Jess Harrold and Sarah Jackman speak to expert professionals at major firms to discuss how real estate teams are embracing artificial intelligence – and its potential to transform the industry.
The rise of artificial intelligence (AI) has not gone unnoticed by our finest legal minds. Supreme Court judge Lord Sales addressed its potential to transform our whole system of law in his recent Sir Henry Brooke Lecture for BAILII, in which he implored the industry to think now about the implications of how AI is transforming human lives, “for fear of the frog in hot water effect”.
Considering the incredible possibilities, he said: “It may be that at some point in the future AI systems, at a stage well beyond simple algorithmic systems, will be developed which will have the fine-grained sensitivity to rule application to allow machines to take account of equity informed by relevant background moral, human rights and constitutional considerations. Machines may well develop to a stage at which they can recognise hard cases within the system and operate a system of triage to refer those cases to human administrators or judges, or indeed decide the cases themselves to the standard achievable by human judges today. Application of rules of equity or recognition of hard cases, where different moral and legal considerations clash, is ultimately dependent on pattern recognition, which AI is likely to be able to handle.
“But we are not there yet.”
Indeed we are not, but, increasingly, law firms are investing in AI and related technologies to dramatically speed up traditionally laborious processes, such as analysing the extensive files of documents that pile up in any property transaction. Cutting-edge software can review and extract the key data in a fraction of the time, freeing up lawyers to concentrate on more important work – and, as a result, reducing fees.
We asked experts at four major firms to explain how they currently employ AI in their real estate teams, and how they plan to develop its use over the next five years.
A client-focused approach
“Deploying AI for us is centred around the benefits it can bring to our clients in terms of cost savings through efficiency,” Sharon Jenkins, senior legal operations and project manager in the real estate innovation team at CMS, told us. “It is something we work with our clients to achieve.”
For Mike Scott, head of real estate at Cripps Pemberton Greenish, it is “important that clients make demands of their law firms” and that all industry participants actively look for ways in which tech can improve the way they operate. “Recently, we have been spending time talking to our clients and contacts about how tech could help to improve every stage of the property lifecycle.”
Scott predicts that the use of AI tools will be commonplace for large-scale real estate due diligence projects over the next few years, and that, together with automated document production, blockchain and bitcoin, there may be a time when real estate transactions “can be undertaken in minutes rather than weeks”. In the shorter term, he added: “We will have bespoke software which can not only automate the production of nearly all first drafts but will also interrogate and ‘red flag’ hundreds of scanned documents within a matter of hours, rather than days, freeing up time for our lawyers to focus on the complex and more commercial aspects of their work which requires valuable human judgment, something that we do not see AI replacing.”
Looking ahead
Geraint Thomas, real estate partner at Eversheds Sutherland, wants AI to help his firm “glean market trends and insights from our own work and activities, where there is a great deal of hidden value in unstructured data”.
He added: “Over the next 20 years, we believe structured and unstructured data will become much more accessible. Land Registry search data and public record data will be easily mixed with private transactional data.
“As transactions become more digitised, AI will be applied effectively to crunch data, give an instant insight into clients’ property portfolios, flag issues and even manage best practice. The spread of AI will definitely depend on how quickly participants in the real estate space, including public authorities, adopt these changes and adjust their approaches. However, we believe digitisation will make the way we transact and manage property easier, swifter and cheaper.”
Looking at the next step, Jenkins said that digitisation of contracts – through the creation of so-called “smart contracts” – is progressing at pace: “There may come a time, in the not too distant future, when this technology has as big an impact on real estate transaction work. The need for AI products to extract data from leases and other documents may become obsolete if the lease itself is created in a digitalised form that offers those data points at source without the need for any extraction from the paper version of the lease.”
Hurdles to clear
However, Nicholas Kirby, managing associate at Mishcon de Reya, offered a note of caution, pointing out that much of the information lawyers want to put through AI systems is either locked up in firms’ systems or confidential, while public data sets are quite US-centric.
“The other major challenge to using AI tools is the lack of standardisation,” Kirby said. “The greater the difference in the form of document and the language used to describe the obligations within it, the harder the AI tool finds it to locate the data we want to extract. So, while there are millions of images of cats labelled by human beings which help Google teach its AI to identify cats in pictures automatically, we don’t yet have large data sets for where rent is found in leases.”
As a result, the initial training of AI models and tools can be time-consuming.
Firms also have to be mindful of lawyers’ attitudes towards AI and the impact this has on adoption. Kirby said: “We have all seen the articles and reports that detail the threat of AI, with ‘robots replacing humans’, and so naturally there is still a lot of fear and mistrust. This is why we are working really hard to ensure there is a strong education programme in place to help our lawyers understand how and why we are using AI, and the benefit this will have on their everyday lives.”
But, once these challenges are met, Kirby is excited to witness how technology will transform the sector over the coming years and decades: “David Kelnar of MMC Ventures summed it up quite brilliantly, by saying that ‘AI tech advances are making the previously impossible, inevitable.’ This is certainly true for real estate.”
CASE STUDIES: How four firms are embracing artificial intelligence
CMS
Sharon Jenkins, senior legal operations and project manager in the real estate innovation team
How is AI being deployed in the real estate department?
We have invested in Kira as our AI contract and lease analysis platform. We use it to speed up lease reviews/extraction and verification of tenancy schedules as well as to extract key information from official copies on portfolio purchases. For some clients we have been able to train Kira to identify specific provisions more accurately.
By using Kira as a review platform, it allows us to quickly and accurately extract and compare key data points across documents. While manual effort is still required to initially train and then to check, correct and supplement the output, Kira significantly speeds up a document review exercise.
How are you intending to develop AI use further in the next five years?
Developments in the use of AI in property transactions are likely to be along three lines. We are starting to see tools that can:
- do an increasing amount of the analysis of leases – to determine if a lease (or a specific provision) is acceptable and offer some risk-based scoring. The best results will come where a clear playbook can be defined about what is acceptable;
- help with the negotiation of leases – using playbooks, fallback provisions and previous examples being able to analyse and suggest changes to a lease to bring it in line with what a client can accept. This is likely to be of more benefit to occupiers negotiating leases and could make the negotiation stage quicker and more consistent;
- help extract, understand and analyse data points from leases and other documents to help drive decisions.
We are exploring the potential of robotic process automation (RPA) to automate small repetitive parts of a process (rather than trying to automate the whole process) – in particular to assist with finding and processing routine pieces of information (eg e-billing info/Land Registry information/company information) to take as much administration away from our lawyers as possible.
Cripps Pemberton Greenish
Mike Scott, head of real estate
How is AI being deployed in the real estate department?
We have been working with a machine-learning software company to consider how we improve the speed and efficiency with which we review and analyse large numbers of legal documents.
We have found this software to be of most value on large-scale corporate sales and acquisitions projects. These typically require hundreds of documents to be reviewed against a set of parameters to identify whether they contain the relevant provisions and to enable the financing deals to go ahead. The programme carries out an initial sort and review of documents (faster than any person is able to) leaving the lawyers to focus on the results and more complex elements of the transaction.
The AI platform allows the results to be made visible to the whole team, aiding communication and project management. This software is also a useful tool to assist with asset management work generally in order to identify specific information needed across a large retail portfolio, for example. The AI flags up key information which helps our lawyers to provide clear and comprehensive advice much faster than they would otherwise be able to.
How are you intending to develop AI use further in the next five years?
Looking at the decision-making elements of AI, we are working on bespoke software which drafts documents based on preset parameters. This initial document automation stage (for example, where the inputting of a simple heads of terms template produces a draft lease in an instant) removes what can be a slow administrative process with a view to producing a first draft within a fraction of the time. Currently this is most applicable to work on commercial lettings and licences, but we are also adapting this to a wider set of work streams across our construction, planning and development teams.
To complement the work we are doing on AI, we are also trialling voice-recognition technology to automate elements of our internal processes. It is early days for this technology but its potential to improve efficiency is clear and, with the technology designed to operate on mobile devices, it will support a flexible working environment, which is important for us. We are also piloting the use of digital signature programmes to remove some of the administrative burden for our clients in signing contracts and other documents.
Eversheds Sutherland
Geraint Thomas, real estate partner, and Gurjit Atwal, co-head of global real estate and planning
How is AI being deployed in the real estate department?
GT: We use AI tools to assist lawyers when reviewing leases and official register of title.
For example, when we advised Network Rail on the sale of its commercial estate we used AI to identify leases in the portfolio that were contracted out of security of tenure provisions within the Landlord and Tenant Act 1954. Using AI, we reviewed thousands of leases on this particular clause within a matter of hours through “clause teaching”. This compares to what would have been days of manual review by a lawyer.
GA: Principally, client service excellence – weaving market leading technology into the way we deliver advice to our clients allows us to provide greater consistency, efficiency and speed without any compromise, and often enhancement to quality.
Adopting AI on appropriate deals allows us to review documents in bulk quickly, accurately and without incurring prohibitive costs – a win-win situation for us and our clients.
How have clients responded and how do your initiatives dovetail with what they are doing in the AI context?
GA: Positively; on high-volume projects the option of AI proficiency is now firmly embedded into clients’ expectations and we are proud to say that we are meeting them. Legal tech solutions are fast evolving. Our challenge is to stay ahead of the curve and bring those solutions to our clients.
We are also collaborating with investors, agents and OSCRE to agree and utilise property data models and schemas, and searching for practical ways to gain access to the data they need, swiftly and cost-effectively.
Mishcon de Reya
Nicholas Kirby, managing associate
How is AI being deployed in the real estate department?
The primary application is the use of AI to streamline how we review documents. We use Kira for our document and lease reviews. Tools like Kira help to improve the accuracy and efficiency of document review across different practice areas including residential, commercial, tax, construction and planning.
How are you intending to develop AI use further in the next five years?
We are starting to use machine learning to help our fee-earners scope and predict their work. Through rigorous analysis and labelling of previous matters, our data science teams are able to simulate key characteristics relating to different work or matter types. For example, in real estate litigation we can predict how much work resource, time and effort will be required for matters that do/don’t go to trial, and predict likely events that might occur to help our lawyers react and stay ahead of the game.
What are the chief benefits to practice and to clients?
Within our firm, the principle has always been to equip our lawyers with the tools and technologies that allow them to do what they do best: be lawyers. The more we can use technologies to speed up or automate certain tasks or processes, or use technology to unearth data across large sets of documents, the more time we can spend providing high quality advice to our clients. This speed and efficiency translates to better outcomes for our clients, but also helps the continuous development of our lawyers. Machines and humans make a better team than a machine or human alone.
To send feedback, e-mail jess.harrold@egi.co.uk or tweet @estatesgazette