Smart technology can strengthen the value, efficiency and marketability of property. But for owners, investors and landlords, those benefits depend on leases, linked contracts and supplier agreements keeping pace with and taking account of the systems being installed.

PropTech is changing the way commercial buildings are operated, valued and experienced. Intelligent building management systems, energy-monitoring tools, occupancy analytics and ESG reporting platforms are becoming embedded across the property lifecycle.

Smart buildings are no longer viewed simply as a premium offering. Occupiers increasingly want efficient, technology-enabled workplaces, while investors and lenders may expect reliable information about how an asset performs. For owners, that creates an opportunity to make buildings more attractive, resilient and easier to manage.

Real-time monitoring can help identify faults before they become expensive problems, while automation can reduce unnecessary energy use and support more efficient maintenance. Reliable data on consumption, carbon performance and space use can also help demonstrate the quality of an asset and support sustainability reporting.

The commercial case is therefore compelling. Yet the more dependent a building becomes on technology, the more important it is that the legal arrangements behind it are properly connected.

When separate contracts create a single risk

A smart building is rarely governed by one agreement. The relevant responsibilities may be distributed across the lease, supplier contracts, software licences, service level agreements and data processing arrangements. Each document may work in isolation, but problems arise when they do not work together.

A landlord might, for example, promise an occupier that a particular system or service will be available, while relying on a third-party PropTech provider to deliver it. If the supplier contract offers a lower service standard, weaker remedies or no suitable enforcement right, the landlord may remain liable to the occupier without having an effective route to recover its loss or secure a prompt solution.

That makes contractual alignment fundamental. The party carrying responsibility for a system should have appropriate rights against the supplier responsible for it. In some arrangements, it may also be sensible to give occupiers direct rights to enforce key obligations against a PropTech provider, particularly where the technology is essential to the use of the premises.

This is not simply a drafting point. It determines who can act when a system fails, how quickly a problem can be addressed and where the liability and resulting financial consequences ultimately fall.

The cost question cannot be left until later

The installation, maintenance and replacement of smart building technology can involve significant expenditure. Owners need to establish at the outset which costs can be recovered through the service charge, which might be recovered via a different route and which will remain with the landlord.

The lease and any associated agreements should deal not only with initial installation, but also with ongoing support, software subscriptions, licences, upgrades, replacement systems and future improvements. If the drafting is too narrow, the owner may face substantial unrecoverable expenditure. If it is too broad, occupiers may challenge provisions that appear to give the landlord an unrestricted right to spend their money on technology.

A clearer and more sustainable approach is to explain how technology expenditure will be managed, when costs may be recovered and who will fund major upgrades or replacements. That gives the owner greater certainty while allowing occupiers to understand their potential exposure.

The same discipline should apply to acquisitions, disposals and refinancing. A buyer or lender reviewing a smart-enabled asset will need to understand whether the contracts support the building’s operational claims and whether future costs and liabilities have been allocated effectively and in line with expectations.

Data brings value, but also difficult questions

Some of the value associated with PropTech lies in the data generated by the PropeTech installed in the building. Yet ownership and use of that data is not always straightforward. The landlord may own the physical system, the supplier may operate the platform and the occupier may generate information through its use of the premises.

Contracts should distinguish between raw building data and the reports, analysis or insights created from it. They should explain what information the owner and occupier can access, whether it can be exported or shared, who is responsible for its accuracy and what happens when a lease ends or a supplier is replaced.

These issues matter when data is used to support ESG reporting, financing, investment decisions or statements about environmental performance. If information cannot be verified or used for the intended purpose, its commercial value may be limited. Owners should not assume that control of the building automatically gives them unrestricted rights over everything its systems produce.  Also supplier security standards and incident-response procedures should be considered

Smart systems may also process personal data relating to employees, visitors, contractors and other building users. UK GDPR responsibilities and any international data transfers therefore need to be addressed as part of the overall arrangement.

Preparing for failure, change and supplier exit

Owners often make commitments about building performance while depending on third parties to meet them. Supplier contracts should therefore contain service standards and remedies that reflect the obligations owed to occupiers. System availability, fault-response times, emergency support, cybersecurity, business continuity and restoration of service should all be considered.

The arrangements also need to anticipate change. A supplier may become insolvent, withdraw support for a product or stop maintaining compatibility with other systems. Technology that appears advanced when installed may require replacement or integration with a new platform during the life of a lease.  Also a lease may be assigned or sublet and the impact of a change in occupier or additional occupiers needs to be addressed at the outset.

Exit planning is also as important as implementation. The contracts should preserve access to data, provide for continuity of essential services, allow systems or information to be transferred to a replacement provider without avoidable disruption and strike the right balance between owner and occupier when a lease comes to an end.

A joined-up legal framework

PropTech sits at the intersection of real estate, commercial technology, data protection and cybersecurity. Looking at each area separately can leave gaps, duplicated liabilities or obligations that cannot be enforced in practice or leave a party with liability but no redress.

Owners should review the complete contractual picture when introducing technology into a new development, retrofitting an existing property or assessing an established smart building arrangement. The same questions should form part of the due diligence on any acquisition, disposal or refinancing of a technology-enabled asset.

Smart technology can improve the performance and competitiveness of commercial property. But it will only deliver its full value when the contracts, data rights, enforcement rights and allocation of risk are as well connected as the building itself.

A smart building can reduce costs, improve workplace performance and provide valuable environmental data. Occupiers should nevertheless look beyond the technology specification and establish what they can access, what they must pay and what happens when a critical system fails.

A smarter space, with new dependencies

Technology is changing what businesses expect from their premises. Energy monitoring, smart controls and automated systems can help occupiers manage consumption and reduce operating costs. Occupancy analytics can show how space is being used, informing decisions about layouts, collaboration and future property needs.

Integrated  systems may also improve comfort, accessibility and convenience for employees or occupiers. At the same time, access to reliable building-performance data can support environmental reporting, carbon-reduction targets and wider ESG commitments.

These benefits can make a smart building an attractive proposition. However, they also create new dependencies. 

Before signing a lease, an occupier should therefore understand not only what the technology is designed to do, but who controls it and what rights the occupier has if it does not perform as expected.

Control matters when systems are business-critical

An occupier may depend on building technology for access, heating, cooling, lighting and other services that are essential to daily operations. Yet it may have limited visibility of the supplier arrangements and no direct relationship with the provider responsible for maintaining the system.

The lease or associated contracts should make clear which systems the occupier can access, how much control it will have and whether those rights will continue throughout the term. It should also address what happens if technology is changed, withdrawn or replaced.

Crucially, the occupier needs an effective remedy when a system fails. A general promise that the landlord will provide a service may offer limited comfort if there are no meaningful performance standards, response times or consequences for repeated disruption. The landlord’s obligations under the lease or associated contracts should be supported by corresponding commitments in its supplier contracts.

In some cases, direct enforcement rights for the occupier against the PropTech provider may be appropriate. The right structure will depend on the arrangement, but the occupier should know who it can hold to account and how quickly action can be required.

Avoiding open-ended technology costs

The financial implications of a smart building extend beyond the systems in place when the lease begins. Through the service charge, occupiers may be asked to contribute to maintenance, licences, software subscriptions, upgrades, replacement equipment and future improvements or there may be costs recoverable under associated contracts.

The lease and any associated contracts should explain which of those costs can be recovered and whether any limits, exclusions or consultation requirements apply. Without adequate protection, an occupier could effectively write a blank cheque for technology chosen and controlled by the landlord.

That does not mean all PropTech expenditure should be resisted. Sensible investment may improve the building, reduce energy consumption, lower other operating costs and ease ESG reporting. The key is transparency. Occupiers should be able to understand their likely exposure and have confidence that spending will be reasonable, relevant to the services they receive and properly managed.

Particular care is needed where the lease and any associated contracts allow the landlord to introduce new services or make improvements during the term. Those provisions should not become an unexpected route for passing substantial capital or technology costs to occupiers without appropriate safeguards.

Data access is not automatic

Businesses increasingly need environmental and operational data from their premises. However, occupying a space does not necessarily give an occupier  an automatic right to use the information generated within it.

The lease and associated technology arrangements should establish whether the occupier can access building-performance data, use it for reporting and export it into its own systems as well as ownership of data. They should distinguish between raw information and the reports or insights generated from it, and identify who is responsible for accuracy.

This can be particularly important where the occupier relies on the data to measure energy use, report against ESG commitments or demonstrate progress towards carbon-reduction targets. If the information cannot be accessed, verified or transferred, it may not meet the occupier’s needs.

The parties should also agree what happens when the lease ends. The occupier may need time to export records, while both sides will need clarity about retention and deletion. Leaving these questions until departure can result in the loss of information needed for operational, regulatory or reporting purposes.  Also where sub-letting is possible consideration should be given to the rights and position of future occupiers.

Integration, cybersecurity and continuity

Occupiers increasingly want building systems to connect with their own workplace applications and PropTech. Responsibility for integration, compatibility, implementation and cost should be agreed before occupation. The occupier may also need the landlord’s consent to install its own technology, maintain it and remove it at the end of the term or a landlord may want it to be left in the property.

Discovering after completion that an essential platform cannot connect to the building can create expense and disruption. Compatibility should therefore form part of the technical and legal due diligence, rather than being treated as an issue to resolve after the lease is signed.

Cybersecurity and data protection must also be considered. Where smart systems process personal data, the parties should understand their respective UK GDPR obligations.  In addition for all data types security responsibilities and incident-management procedures are relevant. A cyber incident may be more than a data issue if it disrupts access controls or other essential infrastructure.

The occupier should know who will respond, how information about an incident will be communicated and how quickly essential services are expected to be restored. Those commitments should be reflected in service levels and supported by practical business-continuity arrangements.

Look beyond the specification

A smart building can support lower operating costs, stronger environmental reporting and a better  occupier experience. But those benefits depend on the occupier having dependable rights, realistic cost protections, effective remedies and knowing where responsibility and liability lie if things go wrong.

The lease and the technology arrangements should therefore be reviewed together. Before signing, the occupier should know what it can access, what it is expected to pay, who is responsible when systems fail and what will happen to its technology and data at the end of the term.

The smartest building is not necessarily the one with the largest number of connected systems. For an occupier, it is the one where the technology supports the needs of the occupier without introducing costs it cannot predict, dependencies it cannot manage or risks it cannot control.

About the authors

Andrew Evans is a Partner in Irwin Mitchell’s Commercial team 

Laura Jones is a Senior Associate in Irwin Mitchell’s Real Estate team

Vashi Suddul is a Solicitor in Irwin Mitchell’s Commercial team