[REN #710] A Smart Lock Legal Battle in NYC

Picture of Apartment Door and number for Real Estate News for Investors Podcast Episode #710

Traditional door keys are becoming less common. Homeowners and landlords are adopting smart lock technology at lightning speed. But there are privacy concerns when it comes to installing them in shared homes and apartment buildings. Several New York City tenants filed a lawsuit late last year demanding the use of a traditional key. They are now getting the help of a local lawmaker who introduced legislation that will force landlords to do so.

72-year-old Mary Beth McKenzie and 93-year-old Tony Mysak are two of the plaintiffs. They have lived in their rented loft for decades, using keys to get in and out of the building and their apartment. But the landlord recently upgraded the front door lock to a Latch keyless entry system. They can still get in and out of side doors with their old-fashioned keys but they live on the third floor, and the only way to access the elevator is by going through the front door to the lobby where the Latch lock is installed. Mailboxes are also in the front lobby.
 

Use of Smart Locks Expanding Rapidly

The Latch lock operates with the use of an app on an iPhone or Android phone. It also works with a door code or a card key. The company began selling the system in the summer of 2017, and according to a recent press release, one in 10 new apartment buildings in the U.S. are being built with Latch. The company calls the fast pace of adoption “unprecedented.” It says, “To enable this rapid adoption, Latch has partnered directly with building developers and operators to bring smart access to both their new buildings and also retrofit existing portfolios.” (1)

The system offers a great amount of convenience for building operators. Latch says it eliminates the need for key exchanges, makes it easier to help residents who lock themselves out, provides keyless access to maintenance crews, and simplifies the process of rekeying locks when tenants move out. Tenants also benefit with an easy way to provide access for friends, house cleaners, dog walkers, and others. They can hand out personal door codes that can be limited to certain hours or eliminated altogether.
 

Legislation to Protect Smart Lock Tenants

The app also allows for the tracking of people coming and going through the door. That’s one of the issues being addressed in the New York legislation. As reported by the New York Times, Assemblywoman Linda Rosenthal, introduced legislation that calls for strict limits on the information that any kind of keyless entry system would be allowed to collect. And, it would require landlords to provide a traditional key for tenants who prefer that method of entry. (2)

There are several systems, such as the August smart lock, that operate in this space. Latch has apparently grabbed a big corner of the multi-family market in New York City. The Times reports that it’s been installed in about 1,000 apartment buildings so far.

Rosenthal says of her legislation, “This is probably the wave of the future. So we have to make sure as we gallop toward that brave new world that there are privacy protections and alternatives to using apps. That people who are older or disabled or have other issues are not being inconvenienced.”
 

Plaintiffs Claim “Smart Lock Harrassment”

The plaintiffs in the lawsuit are either elderly, or close to it. At least some of them feel that the installation of the Latch system is being used to make them uncomfortable, and encourage them to move out so the landlord can charge higher rents.

The Times article says, the Latch CEO, Luke Schoenfelder, would not comment on the court case, but did offer assurances that the company does not capture or store personal data, and does not share any of that information with third parties. But, it says, landlords can look at a log of entries and exits. Tenants also have the right to turn that feature off, however, but some of them may not be confident about doing that, especially the older less tech-savvy ones.

New York City housing advocate, Benjamin Dulchin, sided with the plaintiffs. He told the Times, “There’s a lot of reason for concern that high-tech apps actually take and track a lot of your personal information.” He says, “I don’t want my landlord to know when me or my kids are coming in or out.”

Plaintiff McKenzie told the New York Post, “For 45 years I’ve had a key. And now, we can’t get keys.” She says, “It’s ridiculous that everyone is spending all this money to go to court just to get a key.” Because her and her elderly husband don’t want to use the smart lock, they’ve been forced to go through side doors where there’s no access to the elevator.

Plaintiff Charlotte Pfahl is also concerned about privacy. She told the Post, “Once I come into the building using Latch, the landlord is immediately notified.” McKenzie is calling it a “form of harassment.” (3)
 

Multi-Family Smart Locks Spread

The landlords deny that. They say they installed the system after a burglary in August of last year. But the complaints are not impeding industry acceptance of the locks. Airbnb recently announced that it will use the Latch system for its Airbnb-branded apartments, such as a 324-unit complex in Kissimmee, Florida called Niido Powered by Airbnb. The complex has long-term tenants but they are allowed to Airbnb their units for up to 180 days a year in a revenue-sharing deal.

Smart locks are also becoming very popular among private homeowners. A survey done by Dallas consulting firm, Parks Associates, indicates that one in four U.S. Households will install a smart lock in the next year. The survey company says, “Market dynamics are setting up the smart door lock market for growth. In addition to security, smart locks provide peace of mind and convenience through access control and notifications of use.”

Although there are other keyless systems available, Latch appears to be popular for multi-families because they have several models to work on different kinds of doors. One uses keyless entry only. Another had both keyless and keyed options. And a third has both those options along with a door lever. Latch also says that tenants can disable the GPS function if they are worried about being tracked.
 

Smart Lock Growing Pains

The smart lock industry is expanding rapidly. It’s also still very new so it’s not surprising to hear about issues and problems — you might call them “growing pains.” Landlords considering the installation of smart locks should be aware of these issues, and take steps to avoid them. Installing them during times of vacancy could help, because new tenants would sign a rental agreement knowing that unit is equipped with smart locks.

Installing them on units with existing tenants might be tricker. Many tenants embrace smart locks for their convenience, especially members of the younger generation, but for those who don’t, providing them with a traditional key may be a good solution, and making sure they know they can opt out of any GPS tracking.

Links:

(1) 1 in 10 apartment buildings built with Latch

(2) NYT Article

(3) New York Post Article

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