PropTech Already at the Doorstep of Real Estate Business
BlabDroids are tiny cute robots asking strange questions such as: “What would you do if there were no laws?” Terrible question for a lawyer, but interesting to hear the many different answers – and yes, some people would immediately create laws. The sci-fi author Isaac Asimov also created laws: of Robotics.
János Tóth, Partner, Wolf Theiss Budapest
Robots and other intelligent applications are hot topics in almost all industries at the moment. As a result, lawyers also see an increasing demand in advice in these new areas which are substantively reshaping conventional industries, in particular with regard to data protection and security, intellectual property, consumer protection and regulatory laws. And as the real estate sector faces disruptive businesses, “PropTech”, an abbreviation for Property technology, is the latest buzzword jolting the whole sector.
PropTechs can refer to any application that offers new services for the real estate sector based on a business model that integrates information and communication technology. These services cover many areas, including planning and visualizing, construction, financing, transactions, leasing, usage, and property management.
In our robust region, we are experiencing incredible growth in the PropTech sector already, which is transforming booming real estate markets. Current product offerings already include home matching tools, crowdfunding, shared economy, smart utilities, building information modeling (BIM), smart homes and even smart contracts.
Many influential fora for the real estate sector have been debating extensively on the bright prospects for the PropTech segment, involving executives of real-estate services companies, developers and construction firms, as well as several high-tech startups. Somewhat less discussion has been around the potential legal risks related to PropTech solutions, though, including data privacy and consumer protection regulations, as well as the allocation of legal responsibility. One of the major challenges for all market players will be to apply existing regulations to these innovative solutions and to allocate legal responsibilities as different people build software, implement it, and operate the systems. It is especially important to adhere to data protection and data security regulations to prevent both damage to a company’s reputation and significant fines under the new EU General Data Protection Regulation (GDPR). A legal assessment would reduce any risk that courts would prevent new business models.
PropTechs owe their early success to the legal safeguarding of their business model as well as their innovativeness. It is vital for all stakeholders that these services stand on legally solid ground to prevent the operation and use from infringing upon the IP rights of others. Conversely, solution providers have an obvious incentive to protect their own services from infringement by third parties.
Some questions already exist, however, that the current regulatory framework will be forced to address: Is a virtual tour sufficient to purchase a property and still guarantee that any warranty claims are recognized? Will renters in future be able to demand a virtual inspection of statements and receipts for utilities expenses? Will it be possible to sublet a parking space by the hour? How will utility regulations allow retail landlords to invoice the electricity which visitors consumed when charging their electric cars? How can BIM best be integrated into building contracts? Can visualization give full representation of potential sources of noise and vibration?
Not all PropTech applications succeed, but those that do massively disrupt long-established businesses such as the hotel and tourism sector or the real estate agents-sector. Some react with legal arguments, others try – where possible - to integrate those new technologies into their own business models.
Some other technologies are in the early stage of development. Blockchain technology, mainly known for cryptocurrencies, is currently being tested for use in the land registers in Sweden, Georgia and Ukraine. Blockchain is considered a secure technology that can ensure a secure process for real estate transactions and mortgage deeds in the future. It will be interesting to see how swiftly politics reacts and whether other countries will follow this path.
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