Legal Tech Will Be The Root To Accelerating Commercial Property Asset Management
In July, the concept of digital signatures opened up opportunities for the property sector. In response to the global coronavirus pandemic, the Land Registry changed the rules about accepting digital signatures. Chief executive Simon Hayes described the move as “a keystone of a truly digital, secure and more efficient conveyancing process”.
While accepting digital signatures may be seen by some as a relatively small detail, it is a significant leap for the commercial property sector, which has in the past been considered to be a traditional and paper-based industry. However, the direction of travel is now toward the integration of increased levels of technology as DLA Piper Partner - UK Head of Real Estate William Naunton said.
“We have just launched a platform to carry out digital asset management for real estate clients and we believe it is just one step of many towards a more online-dominated future for property deals,” he said. “Use of legal tech in real estate transactions is increasing. We already use artificial intelligence for lease reviews and document automation for simple document production tasks, and we’re in the process of creating a new portal to store client needs in a more interactive way than at present. Tech solutions integrated throughout the life of a property is increasingly becoming the way things are done.”
DLA Piper’s product, Release, will help speed up a crucial element of managing commercial property that is often overlooked by law firms, DLA Piper Partner – Real Estate Katie Jacobson said. Release will facilitate the entire digital asset management process, from streamlining negotiations with prospective tenants to the documentation of contractual terms and subsequently with the ongoing management of those tenants.
“Many law firms focus on a narrow part of the lifecycle of property ownership, either just working with investors on acquisitions or portfolio sales or simply focusing on the asset management piece,” Jacobson said. “We want to work with clients right from funding and acquisitions, through asset management to exit. This is a full cradle-to-grave service for the institutional investors that we work with.”
A Much Faster Process
Until now, the first hurdle for a landlord and a tenant to scale when they embark on a deal was to agree heads of terms. After weeks, if not months, of negotiating, an agent creates the document, which is then sent to a lawyer who then drafts a lease by filling in the blanks with company names and details such as lease length and rent. This takes perhaps a day to get out.
DLA Piper's Release addresses the wasted time inherent in this process and, for example, reduces the filling out of company names, lease length and rent down to the click of a button. Rather than spend time producing a large document each time a lease is drafted, an agent will be able to input details into Release, enabling the lawyers to produce the first draft of the lease instantly together with the whole suite of necessary documentation that accompanies a new letting such as a licence for alterations or rent deposit arrangements. Where bespoke provisions are necessary, a lawyer can edit those elements after the basic draft has been created.
While software cannot take away the negotiation process between landlord and tenant, it can speed up the transaction once a deal is decided, Jacobson said.
“By creating a streamlined tech solution, we can offer a much quicker turnaround through consistency and automation,” she said. “Institutional landlords want to get the legals concluded quickly when transactions are agreed and, equally, tenants value certainty in the current environment. Previously, two parties would go through a lengthy process of negotiating heads of terms involving a lot of email traffic. Release streamlines and makes this process more efficient.”
Jacobson said that agents are already welcoming the transition to digital tools as everything is quicker and smoother. Using technology and online solutions will cut email traffic and reduce the ability of each party to change its mind.
Technology Up And Down The Chain
Once a lease is signed, Release can help to manage ongoing asset management. Several of DLA Piper’s international clients have been using the technology during the global pandemic to provide a streamlined approach to the granting of rent concessions, Jacobson said. Landlords that have allowed tenants to switch to monthly rent or been given rent holidays have used Release to set up a rent collection letter with different options, which is much quicker than creating documents for hundreds of tenants.
“Release will speed up processes throughout the whole asset management process, not just during the initial lease negotiations,” Jacobson said. “At the end of the project, a property manager can export details such as lease length and break clauses straight from Release into their own property management software, rather than pull information from a 60-page document.”
Technology is creeping into all aspects of commercial property transactions, but the DLA Piper team said that asset management is one of the most straightforward areas to introduce tools such as Release. Other areas, such as acquisitions and sales, will undoubtedly follow as the technology becomes more sophisticated. The Land Registry’s decision on digital signatures in July certainly gives a clear indication of the desired direction of travel.
This feature was produced by the Bisnow Branded Content Studio in collaboration with DLA Piper. Bisnow news staff was not involved in the production of this content.