It is challenging to imagine the impact Covid has had on various industries and the effect that it will have in years to come. For some sectors, like real estate, changing client behaviours lead to new demands. These demands may involve enterprises trying to see if there is room for negotiation of more flexibility, to appease their agile workforce or soon-to-be homeowners relying on a more digitally-friendly purchasing journey. All these demands, alongside the more standard questions about leases, must be dealt with – by lawyers in real estate practice groups.
The challenge is that lawyers face a variety of legal processes. Most matters begin by reviewing the lease with a fine-tooth comb which is still a manual process. It’s a complex task. The time required for the lawyer to do it properly is at odds with how much the client is willing to pay for. However, with the emergence of legal technology, clients are demanding faster turnaround times and will no longer accept the traditional service delivery model as the only way.
Real estate practice groups have their work cut out trying to stay on top of these new demands from clients and regulators alike. They need to have the tools to deal with unforeseen questions and demonstrate the agility required to handle such requests promptly.
The feasibility of fees
Tension is building between client and law firm on the feasibility of fees. While it is reasonable that the client wants to see results faster, it is also important that quality assurance is guaranteed, especially in law. Questions about a law firm’s credibility arising from process failure are detrimental. However, processes are evolving. Covid has given rise to more questions than answers, especially for contracts, than ever before.
“This time around, expect that procurement teams will play an even larger role and that there will be a greater focus on commercial arrangements that provide clients with greater cost certainty, either through a fixed or capped arrangement or through one that more closely aligns fees to the outcomes achieved. Client demands and competition from alternative legal-service providers will also likely pressure high-cost real estate, staffing pyramids, and other elements of the traditional service-delivery model.”
~ McKinsey & Company – COVID-19: Implications for law firms
Efficiency without the loss of quality
The process of creating a full lease report involves reading the lease and then reporting on any areas which are problematic or unusual for the client. For example, if a client wanted to buy the freehold of an office building, they would like to know the likely issues that might occur in the process, i.e. what are the chances and abilities of the current tenants to terminate their leases. Imagine if the client had multiple office sites with leases, it would often be even more time-consuming for the lawyers to produce all the necessary reports.
A common misconception with legal AI tools is that they can review and extract data but are limited to delivery. With the new wave of legal AI, which focuses on accelerating end-to-end legal processes, the real value is in the form of near client-ready lease reports can be achieved. Tools like Della are used by real estate practice groups to significantly reduce the time it takes to create lease reports for clients.
Let’s take a look at an example with a UK law firm.
Creating a full lease report using AI
The firm spent approximately 3 hours completing a detailed analysis of a single lease report. Typically they were produced as a Word document and would involve manually reviewing the lease and then populating these reports. They frequently worked with a fixed-fee arrangement, meaning the time spent was irrelevant. There was a consensus that this was not the best use of time, the opportunity cost was high.
Analysis of the report required more time than the clients were willing to pay for, leading to large write-offs. The work still needs to be completed to free up time for other chargeable projects – the process needs to be more efficient.
How did the law firm use Della?
The firm worked with Della during an intensive 3-month period to create an end-to-end solution to accelerate the entire lease review process.
The task involved creating a detailed checklist of questions to cover expected reporting points. For example, “What is the effective date?” “Is a security deposit required?” and “Are lease extensions permitted?”. The exciting part involved the product and AI team working on the extractive reporting capabilities to automate the production of a lease report, created in the law firm’s template style. We then fed this through our templating system, meaning we could generate text in response to the points extracted by the AI. This text automatically populated the report, only needed minor tweaks by an associate to get it in a client-ready format.
We recently created a guide called “How to accelerate processes in your real estate department using AI“, which dives into more detail on how Della can automate the real estate reporting processes and save firms a significant amount of time. The guide also covers the additional use cases for real estate departments, including drafting letters in house style, creating exception reports and conducting tenancy schedule checks.