By Elizabeth Basten, Chief Marketing Officer at Clarilis.
There’s a prevailing sense of optimism in commercial property circles right now. Tentative murmurings about a real estate rebound have turned into more confident market outlooks. The prospect of a prolonged upsurge in activity weighs heavily on general counsel and private practice lawyers across the sector, as workloads increase. In response, law firms in particular are increasingly turning to technology to help their real estate clients bridge the gap. However, inhouse cost constraints are as present as ever. The pressure is on.
When you take into account the fact that the average attrition rate in the top 1,000 law firms increased by 37% in the last year, (as reported in Artificial Lawyer, Nov 21) with poor mental health and burnout being mentioned far more than it should, the challenges are clear. Do more, faster, and do it in a way that inspires new and existing talent to stay loyal, as well as ensuring lawyers have the capacity to do (more of) the high quality type of work they trained to do.
Do the right thing, do it well and do it better than anyone else
The pressure has always been there, as responsible and inclusive employers, to ensure good governance is intrinsic in all we do. Now of course, we must do all of this in a sustainable environment, with a reduced carbon footprint, as the (LED) spotlight on ESG shines brighter than ever. Adding to the pressure of more activity and less mid-level associates, is the need to devise, embrace and deliver on your ESG agenda knowing how, where and when to adapt.
Clients of law firms are also needing to adapt, with government policies forcing developers, landlords and occupiers to re-focus on energy efficiency and sustainability throughout the life cycle of a building. A ‘green lease’ that incorporates clauses whereby the owner and the occupier undertake specific responsibilities/obligations with regards to the sustainable operation/occupation of a property, for example, is becoming increasingly commonplace.
With interest increasing in tech-enhanced and high-performing ESG properties, digital transformation is rippling through every stage of the real estate life cycle. According to Grant Thornton, ‘ESG factors are now more business-critical than ever before, to the point of determining who will do business with you.’ There is increasing demand from clients of law firms to see a firm’s own ESG credentials and the data behind them. This in turn is forcing forward a cultural revolution in how lawyers deliver services to this sector.
Re-boot, re-set, ready to rebound
Significant changes with the redrawing of the commuter belt, a greater adoption of hybrid working, an enduring appetite for country living but also the resurgence of town and city markets have all contributed to a state of flux, yet the managed real estate market grew to $10.5 trillion by the start of 2021 (MCSI, 2021). According to the Global Outlook Report (2022) from Savills, the sector has shown ‘resilience in the face of the pandemic with reports of total real estate volumes increasing by 38% in the 12 months to November 2021, compared to the same period in the previous year’.
At the start of this year, the Intelligence Lab at Knight Frank reported on how UK market valuation appraisals (a leading indicator of supply) were at their highest level in ten years for the month of November (21). The figure was 6% up on November last year and 20% since November 2019. ‘With the distortions of the stamp duty holiday and end of the furlough scheme behind us, it adds to the evidence that sellers are positioning themselves to act early in 2022.’ The vaccine rollout most certainly also bolstered market confidence, but it’s clear that the rapid adoption of technology during the pandemic has been a force for change itself.
How to keep pace?
‘The real estate industry itself has been transformed by technology,’ says Miri Stickland, Knowledge Development Lawyer for Forsters’ trailblazing real estate practice. ‘We have smart buildings which know when to turn the air-con and lights on, and we’re starting to see tenants pay their rent in crypto-currency. The way in which we provide legal services has to keep pace with this.’
Is LegalTech the answer? No, not on its own. There also needs to be a supportive culture and mindset in the law firm to choose the right solution to solve the right problem. So, where a sustainable footprint, a loyal and attractive talent pool and increased lawyer satisfaction and wellbeing are essential, where is a good place to start? In a document-heavy transactional environment, many law firms have already started with automated drafting. But where to apply it?
Reduce redlines, red pen and red eyes at 2am
In an ever-changing world, one thing you can rely on with a real estate transaction is a hefty wedge of documentation. Real estate transactions are rarely recorded in a single document. Even a straightforward grant of a new lease may require, in addition to the lease itself, statutory notices and declarations (often with accompanying letters to multiple parties), a rent deposit deed, a licence for alterations – the list goes on. Most of these documents are routine, standardised templates that a junior lawyer (under the watchful eye of a senior colleague) in the past would have to laboriously customise. Often equipped with nothing more than print outs, a red pen, and an eye for detail, sometimes on the 2am shift when the pressure is on.
This repetitive (but vital) drafting precisely records the terms of a real estate deal, and as a result accuracy is crucial. Ideally, on the basis that every document in a suite relates to the same matter and factual matrix, the technology would also draft the entire suite without unnecessary fuss or complexity. Lawyers need to have confidence in the quality of the output. Automation should make our lives easier!
Deeper automation solutions (of which Clarilis is one) are created specifically to automate complex suites of legal documents using a highly structured approach to automation that means entire suites of complex legal documents can be automated from a single questionnaire. This means in document-heavy practice areas with well-developed precedents (such as real estate) drafting time reduces from days to hours.
UK-based law firm, Birketts, first introduced Clarilis’ automation technology into their real estate practice back in 2016. ‘Filling in a Clarilis questionnaire takes about 15 minutes,’ explains Marcos Toffanello, the firm’s Head of Knowledge Management. ‘From this, we typically get an 80%-ready first draft. This effectively means the client is investing in the last 20%, and that’s the unique part of the deal that makes the biggest difference to them.’
Real Estate and the LegalTech Landscape – Learn More
If you are interested in real estate knowledge management or innovation, then join real estate knowledge lawyers from Travers Smith and Forsters as they discuss the challenges of today’s market, the impact LegalTech has had on recruitment and retention, the ESG agenda and day-to-day practice innovation.
The event will also include an opportunity to see deep automation of real estate suites in practice, including a lease suite, sale suite, construction suite and report on title. Register here.
[ Artificial Lawyer is proud to bring you this sponsored thought leadership article by Clarilis. ]