Managing Legal Risk When Implementing AI in Real Estate and Construction
Artificial intelligence (AI) has become a pervasive element in modern society, influencing various sectors, including real estate and construction. While some developers and contractors have embraced AI, others remain hesitant, observing its evolving role.
Potential Uses for AI in Real Estate Development and Construction
The applications of AI in real estate development and construction are vast. AI can:
- Assist in project designs and administration.
- Help with schedule revisions and inspections.
- Summarize meeting notes from discussions.
For architects and engineers, AI can alleviate the burden of mundane tasks by generating initial designs and drafts. It can also:
- Cross-check costs of materials.
- Assess the constructability and energy efficiency of designs.
Moreover, AI can streamline legal disputes by analyzing extensive documentation generated daily on construction projects. This can lead to more cost-effective and timely resolutions.
Risks Associated with AI
Despite its advantages, implementing AI is not without risks. Key concerns include:
- Hallucinations: Instances where AI provides incorrect information.
- Training deficiencies: Errors in training models can lead to significant issues.
- User error or abuse: Misuse of AI can result in severe consequences.
Crucially, questions arise about accountability for mistakes made by AI. Who bears the blame—the user, the AI vendor, or another party? This dilemma is compounded by clickwrap agreements, which often limit liability for AI vendors to a nominal sum, potentially leaving users to cover substantial losses.
Mitigating Risk Through Clear Contractual Provisions
To effectively manage the risks associated with AI, real estate and construction contracts must address its implications. Key considerations include:
- Determining who will bear the costs associated with AI errors.
- Clarifying the role of AI in dispute resolution.
If a project owner mandates the use of AI for design, it stands to reason that they should also shoulder the costs of any resulting errors. Conversely, if a project participant opts to use AI independently, they should be responsible for rectifying any mistakes.
Additionally, if parties agree to utilize a specific AI platform for reviewing project documentation, this agreement should be explicitly included in their contract. Such clarity is vital for ensuring that all parties are aware of their respective risks and responsibilities.
By identifying these issues early and establishing clear guidelines, all stakeholders can approach projects with their “eyes wide open,” equipped to manage potential risks effectively.
