You won’t get far with any commercial real estate transaction without encountering the law. From due diligence, to partnership structuring, and transaction closings, legal questions are inescapable in commercial property acquisitions.
In this post, we look at how technology is impacting the legal world – a separate, but related, industry to commercial real estate. Both industries offer plenty of opportunity for innovation, and despite changing tides, they have historically been slow to embrace efficiencies.
DealStat had the opportunity to speak with someone who knows both real estate and law well, and has stayed at the forefront of innovation. We sat down with Lonnie Halpern, a partner at A.Y. Strauss whose law practice concentrates on commercial real estate transactions, joint ventures and financings. Lonnie’s background as a property investor and technology entrepreneur provides unique perspective on real estate technology. In this conversation, we asked for Lonnie’s views on how technology is impacting the legal field.
DEALSTAT: How has your job as an attorney changed as a result of technology since you began practicing?
LONNIE: When I started, I spent a significant amount of time reviewing paper documents,in various conference rooms throughout the country. Thankfully, that practice has evolved and has moved from being less paper focused to being more digital, and requiring less travel!
Are there any specific companies innovating in legal-tech that you’re following?
As a transactional real estate attorney, I am very interested in technology that improves the efficiency of the drafting process. SmartDocs and Contract Express are two companies which help facilitate thedocument drafting process so that you can focus your time on the most substantive aspects of the transaction.
What are some ways you think attorneys’ day-to-day job, and required skill set will change over the next decade as a result of new technology?
The need to understand technology is no longer just a requirement for the IP attorney. Technology is becoming critical to more and more practice areas. For instance, real estate attorneys must understand modular building practices, co-living / co-working business models, and SaaS (software as a service) arrangements in order to advise clients who are seeking to adopt these innovative strategies. In addition, securities lawyers must have an understanding of how the blockchain works if they are going to advise their clients on whether an ICO token is a security and will require compliance with various securities laws.
Even beyond securities law, how do you think blockchain could impact your industry long-term?
Blockchain is a disruptive technology and there is no doubt that it will affect many industries. Blockchain technology allows for the development of smart contracts (self-executing contracts). This has the potential of becoming a game changer, allowing for smart contracts to trigger events, such as distribution of funds and release of documents from escrow. I believe there is enormous potential for platforms which can be used by attorneys (or anyone who is not a computer programmer) to draft and review these smart contracts such as: EtherParty, BlockCat and EtherScripter. In addition, the team at Sagewise is creating a dispute resolution platform for when things go wrong with these smart contracts (no matter how smart these contracts are – things will go wrong!).
What about on the real estate law side?
Blockchain technology provides the ability to "tokenize" or create digital representations of assets. The idea of tokenizing real estate and using blockchain technology to record ownership has emerged as an early real estate use case. In fact, earlier this year the real estate blockchain company Propy launched a pilot program in South Burlington, Vermont for recording real estate conveyances. Using blockchain technology for recording ownership in joint ventures (equity syndications) and participations in loans may be another early use case for real estate. I am excited to see the evolution of this.
Another application of blockchain to real estate which I find very interesting was started by Decentraland which has created a virtual world where participants can buy and sell land using the virtual currency MANA. Owners of land can develop and utilize their property in many of the same ways that real estate is utilized today. It will be interesting to see how this evolves and the potential overlap between real and virtual properties, companies and services as well as the legal implications.
How would you compare the state of legal-tech and commercial real estate tech today?
Both real estate and legal industries have generally been slow to adopt new technologies and innovate. I feel that 2017 was a breakthrough year for real estate technology companies. Not only did we see a dramatic increase in VC investment in real estate technology companies, but many incumbent real estate companies have begun to embrace and invest in these technologies as well. I believe that the companies that have been the most successful have been adept at identifying real problems to solve and demonstrate a meaningful return on investment for their users. I feel that this is a critical lesson that should be focused on by legal technology companies.
Any other upcoming trends you find interesting in legal-tech?
I am really excited to see "design thinking" (an approach to problem solving which is user centered and embraces an experimental and iterative process) begin to be applied to law and legal technology. Margaret Hagan, the founder of Stanford’s Legal Design Lab is a leader in this space. The Legal Design Lab’s website is a great resource for anyone looking to learn more.
Interesting. That framework sounds similar to the iterative problem solving process involved in building a startup.
Exactly, design thinking has been embraced by many in the startup community as well as established companies to drive innovation. I am optimistic that the legal industry will be able to leverage this and other strategic tools to speed up the velocity of innovation.