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Propmodo Daily

By Franco Faraudo · Apr. 18, 2024

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RealPage and its clients have been pulled into a legal quagmire due to the data sharing that took place in its rent optimization software. Well, at least all but one of their clients. In today’s email, we look at how AvalonBay was able to avoid being named in the cases against RealPage for rental price fixing and what that means for the future of real estate technology service contracts.

A lot has been said about the “urban doom loop,” but some cities have been able to avoid the downturn that comes with empty office buildings. On May 7th, I'll be joined by Placer.ai's Caroline Wu for a Propmodo Live webinar as we reveal which cities are finding success despite low occupancy, the surprising impact on other property types, and innovative strategies for downtown revival. Register now for "Which Cities Are Still Thriving Even With Low Office Occupancy?"

This week in Propmodo Technology, we're tackling multifamily development. Learn how sustainable trends like passive house and 3D printing are changing construction. Discover AI's impact on development finance, and explore the viability of franchise models within modular housing.

Now, let's dig in!

RealPage Lawsuit Will Prompt Rise in Software Contract User Protections

In October 2022, a California class action lawsuit alleged that real estate software provider RealPage violated antitrust law with its "rent optimization" software. This software was used by dozens of large landlords to set rents based on market conditions. RealPage and its clients were accused of violating the Sherman Antitrust Act, with lawsuits from Arizona and Washington D.C. soon following.

However, one company may avoid the legal repercussions: AvalonBay, the largest residential REIT by market cap. Court documents reveal AvalonBay's foresight in insisting on a special clause in their contract with Rainmaker (later acquired by RealPage). This clause shields them from liability related to the software's data usage. Their legal team anticipated the potential for antitrust concerns regarding information sharing and price setting.

It's difficult to quantify the exact savings for AvalonBay, but they are likely in the millions. If plaintiffs succeed in the existing lawsuits, more could follow. Meanwhile, RealPage's other clients also face negative press due to the high-profile cases.

While "hold harmless" clauses are common in real estate software contracts, they typically protect the software company. The RealPage lawsuits highlight the risks of data sharing for real estate firms. AvalonBay's example demonstrates the value of negotiating protective clauses in vendor contracts, a practice likely to become more common to shield firms from potential legal trouble.

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Propmodo Daily is written and edited by Franco Faraudo with contributions from readers like you and the Propmodo team.

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