How to use technology to improve stress-testing and investor confidence

Taken together, this makes it essential for RPs to leverage the AI and tech-enabled legal solutions that are now available to capture and leverage as much title, lease and legal liability data as they can to maximise their:

 

• attractiveness to investors
• stress-testing effectiveness
• valuation accuracy
• property values
• borrowing capacity and
• regulatory compliance

 

How can new technology-enabled solutions help the affordable housing sector?

 

Back in 2016, the regulator instructed RPs to gather as much asset and liability data as they “proportionately” could.

 

Thanks to the rapid advance of AI and machine-learning technology, RPs can now capture much more detailed title and legal information much more easily, quickly and “proportionately” than before.

 

This technology has helped to speed up the extraction of data insights significantly.

 

What enhanced Land Registry data insights can associations capture now?

 

By way of example, we are seeing an increase in demand from RPs keen to use technology-augmented legal solutions to help them to quickly capture and organise much more detailed Land Registry title data than before.  

This gives these RPs a quicker, clearer overview of all their assets, including rights, covenants, charges and restrictions.

 

It can help them identify key risk factors more quickly, as well as missed value uplift opportunities. It also helps to give RPs and their investors a much more thorough understanding and oversight of the RP’s assets.

What sort of legal insights can associations capture now?

 

Just as AI and machine-learning are helping associations to understand their assets in more detail, it is also helping them to understand their liabilities better, too.

 

Associations have vast quantities of unstructured data contained in leases and other contracts which can be extracted much more quickly with the benefit of machine-learning solutions than was previously possible.

 

We are also seeing an increase in demand from RPs keen to take advantage of these opportunities to capture and organise more title, lease and legal data within their assets and liabilities registers than they have previously had ready access to.

 

For example, we are acting for a number of clients on large-scale, AI-supported lease reviews, using AI that we have trained.

 

This has helped the RP understand the extent of its liabilities and identify accountable persons and duty holders under the new Building Safety Act, among other health and safety risks.

 

Given the vast numbers of documents involved, undertaking a manual review on this scale would probably have been seen as much too onerous or expensive just six years ago.

 

This is just one example. RPs can now also look to much more easily identify or understand:

 

Revenue opportunities and payment liabilities

 

• the full extent of inflation-linked rent and service-charge liabilities over time
• the extent to which service-charge costs can be passed on to under-lessees
• which properties associations are and are not obliged to insure in order to reduce insurance costs and avoid double insurance risks
• all commercial tenant rent review opportunities in order to maximise revenue

 

Property-related liabilities

• the extent of building safety liabilities
• the extent of repair and maintenance obligations

 

Opportunities for value uplifts

• defects in leases or other documents that need to be rectified before charging or sale (eg forfeiture on insolvency provisions or prohibition on the subletting of individual flats) and
• short leases which could be extended

 

Banking

• streamlining the extraction of relevant covenants from loan documents to produce compliance matrices

 

In the current financial climate, RPs should consider the types of title, lease and legal insights which their own organisation would benefit from having easier access to.

 

Such insights may now be much more readily available than ever before and may help them to make more informed business decisions, to improve regulatory compliance and to increase their attractiveness to investors.

 

Sarah Darvell, managing associate, real estate finance security, Trowers and Hamlins