We are increasingly called upon to give legal opinions that a green building is LEED certified, ‘certifiable’ or otherwise really a green building.
The purpose of a legal opinion given in a commercial real estate transaction is, most simply put, to provide the recipient of the lawyer’s writing with comfort regarding specified aspects of the transaction.
One might ask why they need an opinion from a lawyer that their building is green? The best response is because in many instances their lender requires it. While legal opinions are given in a variety of commercial contexts, they are increasingly being required as part of the due diligence by lenders when making loans secured by (i.e., a mortgage) a green building.
The size and nature of a transaction may well affect the scope of the opinion requested and in larger traditional mortgage financing as well as bond financing, lenders attribute increased value in the security being provided for loans when a building is LEED certified or the like.
Opinion letters are often given by the borrower’s attorney at the request of and for the benefit of the lender. Traditionally, legal opinions in the context of loan transactions provide assurances that the loan documents are valid, binding and enforceable. Often legal opinions arising from the purchase of real estate involve assurance that the improvements exist accordance with applicable zoning, subdivision and other land use laws and regulations. Opinions are also given, from time to time, that a project complies with environmental laws. And now counsel to borrowers and sellers are being called upon to provide assurances that the real property and improvements which exist or are to be constructed have been designed and exist or will exist in accordance a stated green building standard, rating system or code.
Additionally, as increasing numbers of governments make green building mandatory or offer incentives for high performance buildings, purchasers and lenders alike want assurances that a building is in compliance with those green building laws. Tenants, who with greater frequency are required by law or policy to lease only green premises (from the federal government to multi family residential builders and colleges to retail builders) are a fast growing requester of opinions.
We also receive requests to give opinions of counsel that a project is LEED ‘certifiable’ or ASHRAE 189.1 compliant or complies with Enterprise Green Communities criteria; commonly associated with qualifying fir governmental incentives. Committing that a project will be LEED certifiable versus certified by GBCI increases certainly and lowers risk.
And while we believe a lawyer should not be asked to be an additional warrantor of facts, the distinction between questions of law and fact may at time be difficult to separate. In giving an opinion, a lawyer is not and should not be thought to be providing a guaranty or insurance against loss.
As a function of the fact that there are more green buildings being constructed and those building are being bought and financed, we will be giving increasing numbers of legal opinions that green buildings are ‘really’ green buildings.