As the drought in California and across the West Coast continues, the construction industry faces new regulations and environmental risks. Although the drier weather prolongs the building season and the strong rebound of the housing market offers large rewards for the bold, the construction industry in California should be wary of the regulations and drought-related risks described below.

A. New Water Restrictions

On July 15, 2015, the California Water Commission (CWC) approved the Model Water Efficient Landscape Ordinance. This ordinance contains a variety of new regulations, including increased water limits on landscapes for new homes and businesses with landscape areas larger than 500 square feet, cutting the amount of space that can be used for lawns. The new CWC regulations will go into effect on December 1, 2015, effectively eliminating grass lawns at new business and corporate developments and cutting the space allocated for lawns at new homes from 33.3% to 25% of total garden space.1 Remodels requiring permits or design review on existing landscapes larger than 2,500 square feet will also have to comply with the new regulations.

However, a few key exemptions exist that may allow a builder, with help from a landscape architect and an engineer, to minimize the impact of the new regulations. Any lot or parcel within a project that has less than 2,500 square feet of landscape irrigated with recycled water is exempt.Nonresidential landscapes can take advantage of parkway exemptions to increase green space.3 Further, the regulations only apply to the amount of space that can be dedicated to turf—landscape architects can take advantage of native, naturally drought-resistant plants to create green spaces that are both aesthetically pleasing and money saving via lower irrigation costs.

Even before CWC released these regulations, the construction industry faced a number of new water regulations. In April of this year, Governor Brown rolled out a series of new mandatory restrictions, including a prohibition on new residential developments using potable water for irrigation unless a drip system is used. In the same month, the California Energy Commission released new standards for toilets and faucets that will go into effect on January 1, 2016. Although many counties, including San Diego County, are focused on trimming residential water use while minimizing the impact on industrial and commercial uses, businesses must also brace for potential cutbacks as the drought lengthens.

B. Fire and Other Drought-Related Liability Risks

Apart from increased regulation, prolonged droughts may lead to a number of natural disasters that may particularly concern the construction industry. For instance, prolonged drought leads to a higher occurrence of wildfires. In recent years California has seen a steep increase in wildfires, and this year is on pace to double the average number of fires. Warning of the increased risk of fire, California Department of Forestry and Fire Protection director Ken Pimlott noted “we’ve had such limited precipitation that the vegetation is critically, critically dry.” The continuing lack of moisture also means these fires are impacting areas that are usually protected by snowfall or mountain run off, making traditionally “fire safe” regions anything but. An example of this possibility is the Paradise Fire, currently burning in the Olympic rain forest in Washington State, an area that traditionally receives 150 inches of rain a year but has been suffering increasingly dry conditions. The fire is the largest in half a century and expected to continue to burn through September 2015.

This increased risk of fire also means that builders must be even more cautious during construction to avoid creating sparks or other fire hazards. The potential of a mistake at a construction site leading to widespread devastation is a very real risk, and the company responsible for the mistake may have to bear the cost for all the damage a resulting fire causes, not just the damage to the worksite.

Beyond fire risks, droughts present a variety of other increased risks. Landslide rates tend to rise, particularly in clay rich soil. As the clay dries, it shrinks, causing separation between any rocks in the soil. In inclined areas, this can lead to land sinking, slipping, and sliding, with associated impact on any structures on the land. Similarly, this can lead to subsidence, which may serve as a basis for negligence claims in property damage cases against contractors and developers who disturb or do not properly take into account the infirm soil. E.g., Puckett v. Sullivan, 190 Cal. App. 2d 489, 496 (1961) (affirming that defendants were properly found liable for negligent excavation work that led to subsidence on neighboring property).

Droughts have also been linked to increased occurrences of seismically larger earthquakes. Similar to lifting a weight off of a sheet of plywood, as groundwater is depleted, the earth formerly held down by that weight shifts up. This shift has caused the Sierra Nevadas to rise several millimeters per year over the last decade, and researchers suggest that this earth shifting has the potential to trigger any of the fault lines that litter California.

C. Outlook

For now, as the drought continues, construction companies should maintain adequate insurance coverage, build in all appropriate safeguards to any new structures, and adjust future plans to meet the increased regulations on water usage. Additional regulations are also possible if the drought persists into next year. Some scientists are indicating that an intensifying El Niño effect may lead to the end of the California drought. If so, the drought-related environmental risks will decrease, but the construction industry may still be left with managing the various new regulations.