The real estate industry has recently embraced the emerging technology associated with “smart” rentals, including homes and commercial rental spaces. The new phrasing is “connected-home-and-office technology.” For example, see this recent TheRealDeal media article. There are some good business reasons for the emerging trend but some legal cautions, too.
Why the increased interest in “connectivity”?
In brief, the increasing interest in building “connected” homes and offices is about cost savings and catering to consumer demand.
When investing in rentals — from single-family homes to 1,000-unit complexes –connectivity can facilitate access, monitoring, and protection of individual units and multi-unit structures. Access and tracking can speed up the response time of first responders in the event of a fire, criminal activity, or other emergencies. This leads to better protection of physical assets. In general, these benefits of connectivity reduce costs associated with adverse events, which, in turn, can lead to cost savings concerning financing and insurance coverage. Connectivity can also optimize utility costs and facilitate maintenance, determining when maintenance is required and giving access to service providers. The connectivity in smart rentals also allows a higher level of automation regarding monitoring and maintaining vacant units. The same ease of access can also save costs concerning showing a unit to a potential renter or purchaser.
For these reasons, connectivity is becoming popular with businesses operating weekend and weekly rentals. Access codes can be emailed, eliminating keys and needing an agent present when the renters arrive.
Smart Rentals are a new form of luxury
Connectivity is also popular with an upscale segment of the smart rentals — and buying — community who appreciate the “turn-key” nature of smart homes, the security provided by connected locking and access systems, the ease of safety monitoring, and the ability to communicate with the home and interior devices through wireless and mobile devices for purposes like regulating the heat or air conditioning. Connectivity is also widespread since it generally provides an easy communication method with the landlord concerning problems or other issues. Rental payments are also made more accessible. This is accomplished using one platform with a single set of log-ins and passcodes.
Commercial lessors are also seeing the benefits of smart rentals.
Some legal cautions
While there are apparent business advantages of embracing connectivity, there are some legal cautions. The most crucial caution involves a myriad of legal issues surrounding consumer privacy.
The first comprehensive consumer data privacy statute was enacted in California in 2018. Since then, two more states — Virginia and Colorado — have enacted their broad privacy statutes. More than 20 other states have introduced comprehensive consumer privacy legislation. Here in NYC, the City Council recently passed a biometric privacy ordinance to protect consumers from abuse of their biometric data. See here.
Most media reporting on these privacy statutes focuses on collecting online data from consumers. But the California act, for example, is much broader. It applies equally to consumer data that is collected in face-to-face transactions. There is no question that, eventually, courts will determine that the privacy statutes will apply to the data collected for smart rentals. Generally, the statutes require a great deal of information to be disclosed to consumers about what data is being collected, for what purposes, and with whom the data is shared. Further, written consent is generally required before the data can be collected.
Data security will also be a large legal concern. For example, the Federal Trade Commission recently issued new regulations to protect consumers from data breaches and cyberattacks. Many states, including New York, have statutes regulating data security and data breach notification requirements.
The real estate industry should prepare to address the privacy requirements of these statutes as they expand the market for smart rentals and homes.
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For more information, call the experienced New York commercial lease and real estate attorneys at Wright Law Firm NYC. We provide top-tier commercial real estate legal services for the NYC business community. To schedule a consultation, contact our office by email or call us at (212) 619-1500.