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Time for some connected thinking

11 October 2016

The annual HMI Conference, which took place this month, brought together leading figures from across the regeneration and housing industries. This year, we used the conference as an opportunity to reflect on the impact that technology is having on how we live our lives. It's a trend that will undoubtedly affect residential development. But how far have we come, and what are the legal considerations?

The connected home

There has been a lot made of internet connectivity expanding from phones, tablets and computers to other household devices as part of the ‘Internet of Things’. This involves connecting standard appliances to the internet so that, for example, boilers can self-report faults to a servicing company, or fridges can automatically order more milk.

Connectivity is an emerging market (or some would say already established) for technology companies, with Google recently investing $3.2 billion to acquire smart thermostat-maker Nest. The housebuilding industry is taking note too, with the NHBC Foundation’s recent ‘Connected Homes’ report providing useful guidance on design and specification for tech-friendly, ‘smart’ properties.

Lessons from commercial offices

As a firm, we’re interested in how technology is changing our lives and the opportunities ahead. Our research project, “The New Real: unlocking new gains from smart buildings”, looks in detail at how innovation in technology is affecting the commercial real estate industry. It   identifies 10 key trends and a number of implications arising from connected, tech-enabled buildings. These include new considerations in valuing assets, new revenue streams for landlords and, increasingly, the threat of obsolescence for buildings that don’t live up to tenants’ technology requirements.

Commercial real estate is now looking to progress Wired Certification to provide information about internet connectivity and infrastructure for commercial buildings. In London the Mayor has introduced a connectivity ratings scheme that is now being rolled out.

So what do residential developers need to know?

Many of the benefits to offices are transferable to homes. High ‘wellness’ standards require the monitoring of air and water quality in the office. Sensors allow light and temperature to be tailored to individual needs.  It’s done to maximise productivity and provide the best (and healthiest) environment for staff. It’s not a stretch of the imagination to see the appeal of being able to do the same in a modern family home.

Additionally, there will be some homebuyers for whom digital features around the home are an exciting next step in the evolution of technology and new levels of convenience.

However, adoption of the myriad ‘smart’ features and products for the home remains, in our view, a luxury and not a necessity. We’ve not yet hit a tipping point where connected appliances and services are ubiquitous. Products like Google’s thermostats have not been a commercial hit so far, and forecasts suggest that only 15% of homes will have internet-enabled devices by 2021.

I’ve certainly not linked my alarm clock to my coffee maker yet. But I can see the allure, and features of the connected home, and the infrastructure that makes it possible, will undoubtedly become more significant.

While it’s a watching brief to see how homes incorporate greater levels of tech, households’ current level of demand and, to an extent, reliance on internet access is already introducing new legal considerations for developments. These can only become more acute as tech plays a greater role:

  1. Assessing infrastructure
    With ever-increasing demands for data, internet access is a necessity for a new development, and speed and connectivity can be selling points. The provision of the internet is now seen as a utility expected by buyers as an essential supply along with water supply or heating. Particularly in rural areas, the speed of internet connectivity available and existing infrastructure should be considered at the due diligence stage when land is being acquired for development.  Wayleaves, easements or other infrastructure agreements required to serve the development should be put in place as soon as possible to avoid delays. New pipelines and ducts will need to be laid early in the construction programme.
  2. Smooth handovers for in-home tech
    BT Openreach announced with the HBF the launch of its Fibre to the Premises (FTTP) to be offered free or as part of a co-funded initiative to all new developments. This is an exciting service and is welcomed by the industry. We are interested to hear how this is being rolled out in practice. Our experience on installing in-home tech is that ensuring the smooth transfer of both hardware and billing arrangements is key to making such arrangements work for housebuilders.   
  3. Working with tenants on Private Rented Schemes (PRS) and managed developments
    As PRS schemes increase in number and  compete for tenants, in-home technology may provide a differentiating factor.  As a parallel, in the commercial lettings market, we have experienced tenants requesting internet connectivity (at minimum speeds) as part of the “landlord works” in an agreement for lease. As a result of the on-going landlord and tenant relationship, liabilities will need to be carefully thought through from the outset. Clear agreements must be put in place with those able to provide maintenance, so that the developer is not fielding queries that it cannot resolve.  Further, the collection of data about tenant’s lives means that adequate privacy and protection measures must be secured as between landlord, tenant and any service providers. Marketing websites for individual developments are evolving into bespoke matters, covering areas such as car share arrangements. The ownership and potential licensing of intellectual property will need careful consideration.
  4. Working with emerging suppliers
    We are acting for suppliers looking to provide the next generation of software platforms for car sharing and looking to the (near) future autonomous vehicles. The implications for this are significant, from complying with Section 106 obligations to attracting tenants to PRS schemes in city locations. The interest for this in overseas markets is apparently enormous (particularly China) and we expect the UK will soon follow.

Making connections

We were delighted to support the HMI conference again this year. We act for major housebuilders and specialist operators, and recognise the great importance these events have in bringing the industry together to discuss emerging issues and best practice. We’re always keen to meet with anyone in the industry affected by these issues, so please get in touch if you would like to discuss this further.

This article was written by Duncan Salmon, for more information please contact Duncan on +44 (0)20 7427 1067 or duncan.salmon@crsblaw.com

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