The fusion of property and technology, known as proptech, has disrupted the traditional property and real estate industry. Leveraging technology, including data analytics, artificial intelligence (AI), blockchain and more, has reshaped how customers buy, sell and manage property.
If you are running a proptech business, you must consider several things to ensure your business is protected and complies with various laws and regulations. This article will guide you on the critical legal considerations you must address to mitigate risk and ensure compliance.
Intellectual Property (IP)
In the field of proptech, thorough legal agreements should define intellectual property ownership between the parties and the rights and responsibilities that come with that ownership. For example, if a proptech business creates a unique algorithm to value properties, it must ensure it has exclusive rights to modify that algorithm. If they wish to extend access to third parties, they may grant an IP licence for a fee, which limits the third party’s ability to duplicate or alter the algorithm. By doing this, your business is safeguarding its technology while generating licencing revenue. If your technology uses AI, you must also consider the ownership implications of any data created by AI technology.
Data Protection and Privacy
You must adhere to the Australian Privacy Principles (APPs) under the Privacy Act 1988 (Cth) if you are an APP entity. Even if you are not an APP entity, adhering to the APPs is considered best practice. Compliance with privacy regulations is especially crucial in the proptech sector, where vast amounts of personal and sometimes sensitive information are collected, stored, and processed. Ensure your proptech business stays in line with privacy best practices by:
- having an easily accessible privacy policy outlining how you collect, use, store and disclose personal information;
- having a policy in place for data deletion and only storing personal information for as long as necessary;
- implementing robust cybersecurity protocols to protect data and considering whether a cyber insurance policy may be appropriate for your business; and
- regularly assessing your operational protocols and identifying potential data protection and privacy vulnerabilities.
Real Estate Licensing and Regulation
Your proptech business may offer various services, including:
- providing a platform for real estate listings;
- facilitating lease or property sales transactions; and
- offering financial services like a mortgage brokerage.
Depending on the type of proptech business you have, the nature of the transactions facilitated on your platform, and in which jurisdictions you operate, you may be required to hold particular licenses, such as a real estate licence or an Australian credit licence.
Each state and territory has specific regulations on the fees or commissions that can apply to your proptech business.
Consumer Protection and Disclosure
Transactions that occur on your proptech platform might fall under the scope of the Australian Consumer Law (ACL), which means you must:
- not engage in false or misleading claims for any properties listed. For example, posting altered property images that do not reflect the actual property could result in penalties;
- not encourage higher bids or make false representations that could mislead consumers into paying more than they otherwise would;
- ensure you advertise all properties with an estimated price range that is reasonable, based on a reasonable market value or what the seller might accept, and not well below the selling price to gather interest; and
- disclose important information truthfully about the property, including its history, zoning, features and characteristics.
Contracts
Your proptech business must have comprehensive agreements with vendors, agents, consumers, and partners. These contracts serve multiple functions, such as:
- detailing platform use guidelines;
- clarifying pricing terms;
- establishing warranties and indemnities;
- limiting liability;
- setting out dispute resolution mechanisms; and
- ensuring regulatory compliance.
These agreements should be flexible enough to accommodate future changes in technology and regulelations.
A factsheet that sets out the three ways to end a commercial lease in Australia: surrendering your lease, assigning it or subletting it.
Financial Regulations
Proptech businesses often intersect with various facets of financial transactions, from payment processing to investment management and lending services. Accordingly, proptech businesses must consider their financial compliance obligations, including:
- Anti-Money Laundering (AML) laws;
- Know Your Customer (KYC) requirements; and
- specific real estate financing regulations.
Key Takeaways
As a business in the proptech space, you must know and comply with several key legal considerations, including IP issues, data protection, the ACL, and financial regulation. You need to have the appropriate licences and establish comprehensive and flexible contracts with other parties such as vendors, agents, consumers and partners.
If you need help complying with your legal obligations as a proptech business, our experienced real estate lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 1300 544 755 or visit our membership page.
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