Legal Automation in the Real Estate Sector: An Unavoidable Process

By Romain Keppenne:

As the legal tech industry is growing at a steady pace in Europe and in the world in general since a few years now, more and more sectors of the economy currently start facing the consequences of this new industry on their own activity. As Europe is not as much of a uniformized market for the entering legal tech actors, it is clear that the emergence of a massive actor able to act as a regional superpower in the legal tech industry will not arise rapidly, if it ever does : the disruption meant by the legal automation startups in Europe will follow much more of a local rather than regional trend in its development. Indeed, although European law creates some kind of a legal uniformity across the EU, the vast majority of today’s real estate services are directly regulated by national entities and still under the direct influence of national legal norms.

As it happens, real estate regulations are directly supervised by national politics and won’t see the sudden arrival of major EU legal tech actors. However, it is interesting to ask ourselves wether or not the current companies of the real estate sector will be deeply affected by the upcoming legal tech expansion. Will legal tech destroy jobs in rental agencies? Will it disrupt the current state and shape of the market in the long run? To answer those questions, we first have to ask ourselves what type of services legal tech actors can provide to the real estate sector. To what extent is the offer made by the legal automation technologies directly linked with core activities of the housing and rental.

Innovation does not mean disruption, and legal technology can also be a totally non-disruptive process, creating new business opportunities rather than simply destroying other actors’ storefront and invading their sector in order to replace them. It seems that legal tech, on the contrary, can be an opportunity to shape brand new business opportunities and services. To explore how a non-disruptive legal tech is conceivable, there is no better way than to dwell for a while on a precise startup that has used legal automation not to weaken competitors, but to explore new ways of getting into business.

LeBonBail : A casestudy of non-disruption & added value

LeBonBail is a Brussels based startup born in 2015 and operating both in France and Belgium. It is providing a key niche product to its users : a fully law abiding lease agreement that can be directly drafted online and takes into account all the specificities of the latest real estate regulations. The service is fully free for private individuals, that is to say lessors willing to draft and manage their lease agreement 100% online. It is a good example of a legal tech actor that does not seek to be disruptive, simply because it doesn’t need to be so.

In that precise case, legal automation is a non-disruptive activity that creates new business opportunities. Indeed, providing a value-added and free service, the startup is then able to build an original business model : the customer is attracted to the website by the free legal service provided, and is then proposed a whole set of subsidiary services connected to the core product of the website : insurances, moving services, credit and banking services, furniture rental… All these links lead to affiliate partners ready to pay for the business opportunity they are provided with by this virtually free online presence. Put differently, LeBonBail is basically selling a storefront rather than a legal automation service. The startup generates most of its turnover that way.

Moreover, the legal dimension of the real estate sector, although important, is not at the very center the traditional actors’ value proposition. A legal tech service such as LeBonBail therefore won’t hurt the actors it first seemed to be disrupting.

Indeed, it is not a disruptive service : no one is ready to pay for a lawyer or a real estate agent for such a basic and ordinary service as the drafting of a lease agreement. And yet, national legislation makes the rental process more and more difficult, resluting in a paradoxical situation : no one is ready to pay for a simple service, and yet is able to properly draft a fully law-abiding contract. Put differently, it is the perfect opportunity to get into

Conclusions : About disruption and the legal tech industry

This case study shows that legal tech does not necessarily have to be disruptive in order to get into business. Some services will find their way and shape some niche businesses that could not exist previously given the technological situation. Legal automation services still require a lot of capital in order to be developed and fully implemented : this means that the new entrants growing on the European market will first spend a lot of time creating rather basic and highly specific services on their given national stage. Their strategy will therefore be to turn into plugins and white label services before acquiring the necessary capital to turn into massive actors providing complex automation services. Legal tech startups are able to create their own environment around their service and to act as online platforms : for example, LeBonBail is a customer provider for other services before it actually is a legal tech service. Or to be more precise, LeBonBail has two storefronts and has based its business model on their complementarity. When the value proposition is strong but not strong enough to offer a product that can be sold as it is, alternative business models can be organized to improve the positionning of the startup. This evolution pattern will leave time to traditional legal actors in the EU to review their current business model and make the necessary cuts to face the legal tech transformations that lie ahead of them.