As more government entities use a mix of mandates and incentives to push for greener buildings in both the public and private arenas, the stakes in sustainable design and construction are getting much higher. With green certification becoming a requirement on an increasing number of projects, owners and developers face an expanding field of financial and regulatory risks. In some parts of the country, failure to achieve green certification could result in onerous code violations or lead to the loss of significant tax credits.

In trying to establish who bears the risk when a project misses its sustainability goals, project teams are finding a lot of gray area in green construction. Limited contract vehicles, few targeted insurance programs, and a lack of legal precedents have left companies scrambling for answers.

As more buildings in the recent sustainability wave reach completion, failed projects are starting to wash up in court. The first known case of a project that didn’t meet green certification was brought before a Maryland circuit court in 2007. Shaw Development sued Southern Builders after its $7.5 million Captain’s Galley condominium project failed to meet U.S. Green Building Council LEED Silver certification. Shaw claimed that it lost $635,000 in state tax credits as a result.

The case was settled in November 2008—the terms were not disclosed.

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