The Legal Implications of Commercial & Corporate Real Estate Digital Transformation
Potential risks, liabilities and contractual nuances should be a primary concern for commercial and corporate real estate owners who seek Digital Transformation. Owners should consider how laws related to data, privacy and cybersecurity frame the scope of Digital Transformation.
Assessment of applicable legal boundaries can help owners develop a framework for a transformation that incorporates risk avoidance and preservation of opportunities during third party contract negotiations. Additionally, attention to such legal implications can improve organizational agility and flexibility by enabling the development of a cache of legal documents designed to simplify and incorporate third party services without extensive negotiation or unnecessary assumption of risk.
An owner may contemplate a Digital Transformation that includes activities like the collection and analysis of data, which are subject to local, state, or federal regulation. As with any entrepreneurial endeavor, owners should understand a new regulatory environment prior to entry. For example, a portfolio real estate owner may determine that it will upgrade all security systems to incorporate advanced analytics, machine learning and third party facial recognition services. The property owner could face potential liability if portfolio tenants are healthcare providers and the system operate in a way that violates patients’ rights under HIPAA. Failure to observe regulatory requirements could result in fines and potential criminal liability. As part of a Digital Transformation, an owner may want to evaluate the unique circumstances of existing properties, tenants and agreements to identify whether any regulatory schemes could limit the collection and retention of data or other digital activities as well as an effort to avoid regulatory risk determine whether a digital benefit is outweighed by cost of compliance.
Owners should examine the impact of new technologies in contract negotiations and recognize that technology will advance rapidly during the term of existing and future agreements. A digitally resilient approach to contract negotiation could focus on the management of interests, activities and relationships of the parties to the contracts with respect to the creation, collection, interpretation and sharing of data arising from or with respect to the property or parties subject to agreement. Prudent owners should consider contractual provisions that will account for the occurrence of data incidents like a cyber attack or data leak, in commercial financing documents, purchase and sale agreements, and leases. Simple tweaks to widely accepted standard language can provide significant protection, if a data incident occurs, by eliminating ambiguity that could result in costly litigation. For example, parties to a purchase and sale agreement could agree that failure of either party to perform because of a data incident is not a default of the contract and that the parties agree to cooperate and proceed to closing in such an event.
Owners with Digital Transformations that incorporate third party services require contracts that allow the sharing of customer or tenant data, without additional liability, or loss of control. To avoid negotiation bottlenecks an owner may develop a standardized collection of service contracts including non-disclosure, privacy, indemnification and agency agreements with third party service providers to test relationships during short-term feedback loops. Without the ability to engage in feedback loops and share data quickly and security, an owner may struggle to keep up with the pace of digital markets.
Cybersecurity should be a top priority of any Digital Transformation strategy. While traditional cyber risk assessments focus on the value of data, the significant business interruption that accompanies a data incident like a cyber attack or a data leak has the potential to severely disrupt real estate operations and obligations. Perhaps even more significant, however, are the security risks that may accompany the utilization of systems that automate and control real world places.
As technology evolves, many owners will implement building control systems to reduce costs and optimize efficiency. Significant concerns abound regarding security of IoT devices. Unlike cyber attacks on data, attacks on building control systems can result in real world consequences including disruption, damage and death. Owners should consider threats to building control and automation systems as categorically similar to public infrastructure and utility threat, and invest significant time and resources into the deployment of systems that are designed to be secure. For example, a developer or property owner may want to carefully assess whether remote control and automation of systems like fire suppression, elevators, door locks and other critical components offsets the potential negative impacts that could occur if such systems are manipulated. Furthermore, great efforts should be taken to monitor and maintain the security and integrity of such systems to avoid unwanted and unintended consequences.
Cyber Insurance and Practical Approaches
Fortunately, many of the existing and emerging cyber risks are covered by cybersecurity insurance policies. Digital Transformation should include careful study of available cybersecurity policies and appropriate policy limits. Owners will want to be sure that appropriate third party policies are in place to effect more complete coverage of potential loses. Additionally, owners may avoid potential liability by focusing on the practical aspects of technology deployments. For example, many Owners utilize security cameras to monitor parking pay machines. It’s likely that at many of these locations such surveillance cameras are positioned in a way that captures an image of an individual’s credit card being inserted into the pay station. It’s unlikely, however, that many of the Owners of such properties have considered whether the orientation, resolution, and frame rate of a security camera, and how such security footage is stored create any sort of significant liability. In fact, it’s unlikely to even cross a property owner or manager’s mind, until law enforcement identifies the existence of such protected information on the Owner’s system after an attack, when significant third-party liability to the card holders has been created. From a practical perspective however, the significant expenses of this type of data loss could have been avoided by practical consideration of how and where building technology is deployed.
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Controlling a Building from Your Phone – OCCUPANT EXPERIENCE Platforms Arrive - 2/28/2019
The initial focus in mobile technologies was on meeting room reservations; then came lighting, heating and cooling, then access control. Over the last 24 months it has become apparent that there are many more occupant experiences that can be delivered via mobile phone. Managing parking, reporting maintenance issues, ordering coffee, scheduling an exercise class, viewing security cameras, and other applications were quickly added to the list. With so many options and approaches available, what are the best strategies for occupant experience? Build versus buy, functionality selection, solution integration and ongoing support are just some of the topics to be addressed by the industries’ most respected professionals.
Chuck Niswonger has over 30 years of successful leadership experience in technology-related roles that range from operating his own consulting company (www.nicenets.com) to directing the IT strategy of a real estate investment management firm to manufacturing and technology-enabled education. Chuck has also been the chair of the Realcomm Investment Management (IM) Advisory Council for the last ten years, managing content selection for the conference educational sessions, IM forums, workshops and webinars.
Matthew Lennan has been integrating IT and building system technologies for more than 30 years. He has developed and implemented computing infrastructures for global financial firms, major healthcare facilities, manufacturing, entertainment complexes and traditional smart buildings. Most recently, Matthew has been working in software development to refine the customer experience for smart buildings in Office, Retail and Residential environments. He is currently responsible for driving Innovation across Oxford Properties’ portfolio.
Jared Summers is a motivated execution-oriented high performance individual who has extensive experience managing large-scale global programs. He brings a unique ability to understand and articulate complex technologies in a relatable way while rapidly fielding innovative capabilities. Currently Jared is the Data, Analytics & Technology Manager at ExxonMobil, delivering on the promise of transformational change enabled by digital technologies across the entire global real estate portfolio.
Elizabeth Dukes is the Co-Founder and CMO of iOFFICE, the leading workforce-centric IWMS software and the first 100% SaaS platform designed for the Digital Workplace. Dukes drives strategy for iOFFICE and advocates for the confluence of people and technology that unleashes the full potential of the workforce and the workplace.
Matt leads the product development and roadmap strategy for Modo Labs. With broad experience across mobile and audience engagement, along with a customer-centric mindset, he is the company’s product leader for both Workplace and Campus solutions. Matt and his development team continue to enhance the Modo no-code platform, empowering higher education and enterprise organizations to quickly create personalized applications and ensure students and employees have access to the information they need most.
Joshua has over 15 years of successful leadership experience with early-stage disruptive companies. He has an extensive background in property technology, focusing on amenities that drive tenant experience across commercial real estate, multifamily residential and student housing. Josh has lead national sales and support teams with an emphasis on customer success, brand recognition, and occupant experience.
As Head of Sales, Nick is responsible for leading the sales organization including domestic sales, product implementation and customer success. Nick’s 20+ years’ involvement with technology dates to the 90s when Peapod did its best to teach him UNIX. Nick’s IT responsibilities over his various positions have included End User Support, System/Platform Administration, Business Continuity Management and Project, Facilities, Procurement, Contracts & Maintenance. Most recently Nick served as Vice President at Environmental Systems Design (ESD).