Budgets, Changes Orders and A Green Building Project

If you were to survey green building critics, it’s safe to guess most will argue that the cost to build green do not outweigh the benefits.

Indeed, many have suggested that the cost of building green (especially gaining LEED certification) is significantly higher than building to ordinary standards.   Others argue that LEED certification can be achieved through an everyday budget.

Regardless of where you fall on this issue, everyone should agree that green building projects have certain specifications, and bidding contractors must project the construction costs responsibly.

And so, one of the most challenging components of a constructing a green building may be the process of bidding it.

Since green building work is just starting to take hold in the construction industry, many contractors and subcontractors are working on little-to-no experience on green projects.   And sometimes the data behind green building techniques and products are thin (see greenwashing).

On Wolfe Law Group’s Construction Law Monitor, we published a 2-part article on the Bidding Process and Change Orders:   Bidding Errors and Change Orders: Avoiding a Nightmare [Part One and Part Two].

How do we suggest you avoid Bidding Error nightmares?   Spend time with the Contract Documents pre-bid.

With green building projects, this is more true than usual.

When preparing your green bid, here are some example thoughts that should be considered:

  • If the project is being certified with LEED or another standard, who will be responsible for the submittal process?   Who will be responsible for monitoring the construction process?
  • Contact vendors who will be providing the project’s materials, and review the data they have to back-up their performance and environmental claims.   It would be a pity to plan on using one product, and being forced to later use a more expensive substitute.   See this article on how to shop for green building materials.
  • If the builder is anticipating a tax credit, do you understand the requirements to qualify for the credit?   Will this increase your construction costs?

A successful green building project starts where successful ordinary projects begin:  during the bidding and contracting period.

Whether your green building project will increase costs, or not, understand the green building expenses associated with your project, and avoid bidding errors and change order nightmares.

This article was originally posted on Wolfe Law Group’s topic-specific Louisiana Green Building Law Blog.

Green Tax Credits in Plain English

Are you absolutely confused about “green tax credits?”

We hear the terminology enough, as green building and green products aren’t short on press coverage.  Too often, however, it seems that the tax credit system isn’t actually explained, and one is left to wade through Google searches to understand how to qualify for these tax breaks.

Tax Credits for Home Builders

Yes, you read that correctly….there are tax credits available to home builders who build homes to certain energy standards.   These tax credits apply to builders of new manufactured or non-manufactured homes.

This is a great way for home builders to make extra money on a home building project, and can be especially beneficial to home builders who build tens or hundreds of homes each year.

Each new home that achieves 50% more energy savings from the 2004 International Energy Conservation Code (IECC) qualifies for a $2000 tax credit.   A 30% energy savings qualifies for a $1000 credit.   Builders simply need to fill out and return IRS Form 8908.

To qualify for these credits, the home must be completed after August 8, 2005, and sold between Jan. 1 2006 and December 31, 2009.   Builders who have built qualifying homes, but did not apply for the credit, can still apply.

We’re still waiting to see whether these credits are extended past the end of the year.  More detailed information about the IECC and the tax credits can be found at this link:  http://www.energystar.gov/index.cfm?c=tax_credits.tx_hm_builders

Tax Deductions for Commercial Buildings

Environmental tax credits are not just for residents and residential builders.

To understand these available deductions, it’s important to read about and understand the ASHRAE Standard 90.1 2001.

Commercial buildings qualify for a tax deduction up to $1.80 per square foot when new or existing commercial buildings save 50% of the heating and cooling energy of a building that meets ASHRAE standards.

The amount of deduction depends on the building savings.   The deduction can be made to the owner or designer of the building.   They are available for HVAC systems placed in service from Jan 1 2006 through Dec 31, 2013.

Check out IRS Notice 2006-52 for guidance on how to make these deductions.   Check out this link for more details:  http://www.energystar.gov/index.cfm?c=tax_credits.tx_comm_buildings

Tax Credits for Homeowners

Far and away, the most available tax credits are available to homeowners.

For existing homes in 2009 and 2010, homeowners can get up to 30% of the cost for energy efficient installations of windows and doors, insulation, roofs, HVAC systems, water heaters and biomass stoves.

For new and existing homes through the year 2016, tax credits are available to homeowners of up to 30% the cost of energy efficient installations of geothermal heat pumps, solar panels, solar water heaters, small wind energy systems, and fuel cells.

Information on each available credit is available at this link, in easy to understand language:  http://www.energystar.gov/index.cfm?c=tax_credits.tx_index

How to Get A Better Grip

Learning more about available tax credits is both easy and hard for the same reason:   there is a of information on the subject out there.

Here are some good resources:

http://www.energystar.gov/taxcredits (the BIBLE of energy tax credits – including a summary chart of tax credits for homeowners)

The Tax Incentive Assistance Project (TIAP)

Read about pending Tax Credit Legislation

Check Out this Residential Flyer from the TIAP

Check Out this Commercial Flyer from the TIAP

This article was originally posted on Wolfe Law Group’s topic-specific Louisiana Green Building Law Blog.

Chinese Drywall Presentation on July 31st – Slides Now Available

On July 31, 2009, Wolfe Law Group’s Scott Wolfe and Doug Reiser will co-present at Half Moon Seminar’s Chinese Drywall Conference in New Orleans, Louisiana.   The program is titled “Chinese Drywall Problems and Litigation.”  Attorneys, contractors, engineers and architects can all obtain CLE credit for attending the program [register here].

Wolfe & Reiser will co-present during the program’s middle segment, “Exploring the Current Status of Chinese Drywall Claims and Litigation.”

Be sure to attend the program on July 31st in New Orleans.   To get ready, or in case you can’t make it, below is the slide presentation we’ll use during the presentation.

This article was originally posted on Wolfe Law Group’s topic-specific Chinese Drywall Blog.

Frequently Asked Questions from Homeowners About Chinese Drywall Claims

As homeowners retain Wolfe Law Group to represent them against their builders and insurers, we’re encountering some frequently asked questions.   We thought that these questions (and answers) were widely applicable to those considering representation, and so we are posting them here.   Please read the disclaimer at the end of this post.

Who is liable for my damages?

This is the golden question.  The Chinese Drywall situation is unique in that there are so many parties, and so many possibly claims.   The builder, supplier, manufacturer, and insurers may all have exposure for the damages under various legal theories.  It’s too soon to say who will ultimately be liable for Chinese Drywall damages.   Wolfe Law Group recommends filing direct individual actions against the builders and suppliers, their insurers, and a homeowner’s insurance policy.

Is this a class action?

The action recommended by Wolfe Law Group is not part of the Chinese Drywall “class action.”   While the class action has merit, it is a suit against the manufacturer and not the builders and insurers.  The class action litigation could take a long time to resolve, may have problems collecting from foreign defendants and does not address the liability of builders, local suppliers and insurers.

Wolfe Law Group encourages its clients to talk with class action attorneys about being represented in these proceedings, as claims against the manufactures do have merit.   However, Wolfe Law Group does not represent you in these actions.

How long will my lawsuit take?

It’s difficult to predict the length of any litigation, as some cases may settle shortly after filing a complaint, and others may take years to resolve.   On the one hand, Chinese Drywall claims present unique legal arguments that may take some time to resolve.  On the other hand, however, the claims will be expensive to litigate and this encourages settlement.   In general, lawsuits take between 8 months and 4 years to resolve.

What do I do now?

If you retain Wolfe Law Group as counsel, we will begin litigation promptly after retention.  You will be kept apprised of the progress of your case, and as we require information about your claim, we will contact you to acquire it.   We will also schedule an inspection of your property to confirm the presence of contaminated drywall.

From a non-legal perspective, the health effects of Chinese Drywall are still unknown.  If you are living in a home with Chinese Drywall, it is safest to find alternative living arrangements.   We do understand that some do not have the means to make this move, and in these circumstances we recommend having the drywall replaced as soon as possible.

Disclaimer:  These frequently asked questions and answers are posted to provide information to property owners who have contacted Wolfe Law Group and are interested in retaining the firm in representing them against builders and insurers.  The information posted herein is not legal advice, and does not create an attorney / client relationship between Wolfe Law Group and the reader.    To become a client of our firm and retain Wolfe Law Group, it is required that you sign a Fee Agreement.  Only upon the signing of a Fee Agreement will an attorney/client relationship be created, and legal advice procured.   This post is provided for information only.

This article was originally posted on Wolfe Law Group’s topic-specific Chinese Drywall Blog.

Is the Avalanche of Lawsuits Against Builders Imminent?

Wolfe Law Group’s own Scott Wolfe, Jr. provides the leading quote in a recent article from HousingZone.com:   Homeowners Increasing Suing Local Builders.   Scott gave this quote to the publication:

The best and quickest way to get the drywall out is to go after the builder, who ultimately has to live up to his warranty.   If the consumer tinkers with class-action lawsuits that can drag out for months, their warranties start to expire, and their chances of getting something from the builder are slimmer.

If we’ve said it once on this blog, we’ve said it a thousand times (here, here, here, here and here).

While class action suits have their purpose, it presents real challenges to homeowners who are interested in getting the Chinese Drywall out of their property.

The class action suits have their warts, and homeowners may find a better remedy by filing a direct action against their builders, suppliers and insurers.

With every day that passes, however, deadlines are drawing closer.    The one year deadline for insurance claims and torts.  The 3-4 year deadline with claims in redhibition.   And the 1, 2 or 5 year deadlines associated with construction warranty claims.

The worst news about the deadlines being that many, if not most of the statutory periods begin when the drywall was delivered or installed…and not when the homeowner learned of the problem.

All was quiet with regard to individual lawsuits against builders and suppliers, but recent news reports indicate that the remedy is gaining some steam.

The article from HousingZone.com is not alone.  The Times Picayune recently reported that homeowners are more frequently suing builders, and Baton Rouge’s Advocate had the same analysis.

Could an avalanche of Homeowner v. Builder suits be on the horizon?

If you’re interested in learning more about bringing a suit against your builder, or your construction company is interested in bringing suit its suppliers and insurers, contact Wolfe Law Group today.

This article was originally posted on Wolfe Law Group’s topic-specific Chinese Drywall Blog.

Louisiana’s 2009 Green Building Legislation

Governor Bobby Jindal signed two Green Building bills into law this July 2009.

The first, Act 348, authorizes the creation of sustainable energy financing districts and was authored by Senator Nick Gautreaux.    The second, ACT 520, authorizes a tax credit for certain green job industries, and was authored by Representative Walt Leger.

The two acts provide green building contractors and businesses, and the purchasers of those products and services, some of the most beneficial tax incentives in the nation.   The new laws also help Louisiana hold its ground in the national green building boom.

Act 348 – Gautreaux (LA R.S. 33:130.790 – 793)

The digest of Act 348 only scratches the surface for the green building opportunities created by this act.    Here is the official summary for the Act:

Authorizes creation of sustainable energy financing districts by local governmental subdivisions and provides for issuance of bonds and property assessment programs for solar and energy efficiency projects.

The effect of this act, in plain english, is to allow local governments and subdivisions to incur debt for the purposes of providing these “energy financing districts” with necessary funds to cover the cost of energy efficiency improvements or renewable energy improvements.

These loans are made directly by the district to the home or property owner, and can be paid back over a twenty year period.   Property owners can even make arrangements to pay back loans through its payment of annual property taxes.

On July 7, 2009, Governor Bobby Jindal caused Act 348 to become law.  Time will tell whether local government subdivisions will take advantage of the new law and start offering loans to homeowners and property owners who are interested in making green building improvements to their properties.

If these loans become available, and used, it could lead to an enormous amount of green building projects throughout Louisiana.   Read the full text of Act 348

Act 520 – Leger (La R.S. 47:6035)

According to the New Orleans’ Times Picayune article on Act 520, the tax credit system created by this proposal is similar to the  tax credits offered to filmmakers in Louisiana.   State Representative Walt Leger hopes to lure green businesses to Louisiana through the same trick that helped coin New Orleans’ “Broadway South.”

The tax credits are explained in the Times Picayune Article as follows:

Working on a tiered system that offers 10 percent to 25 percent, based on how much companies spend, the tax credit applies to the start-up costs of a new green business as well as to the payroll of each new green job…As defined in the bill, green jobs and industries can include a wide range of potential businesses, including renewable energy services, green building and construction, weatherization, energy rating, biofuels, energy-efficient transportation, deconstruction and green product manufacturers.

The potential reach of the new legislation – known as the Louisiana Green Jobs Initiative – is wide.

With the post-Katrina construction silver lining, the injection of stimulus cash, and the national (and local) green building boom…Louisiana’s Green Market may be in for a perfect storm in 2009 and 2010.

Read full text of Act 520.

This article was originally posted on Wolfe Law Group’s topic-specific Louisiana Green Building Law Blog.

Some Claim Insurance Will Not Cover Chinese Drywall Losses. Is it True?

The Controversy and Uncertainty

This much is clear:  it is not certain how the courts will interpret insurance policies and insurance policy exclusions, as they apply to Chinese Drywall claims.

Many predict that the insurance industry will rely on what is called a “pollution exclusion” to deny Chinese Drywall insurance claims.

A South Carolina Construction Insurer, Contractor-Insure.com, makes this claim in a recent press release:

Most contractor General Liability insurance policies contain the Total Pollution Exclusion.  All claims adjusters who have been interviewed will take the position that the sulfur dioxide fumes released by the defective Chinese drywall are ‘pollution’ and as a result all legal defense and damages under the General Liability policy will be denied.

While the press release largely discussed builder general liability policies, the same controversy exists for homeowners insurance policies.

Further, the controversy and predication are proving to be true, as across the country there are already suits on the issue.

As already reported on the Chinese Drywall Blog, in Baker v. American Home Insurance Company, a homeowner sued their insurance carrier claiming coverage for Chinese Drywall claims.   In Builders Mutual v. The Dragas Company, a builder’s general liability insurer brought a declaratory judgment action to have a judge declare that Chinese Drywall damage was not insured.

The claimed exclusion:  Pollution.

Both suits are very important to homeowners with Chinese Drywall claims.   But for Louisiana homeowners….how will the issue be resolved?

Why Louisiana Is Different

Unlike in South Carolina and most other states, Louisiana has very narrowly interpreted the pollution exclusion.   We reviewed the applicability of the pollution exclusion to Louisiana insurance claims in a previous blog post here:  Home Builders v. Insurance Pollution Exclusion.

There, we quoted the seminal case in Louisiana on this subject titled Doerr v. Mobil Oil Corp.  The long and short of things:  “Using the Doerr analysis, it seems that builders or suppliers would not be considered a “polluter” within the meaning of the exclusion” in Chinese Drywall claims.

For homeowners with Chinese Drywall, and builders with potential exposure, this is welcome news.    While the issue remains unresolved, the Doerr decision at least gives homeowners and homebuilders hope that Chinese Drywall losses may be insured, and therefore, within reach.

The problem now?   Getting homeowners and home builders to timely make claims and pursue recovery.

This article was originally posted on Wolfe Law Group’s topic-specific Chinese Drywall Blog.

More Evidence of Green Building Staying Power in Louisiana

Last week, the New Orleans’ Times Picayune ran an article about a green housing program being launched this month in Mandeville, Louisiana, providing more evidence that “green building” efforts in Louisiana are growing.

According to the article, Mandeville is the third Louisiana community to participate in the “EnviRenew” program from the Salvation Army, with the first and second communities being Broadmoor and Riverview.

On their website, EnviRenew defines its mission as follows:

Envirenew, is a comprehensive strategy for community renewal. It is doing the most good in our neighborhoods and for the future of our city.

The program will build 20-25 homes in the Mandeville area, with each costing approximately $200,000, and each qualifying for LEED certification.   It will be an excellent opportunity for contracts with green experience to work on LEED projects, and for inexperienced green builders to participate on a project undergoing the certification process.

This article was originally posted on Wolfe Law Group’s topic-specific Louisiana Green Building Law Blog.