All businesses use contracts to regulate their dealings. For many firms, this may include a significant volume and variety of documents, covering most aspects of the business. In the event of a proposed regulatory change, going through all these documents to identify relevant provisions will be both expensive and time-consuming.
Two recent events have had a major impact on the real estate dealings of businesses around the world.
Firstly, the global coronavirus pandemic has resulted in the implementation of lockdown measures in many countries that require commercial premises to close for the duration of the lockdown. Accordingly, it has become important for businesses leasing premises to establish precisely their rights and responsibilities during this time, as well as those of their landlords.
Further, in 2016, the International Accounting Standards Board published a new accounting standard for leases, IFRS 16, taking effect on 1 January 2019. This new standard requires lessees to recognise most leases on their balance sheet; a significant departure from IFRS 17. Companies across the globe were required to examine all their legal documents containing leases in order to comply with these regulations – not a simple task when potentially thousands of documents are involved, traversing jurisdictions and languages, and where some contracts may contain both lease and non-lease components.
These events highlight the reality of operating a business in an increasingly globalised world: compliance with regulations has become more complex, as global events influence domestic rules and international regulations affect local companies. More than ever, businesses need to find a way to comply without incurring too much expense or wasting too much time.
Compliance with regulations has become more complex, as global events influence domestic rules and international regulations affect local companies.
The use of artificial intelligence to abstract, review, identify and extract key provisions from a lease provides a clear solution to the problem of balancing compliance requirements with the need to maximise efficiency in a business by saving time and money.
The lease abstraction software developed by Cognitiv+ is an example of this type of solution.
The team at Cognitiv+ employs their expertise in natural language processing, vision AI and deep learning to create a suite of products to improve value extraction from legal documents. In relation to lease abstraction, features of the software include automatic analysis of lessor and lessee obligations including prohibitions, discretions and deliverables, and automatic extraction of key leasehold clauses.
For a quick breakdown of how the software works, firstly any lease documents will be duplicated in an identical digital format, allowing information to be captured in its original format, retaining legal integrity. This will also allow companies to have a full digitally elastic search of their leases. The contents will be extracted, and the results presented in a filterable Excel spreadsheet, or a summary in Microsoft Word.
Extracts from the lease can be merged into a letter, report or notice. Importantly in the context of lease documents embedded into a larger contract, the system will continue to improve in accuracy over time through the use of the artificial intelligence allowing it to be “trained” by staff.
Features of the software include automatic analysis of lessor and lessee obligations including prohibitions, discretions and deliverables, and automatic extraction of key leasehold clauses.
While lease abstraction through artificial intelligence can provide many benefits to businesses, it involves some challenges. There are various legal technology solutions available that incorporate artificial intelligence but choosing the most suitable solution may require an understanding of not only the business’ needs, but how these needs will interact with the technology. Further, implementing any new technology within a business is always potentially challenging; even more so when that technology is different from the enterprise resource planning or contract lifecycle software most staff may be accustomed to. The difficulty experienced in overcoming these challenges will differ between businesses, depending on general levels of technological literacy and experience with implementing these solutions.
It is with these challenges in mind that SYKE was created in 2016, with a mission to support the transformation of the global legal industry in an increasingly digitalised world. The fastest growing independent legal technology firm in the world, SYKE helps law firms and corporate in-house legal teams to choose, buy and implement legal technology, in addition to developing legal technology solutions internally.
The most suitable solution may require an understanding of not only the business’ needs, but how these needs will interact with the technology
As SYKE’s team of legal engineers is made up entirely of lawyers or ex-lawyers, it is able to provide end-to-end support and advice to businesses based on their own experience of the market. This allows businesses to reap the benefits of implementing these solutions, while avoiding the challenges outlined above. Further, as SYKE retains a product-agnostic approach to procurement, businesses can be assured that the most appropriate tools for their needs will be selected. Its global team of legal engineers, based in the UK, Europe, Australia, Malaysia, Singapore and India, bring their experience of working in different countries and in different languages to each project, allowing for a nuanced understanding of how firms operate in various contexts.
Addressing both the benefits and challenges of using artificial intelligence to abstract provisions from leases, SYKE and Cognitiv+ are well positioned to help businesses to navigate the complexities of operating in a global, digital environment. All that remains is for businesses to decide on how they want to respond to these changes.