This post is a collaborative effort by Jennifer Mullen,* Andrae J. Via,** Mary Katherine McGetrick,*** and Michael Nicholson****

Stimulus money, increased awareness of work and living environments, and new building practices have quickly moved green building to the forefront of the real estate market. A variety of methods exists for increasing energy efficiency, improving air quality and decreasing building emissions with or without certification. However, standards and rating systems provide a verifiable mechanism to determine the commitment to sustainability and the opportunity to showcase that commitment for marketing and financial incentives. The U.S. Green Building Council (“USGBC”) developed the Leadership in Energy and Environmental Design (“LEED”) rating system, a well-known, consensus- based approach to green building with third-party verification through the USGBC.¹

Certification for commercial buildings is available under LEED for New Construction, LEED for Existing Buildings, LEED for Commercial Interiors, LEED for Retail, LEED for School and LEED Core & Shell.² All certifications are forward-looking based on design, except LEED for Existing Buildings, which is performance based.  LEED ratings are available at four levels: Certified, achieving 40-49 points; Silver, achieving 50-59 points; Gold, achieving 60-79 points; and Platinum, achieving 80+ points.³ In order to achieve a certain level of LEED certification, a project applicant must gain “credits” for sustainable design in six specific areas: Sustainable Sites, Water Efficiency, Energy and Atmosphere, Materials and Resources, Indoor Environmental Air Quality and Innovation in Design.⁴ Innovation in Design includes bonus points for team member expertise in sustainable building and design features not accounted for in the other five categories.⁵ Certain individual credits may have prerequisites which must be achieved as a baseline to earn corresponding point(s).⁶ Each credit is assigned a certain number of points and bonus points, which can then be totaled to achieve LEED certification. LEED certification does not mandate the areas in which credits must be obtained, but rather offers the flexibility for the team members to pick credits which earn points under the LEED rating system for which the project is registered.

The first step toward certification is registration of the project and, ideally, identification of the team members. The USGBC offers an online registration process and paper registration for those seeking building certification.⁷ Integrated design is a key component to LEED certification; therefore, it is beneficial to register early in the design process.⁸ Early coordination and collaboration from team members may help reduce the costs of the construction or renovation of the building. Once registered, the project is easily tracked and managed through the online system, known as LEED Online.⁹ The applicant may, for a fee, request an interpretation from USGBC on the likelihood that a credit will be received and points awarded. LEED Online provides free access to team members for previous interpretation requests and interpretation rulings for all projects.¹⁰

Certification fees vary depending on the project, but if the project achieves Platinum certification, the certification fees are refunded.¹¹ Through LEED Online, project team members upload supporting documentation for certification. Preliminary review is available by the USGBC, which will indicate what credits are anticipated, need clarification or will be denied for particular reasons. This provides the team members the opportunity to revise the project where possible to achieve the maximum number of points. Upon substantial completion, the project is submitted for formal review by the USGBC, which also has an established appeal process for denied credits.¹²

The LEED certification process, as well as other rating systems, can play an important role in drafting and negotiating “green” real estate documents, including leases and construction agreements. Depending on the stage of certification, and the type of real estate transaction, there are green building concepts which may affect each party’s negotiating position and bottom line. LEED certification can create real value for a project, and the following overview of applicable law and documentation will assist the project owner in leveraging that value.

(conclusion follows)

Today’s real estate transactions are already feeling the impact of a “greening economy” – and sustainability is expected to be an issue of increasing importance in most commercial real estate transactions. Opportunity is a driver of transactions – and standards and rating systems such as LEED create transactional opportunities by allowing clients to quantify a commitment to sustainable design and development. Such commitment levels will only increase with increased demand for sustainable products, the continued development of the various rating systems and governmental incentives.

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* Jennifer Mullen is an associate with the firm of Williams Mullen in Richmond, Virginia. She is a member of the Financial and Real Estate Services Team and focuses her practice on commercial real estate transactions, including the acquisition, financing and development of office and residential condominiums, and matters related to land use. Ms. Mullen is certified by the U.S. Green Building Certification Institute as a LEED Green Associate.

** Andrae J. Via is an associate in the firm of Williams Mullen in Virginia Beach, Virginia. He is a member of the Financial and Real Estate Services Team and focuses his practice on the acquisition and leasing of commercial property, as well as banking services.

*** Mary Katherine McGetrick is a partner in the firm of Williams Mullen in Richmond, Virginia. She is a member of the Financial and Real Estate Services Team and focuses her practice on acquisition, development and leasing of commercial property.

**** Michael Nicholson is an associate at the law firm of Williams Mullen in Richmond, Virginia. He is a member of the firm’s Financial and Real Estate Services Team and focuses his practice on all aspects of commercial real estate, with an emphasis on sales and acquisitions, leasing, financing and development.

Citations

1  U.S. Green Building Council, http://www.usgbc.org/DisplayPage.aspx?CMSPageID=1988 (last visited Oct. 14, 2009).
2  U.S. Green Building Council, http://www.usgbc.org/DisplayPage.aspx?CMSPageID=222 (last visited Oct. 14, 2009).
3  U.S. Green Building Council, http://www.usgbc.org/ShowFile.aspx?DocumentID=3330 (last visited Oct. 14, 2009).
4  Id.
5  Id.
6  Green Building Certification Institute, https://www.gbci.org/DisplayPage.aspx?CMSPageID=130 (last visited Oct. 14, 2009).
7  Green Building Certification Institute, https://www.gbci.org/DisplayPage.aspx?CMSPageID=137 (last visited Oct. 14, 2009).
8  See http://www.usgbc.org/DisplayPage.aspx?CMSPageID=64 (last visited Oct. 14, 2009).
9  See id.
10 Id.
11  Green Building Certification Institute, https://www.gbci.org/DisplayPage.aspx?CMSPageID=127 (last visited Oct. 14, 2009).
12  Green Building Certification Institute, https://www.gbci.org/DisplayPage.aspx?CMSPageID= 211 (last visited Oct. 14, 2009).