Law in Order: Utilizing Artificial Intelligence in Operating Residential Housing for Multifamily Properties

By Hari Nathan Kalyan and Allison Mattocks

Artificial Intelligence (AI) has significantly advanced various industries, including real estate. In Texas, the multifamily residential sector is increasingly curious about AI’s potential role to improve operations. While AI may offer efficiency and cost savings, its implementation in drafting legal documents like residential leases presents significant challenges and risks.

Firms specializing in landlord-tenant law, such as Warren Kalyan Mattocks, help clients navigate residential housing and ensure legal compliance with various requirements. Principal of WKM, Hari Kalyan states “We leverage innovative technology and digital processes to meet the current legal demands and counsel clients on integrating new technologies such as artificial intelligence (AI) within the multifamily industry.”

This article explores the considerations, benefits, and drawbacks of using AI in operating residential housing for multifamily properties in Texas, with a focus on the Texas Apartment Association (TAA) Lease and Redbook, statutory requirements, eviction processes, housing discrimination concerns, and the critical need for competent legal counsel.

The Role of AI in Multifamily Legal Forms

AI’s role in multifamily management often revolves around automating repetitive tasks, ensuring consistency, and reducing the time spent on document management. AI can analyze large datasets, identify commonalities, and use this analysis to generate reports and insights into many operational issues, policies and procedures. However, while AI excels in efficiency, it lacks the nuanced understanding of legal subtleties, state and local laws, and human elements that are crucial in best-in-class legal documents such as the TAA Lease.

[Perceived] Pros of Using AI for Lease Drafting

1. Efficiency and Speed:

AI can prepare documents much faster than a human.

2. Cost Savings:

By automating parts of the process, AI may reduce some legal costs in the short term but as we discuss later in this article, these short-term cost savings come with a significant long-term risk.

While these potential benefits may be appealing, it is important to consider the possible drawbacks of utilizing AI for legal needs.

Cons of Using AI for Multifamily Legal Forms

1. Lack of Legal Nuance:

AI does not fully comprehend the complexities of federal, state, and local laws and regulations, how they interrelate and how they may conflict.

2. Risk of Ambiguity:

AI-generated leases may contain vague or unclear language, leading to potential disputes between landlords and tenants.

3. Inflexibility:

AI might not adapt well to unique or nonstandard situations that require customized clauses.

4. Overreliance on Technology:

Relying too heavily on AI could lead to overlooking critical legal details, which may result in costly legal disputes. While helpful, AIgenerated recommendations should be questioned and not automatically accepted without human intervention.

The TAA Redbook and Lease

The Texas Apartment Association (TAA) provides a comprehensive set of resources for property owners and managers, including the TAA Redbook and standardized leases and forms. These resources offer a robust legal foundation for the rental housing industry in Texas.

The TAA lease is widely recognized and accepted across Texas and is peer-reviewed and updated each year and after each legislative session to reflect the most up-todate legal and operational requirements.

In recent years, the TAA lease forms have been revised, updated, and distilled into significantly fewer pages [six now as opposed to eight previously pursuant the earlier versions of the TAA lease].

Paragraphs in the current TAA lease are now organized by topics encountered in the lease life cycle, with updated provisions that reflect and implement state-specific legal requirements. Lease Details on page 1 of the TAA Lease promote improved transparency, clarifying and summarizing materially important items such as total amounts due. In fact, the TAA Lease has been recently recognized by HUD as an example of enhanced transparency and decisionmaking for both residents and operators. TAA also provides several other resources, including addenda that are used by members and become part of a lease when signed as part of a lease package, ensuring compliance with various state laws. Some of the addenda are curated by expert landlordtenant attorneys and drafted specifically in response to new Texas legal requirements for residential leases.

For example, TAA provides a “Flood Disclosure Notice” form which meets the requirements of Section 92.0135 of the Texas Property Code. This notice is automatically included with all leases for TAA Click & Lease Users, ensuring legal compliance with state regulation.

One might wonder how to combat this challenge and conclude that While AI could assist in some aspects of form generation, it is critical to recognize that legal documents (like the copyright-protected TAA Lease) require careful oversight by legal professionals to ensure they meet Texasspecific and other legal standards.

Disputes and Mistakes

In contractual disputes between residents and owners, it is essential to consider the unique obligations of both parties. Lease changes, for example, are only allowed in certain circumstances, and are governed by the lease, community policies or written amendment signed by both parties. If mistakes are made during lease generation, resolving them can be difficult. Competent legal counsel can help ensure the lease packet is tailored to the specific property and owner operations.

Statutory Considerations

Texas law imposes specific requirements on residential leases that must be followed by property owners. These include regulations relating to security deposits, repairs, late fees, notice periods, and more. Ensuring these statutory requirements are clearly reflected in lease documents is crucial to maintaining compliance and is why the overwhelming majority of Texas rental property owners rely on the TAA Lease

AI and Evictions

Evictions are a significant aspect of property management. Texas law outlines a strict procedures for evictions, which include providing notice to the tenant, filing a lawsuit, and obtaining a judgment. Leases must include provisions that align with these statutory requirements to avoid delays or complications in the eviction process.

Housing Discrimination Lawsuits

Housing discrimination is a major concern for property owners and managers, with federal, local and state fair housing laws which provide protections against discrimination based on race, color, national origin, religion, sex, familial status, and disability. AI-generated leases and policies must be carefully reviewed to ensure compliance with the Fair Housing Act and state laws to avoid any risk of unintentional bias or discrimination lawsuits.

AI-generated leases could increase the risk of unintentional bias and legal exposure. For instance, AI might introduce policies that disproportionately impact certain residents, leading to discrimination lawsuits. All fair housing cases are addressed on a case-bycase basis, with claims of discrimination scrutinized by human fair housing investigators, specialists, and advocates. Reliance on AI to respond to residents’ accommodation requests or other policies and procedures may run afoul of fair housing rules.

The Need for Competent Legal Counsel

While AI offers benefits such as efficiency, it cannot replace the expertise of a seasoned attorney. Legal counsel is essential to ensure leases and operations comply with Texas law and protect the interests of both parties.

AI should be viewed as a tool to assist the management and operation of rental housing and documents should be reviewed and approved by legal professionals to minimize risk.

Conclusion

The use of AI in operating residential housing in Texas presents more challenges than opportunities. While AI can enhance efficiency, it cannot replace the nuanced understanding of Texas law and the need for personalized legal advice. Property managers and owners should exercise caution when considering utilizing AI and ensure that all documents and operations are reviewed by competent legal counsel to avoid potential legal pitfalls. By balancing the benefits of AI with the expertise of human attorneys, multifamily property owners can maintain compliance and protect their investments.