replacement.

Historically, insurance claims for mold were permitted under property damage insurance policies where the infestation arose from the intrusion of rain water as a result of storms, or the discharge of water, steam, or condensation from plumbing or mechanical systems.  However, as mold related claims have increased, insurers throughout the country have sought to exclude mold from property damage coverage.  In mid-2003, the Maryland Insurance Commissioner reversed a ruling by his predecessor, and made mold exclusions permissible.  Where mold exclusions are applicable, coverage is only available through the purchase of separate policies or endorsements.

The deterioration of building components, the diminishment of indoor environmental quality and aesthetics, and the potential for allergic reactions and other health consequences provide reason enough to adopt policies that promote the elimination of sources of indoor mold and provide a protocol for the removal of mold growth.

Rather than allow extremists to define the debate, the more reasoned approach is to adopt standards that ensure watertight buildings, identify unacceptable levels of mold contamination, and establish reasonable remediation criteria that allow its removal while minimizing the spread of the airborne spores.  To do otherwise merely perpetuates the current uncertainties and hyperbole, while the costs to property owners continue to accumulate.

Until such standards are in place, property owners need to be mindful of the potential for harm to their investment from water intrusion and mold.  It should be part of any due diligence checklist.  Where problems occur, competent professionals should be engaged to properly identify the source of the moisture and develop specifications for an effective repair, as well as to determine the need for and appropriate scope of any mold remediation program.

In the years since that first construction defect case, I have litigated, and tried many more equally complex matters, and have resolved still more by other means of dispute resolution. Because condominiums are usually large multi-family housing complexes, they are much more like commercial buildings than they are typical housing, and the impact of design and construction issues are multiplied by the sheer size of the project. As a result, the consequences of failure to act diligently and properly have the potential to be enormous and prohibitively expensive.

This blog is devoted to the things that I have learned from these experiences that can benefit condominium owners, homeowner associations, and property managers in dealing with their ownership and maintenance responsibilities, as well as the means by which developers, designers, builders, and contractors can produce residential projects that do not become a source of liability and unhappy customers. I look forward to our discussions.