Lease Abstraction Services: A Hybrid Model

Simplify complex agreements, optimize costs, and learn how human expertise with automation enhances accuracy and efficiency in the real estate landscape. Click to learn how a hybrid model in lease abstraction services drives the best results.

What is Lease Abstraction?

Imagine you are taking a lease and come across an agreement. It has excessive jargon, and you need help finding all the important information related to the lease. When fear of being deceived starts to kick in, you feel helpless. That is where lease abstraction services come in handy.

Lease Abstraction Services provides you with an expert in the field who will run a check on the lease terms and conditions and summarize the lease agreement before you sign it.

The ultimate purpose of lease abstraction services is to save you from fraudulent activities and hidden threats in the agreement by extracting and summarizing the agreement. When you hire a lease abstraction service, you will be provided with all the necessary information, such as:

• Base rent amount
• Payment Frequency
• Rent abatement
• Escalation or annual increase
• Rent types (Net, Gross, Base year, Expense stop)
• Currency
• Percentage rent
• Breakpoints

Traditional Lease Abstraction Models

Manual Lease Abstraction

• Manual Lease Abstraction uses trained professionals to meticulously go through the lease and identify basic information such as building address, square footage of the space, tenant’s name, landlord’s name, building name, and use of the premises rented.
• Once the data is extracted, it is compiled clearly and concisely, which is easy to understand

Limitations and challenges

Although the traditional method is the most sought-after, there are some limitations and challenges to the model.

• Reviewing and compiling the copies can be time-consuming, especially for large businesses
• To err is human. Since the data is analyzed by humans, it is prone to error and inconsistency
• Due to the prolonged duration of analyzing documents, it is hard to scale efficiently
• Human labor costs are high, making it a drawback for companies

Automated (AI-Powered) Lease Abstraction

• Automated Lease Abstraction uses software and machine learning to abstract a lease. It is cost-effective and less time-consuming, compared to humans
• Since human intervention is minimized, the data is less prone to errors, and machines use algorithms to learn not to repeat the same mistake made in the past
• Automated lease abstraction lets companies scale more efficiently

Limitations and challenges 

• Implementing automation and machine learning requires an investment in maintenance and technology, which can break the bank
• Although AI is effective compared to humans, there are some drawbacks, such as the possibility of misinterpretation, and it will still require human expertise to function effectively
• Automated models are less likely to be as versatile as humans, hindering the desired results
• With the advent of AI, protecting data and privacy will become one of the key considerations, especially when dealing with sensitive projects

The Need for a Hybrid Approach

While both automated and manual models offer advantages, they also have certain limitations. Clubbing both models forms the hybrid model, which lets us combine advantages from both models and extract the most out of the model.

Advantages of a Hybrid Model

• The hybrid model uses automation to swiftly analyze and summarise the lease agreement and uses human expertise to review, cross-check, and interpret complex clauses
• Combining human expertise with automation’s swiftness minimizes errors and streamlines workflow, resulting in efficiency and accuracy
• The hybrid model employs humans to extract and analyze complex data, ensuring safety and privacy, especially when handling a complex portfolio
• The hybrid model is cost-effective and less time-consuming compared to manual lease abstraction

Components of a Hybrid Lease Abstraction Model

Human Expertise Integration

• One of the main components of hybrid lease abstraction is human expertise integration. An expert in the subject matter who has a deep understanding of real estate principles is employed in the role to grasp the nuances of the lease agreement
• They go a step further to make sure that the agreement corresponds with the terms discussed in person and that the final abstract reflects the true nature of the agreement
• Their expertise in the field lets them negotiate potential room for improvement and clarify the terms mentioned

Automation Tools and Technologies

• AI-powered lease abstraction tools are trained on large datasets of previously abstracted leases. This allows the model to learn from mistakes and not repeat them in the future, avoiding misinterpretation, identifying key clauses, and ensuring accuracy
• With preset information, hidden risks, anomalies, ambiguous patterns, rent forecasts, and inconsistencies can be found easily. By analyzing previous lease agreements, the automated models can provide valuable insights regarding the portfolio and identify trends

In short, the real estate landscape is constantly evolving. To keep up with the trend, it is significant to adopt hybrid lease abstraction models. The full potential can be unlocked by integrating human expertise and automation tools into commercial real estate lease abstraction services.