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Blog Jul 07, 2016

The Signs of the Times: Deep Learning Technology in Law & Real Estate

The real estate industry is discussing about the usage of a certain software. In-house lawyers want to save costs with LEVERTON’s technology but some law firms refuse to collaborate. The ones that wait for too long will lose more than just their money – they will lose their credibility as modern service providers.

Benefits at a glance:

  • Faster and easier review of lease documents
    “We believe that LEVERTON can help with facilitating our everyday workload considerably” Joachim Kämpf, Associate General Counsel, ECE
    “The entire process can be carried out significantly faster with LEVERTON’s preparatory work” Dr. Niko Schultz-Süchting, Partner, Freshfields Bruckhaus Deringer LLP
  • Lower due diligence costs
    The work was previously done manually by Associates in law offices and depending on the law office, could cost as much as €350 per hour. “Especially international, large law firms have been under pressure to decrease due diligence costs for quite some time already” Matthias Meckert, Head of Legal, PGIM Real Estate Germany AG
  • Less routine work – more time to focus on more complex tasks
    “By utilizing this technology, our lawyers can focus on high-end advisory instead of repetitive, less demanding work” Matthias Meckert, Head of Legal, PGIM Real Estate Germany AG

Exploitation of artificial intelligence to accelerate
the due diligence process

LEVERTON’s software extracts pre-defined information from lease agreements for risk assessment in due diligence processes. The technology learns to recognize various phrases in order to extract the correct information. This information can therefore be both simple information such as the name of the tenant and leasable area, or more complex data such as information regarding option rights. This extracted information will then be clearly presented in a spreadsheet so that the user has all relevant details on hand.

LEVERTON’s software achieves up to 90% accuracy with this automated extraction of information. To ensure further accuracy this process is followed by a twofold manual quality control. Although manual quality checks are required, the software uses self-learning technology, which enables the software to learn to identify recurring phrases and the more the clients use it; the better it will perform.

The ones that wait for too long will lose more
than just their money – they will lose their credibility
as modern service providers.

Despite the benefits of implementing LEVERTON’s software, the real estate industry is still not unanimous on the adoption of the technology. In-house lawyers have reacted positively towards the new software. Nevertheless, larger, global law offices are yet to be convinced about adopting the new technology. Large law firms have previously been under pressure to minimize due diligence costs, mainly due to high hourly wages. For this reason, law offices with lower hourly wages have been preferred for running due diligence processes, while the negotiation of the transaction is still trusted to renowned firms.

However, since the due diligence phase yields large revenues, the larger law firms would like to continue taking care of both negotiation and due diligence phases. Therefore, they also have mixed feelings about the development of new technology that would substitute their work. Smaller offices seemingly have been more flexible and have used this as an opportunity to try something new and gain the trust of clients. Nonetheless, what is certain, is that those firms (large or small) that are not ready for the digital evolution, will have a competitive disadvantage. They will suffer in terms of costs and innovation capabilities, both key for the continued successful servicing of clients.

New partner model between LEVERTON and law firms

Historically, LEVERTON has taken care of the extraction process and both quality checks. Now, however, LEVERTON is working together with legal offices and the second quality check is carried out by the lawyers themselves. Thereby, LEVERTON’s service will work in tandem with the law offices’ services and can be priced together for the client. This serves as an appealing solution for law offices whose focus is lowering the costs of due diligence

Freshfields Bruckhaus Deringer, one of the top law offices in real estate transactions, is the first to partner up with LEVERTON in such a way. Lawyers were trained to review the data that is delivered from the software, in order to carry out the second quality check. With the help of LEVERTON’s software the entire process was executed considerably faster than usual. The processing time of each contract decreased from three hours to 45 minutes. For now, Freshfields will still inform its clients whether they are using LEVERTON’s software; however, in the long-run, the software will be self-evidently applied without separate notice to clients. Partnering with LEVERTON has signified Freshfields investment in pioneering legal practice and the LEVERTON product has also helped secure the continued trust of their clients, who want to save costs and who see LEVERTON as a positive development for the industry.

Disruptive technology to revolutionize the global
real estate industry

LEVERTON was founded in 2012 with the aim of revolutionizing the due diligence processes in real estate transactions. The technology can be exploited for revising homogenous lease agreements in order to speed up the entire due diligence process. Today, the management team is ensuring that there are hardly any real estate lawyers in Germany that have not yet heard of LEVERTON’s software. The team has now grown to 50 employees, with a head office in Berlin and offices opening in London and New York in the near future; now that LEVERTON has set a foothold into the German real estate market, it is time to expand globally. And in the future, the software will be introduced to new branches outside of the real estate industry.

The original and full article “Die Zeichen der Zeit” (by Christin Nünemann) was published in German in JUVE Rechtsmarkt 07/16.

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