Commercial real estate is almost always the second-most expensive items for a company of any size (the cost of employees is usually the highest). It’s a long-term commitment for a lot of money, so a savvy business owner wants to get a legal review before signing a lease. But attorneys can be expensive, and is it really going to make a difference?

Yes.

The two goals of a good commercial lease review are: 1) not to spend a fortune and 2) identify, quantify and mitigate risk. It’s important for the parties to understand what they are (and are not) obligated to do under the lease. If the landlord and the tenant don’t figure it out before signing on the dotted line, then they can expect to spend a lot more money and time with lawyers to get clarification.

Instead of living with uncertainty and hoping for the best, some tenants (and landlords) are turning to alternative resources, such as generative AI (artificial intelligence), like ChatGPT and all the other consumer-facing platforms. It’s a fast, cheap way to get answers to any question, right?

No.

In an ideal world, the parties to a lease would have access to a curated AI product created with guardrails that provide accurate legal information on the relevant topic, allowing them to understand the lease issues and get helpful guidance. In the real world, consumer-facing AI tools scrape up all sorts of information and disgorge it back without any sort of discernment as to accuracy or relevancy. Even good information, incorrectly or incompletely applied, can become misinformation. The danger is when this (mis)information creates false confidence that the tenant or landlord is adequately equipped to negotiate or review a commercial real estate lease.

As an analogy, if a person watches a lot of shows on TV about home flipping, that doesn’t really qualify the watcher to be a successful home flipper. Someone without medical training can spend a lot of time online learning about various medical conditions, but it doesn’t mean they have the ability to correctly diagnose that condition in a patient, much less suggest an effective treatment.

using ai in commercial leases

Generative AI, like ChatGPT, can’t actually think; it’s predictive text that is basically guessing what should come next in a sentence. Sometimes it’s really good, like for a fact-based question (how many square feet in an acre?), but when judgment or nuance is required (is this a common clause in a commercial lease?), then the results are usually between questionable and frighteningly inaccurate.

Most sophisticated commercial lease parties understand that when searching for legal information or advice online, they need to tread carefully, reviewing and verifying information from search results before taking any sort of action based on it. AI actually provides an answer to a question, which might be good or bad information, or completely irrelevant! AI can be very useful to translate and simplify legal concepts, and understanding is key to participating meaningfully in negotiations. Application of the legal concepts to a fact-specific lease review situation is another matter. Connecting users with “good” AI tools for their needs is an acknowledged challenge. Before anyone can effectively use any AI tool, even a “good” one, the user has to understand the limitations of the information- it’s just information, with no guaranty it’s being applied correctly to the lease under negotiation.

Instead of having to read and interpret or apply search results, users are more likely to take the answers AI generates and run with them. The problem with that is that AI is really good at giving answers, but there really isn’t any control over whether the answers are helpful or downright harmful in a specific lease context. Remember, it’s generative AI and it’s guessing what text is most likely to come next, based on whatever data set its been provided (and who knows if it’s a good set of leases or not). AI doesn’t actually understand the question (or the answer it provides).

AI won’t tell you if the answer it provided is wrong, or nuanced, or if it has exceptions, or if it making up information altogether (although it looks like if AI is confronted with its error, it will apologize). It’s up to the landlord or tenant using AI to verify the answer and its accuracy. If not, then reliance on the misinformation has its consequences: the lease won’t be a fairly negotiated meeting of the minds, but a mishmash of semi-coherent legal concepts that may, or may not, provide clarity for the landlord and tenant.

AI VS. JD – USING ARTIFICIAL INTELLIGENCE OR AN ATTORNEY IN CRE LEASES

Attorneys often write articles or newsletters on a real estate leasing or other legal topics and publish them online. This is to provide a resource and information to the public, to demonstrate their knowledge, and (ideally) to win clients. These authors will pretty much uniformly put a disclaimer at the bottom of the article, stating that it’s not legal advice, it’s just information, and the information shouldn’t be relied on as legal advice.

A search online for legal information, or a query to AI, will return results, which may or may not be relevant or useful, but the landlord or tenant has to review the response and make a judgment based on the information provided. If they want certainty, then they need to hire an attorney to use their training and expertise to provide the judgment. AI acts like its giving specific advice, but it’s not. AI isn’t providing information, it’s providing its best guess, which is sometimes inaccurate, incorrect, or irrelevant.

If an attorney gives bad advice, and the client relies on it, there are specific consequences, which have a direct impact on a lawyer’s ability to practice law and make a living. Lawyers know this and (should) take great pains to make sure to deliver specific, tailored legal advice when hired to do so. There’s no accountability in AI, so the landlord or tenant who relies on inaccurate, wrong or just plain awful response is out of luck regarding a remedy. Regulators don’t show much interest, and individuals aren’t having much success, in suing AI providers for bad legal advice.

(There’s also a question, is AI is engaging in the unauthorized practice of law (UPL)? It’s a crime if a person does it, but how to keep a machine system from providing misleading, wrong or even dangerous information that looks suspiciously like advice on a legal matter?)

Here’s a secret- attorneys also use the internet in research. The good news is that they have the training to review and evaluate the results. Often, it’s a starting point for additional research or identifying relevant resources to actually get an accurate, applicable answer. It’s hard enough for an experienced attorney to sift through the (mis)information on the internet and understand what is relevant and/or helpful, so the clients will have an even tougher time.

The better the AI tool, the more trust it engenders, so the bigger the risk and impact of a mistake. Legal professionals often have access or subscriptions to vetted (and expensive!) legal resources that aren’t available to their clients. Attorneys have the training and experience to apply the results to the specific lease under negotiation, and to advise the landlord or tenant client accordingly.

Generative AI has a mandate to provide an answer, not a good or right answer. Even asking AI to cite its sources can create problems, since sometimes just makes up answers when there aren’t any actual facts. As long as there is an answer, then AI has done its job. The correctness of an answer is secondary. Was the question was answered completely, or is important information is missing? AI won’t know, but a competent real estate attorney will.

A combination of generative AI and commercial real estate legal knowledge can be the best of both worlds. AI can produce a lot of information quickly, and then the attorney can examine the results and return an informed response. The goal is to reduce the time (and money!) spent on commercial lease review, without sacrificing the quality of the results.

As a commercial real estate attorney with a focus on leasing activity, I am sensitive to client budgets and requirements in commercial lease reviews. Let’s discuss how we can use time-saving tools to create legal certainty in your lease negotiations.

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