Technology - Property

Technology—Property provides information on current technology and microcomputer software of interest in the real property area. The editors of Probate & Property welcome information and suggestions from readers.

Document Automation

Document automation software has reached a development stage making it inefficient for law firms, corporate and governmental law departments, and solo practitioners to operate without it. Those who do not use the software will be doing a disservice to their clients and will have a significant competitive disadvantage. As with other tools lawyers use in their practices, they must invest some time to learn to effectively use document assembly software.

Preparing Documents

When I began practicing law in 1969, letters, memoranda, and transaction and litigation documents were generally prepared on a typewriter using carbon paper to make copies. At one of the first closings I attended, a lawyer from a major New York firm representing a large lending institution refused to allow the parties to sign photocopies of a loan agreement. Carbon copies were required because of the concern that the text appearing on the photocopy would disappear in a relatively short period of time.

With improved photocopiers, many firms began to use cutting and pasting as a technique to assemble documents and reduce the need for retyping major portions of them when only a relatively few changes were required. This was not cutting and pasting as we know it today with our sophisticated word processing software. This was using scissors or paper cutters and glue or tape to add or rearrange text and photocopying the result. To a small extent this method is still used today.

With the introduction of typewriters that could store documents on magnetic cards, documents could be reprinted after correcting errors or making other changes without having to retype unchanged provisions. I recall a number of lawyers shunning this advance in technology because they had perfected the art of cutting and pasting, and, they claimed, the use of scissors and tape could get the job done quicker and cheaper.

Then dedicated word processing machines were developed that provided much more extensive editing capabilities and further reduced the need for retyping by editing a prior document for use in a new transaction. This was before the introduction of personal computers, and these dedicated word processors were very expensive and, as a result, in limited use.

With the development and acceptance of personal computers, word processing technology became much more affordable, and the preparation of documents on personal computers ultimately became the legal and business standard. Over the years, the speed, memory, and storage capacity of personal computers as well as the capabilities of word processing software have greatly increased.

Word Processing Templates

The leading word processing software packages, Word and WordPerfect, have built-in features for the creation of automated document templates that enable all types of document generation at much greater speed than traditional word processing methods. The software allows the material that tends to change from deal to deal, such as names, addresses, phone and fax numbers, amounts of all types, and property descriptions, to be identified and defined in a manner that frees the user from ever having to enter the same information more than once, no matter how many times it appears in the document or a set of documents for a transaction. The capability also exists to select certain words, clauses, paragraphs, or sections to be included or excluded from a document based upon simple or complex conditions. These capabilities are particularly useful in a practice that produces a relatively high volume of similar documents, because individual documents can be produced in less time and with enhanced quality and consistency. How often do you have an opportunity to improve quality while reducing the time spent on a matter? Usually quality suffers when time is cut.

So how can this be true? It is really not much different from the results to be expected in comparing the work of a firm’s well-experienced partner with that of an inexperienced associate. The partner will spend less time to complete the job. With a wealth of experience the partner will also achieve a higher quality work product in less time than the associate takes to produce a product that needs an expert’s review to identify issues with which the associate is not yet familiar.

It is important to focus on the “time” being discussed in this scenario—the time from the beginning of the job to its completion—because this is not the only time actually involved. The same is true in comparing document preparation using special automated templates versus the traditional word processing approach of reviewing prior documents, selecting one to use as a base, and choosing appropriate language from other relevant precedents. Just as a partner spends years in practice developing skills and knowledge, for an automated document template, time must be spent in its development. This development time will depend on the complexity of the document, the amount of knowledge being incorporated, the availability of the subject matter expert, the software being used, and the skill and experience of the template developer.

Document Automation Software

Fortunately, the time to develop and maintain templates can be substantially reduced by using commercially available document automation software instead of the built-in features of word processing software. The learning curve to use the built-in word processing tools is often much greater than for document automationsoftware.

The current marketplace leader in document automation software is HotDocs, which is used in many law offices throughout the nation and in other countries. There are a number of competitive products, and their pluses and minuses will be discussed in this column in the magazine’s September/October issue.

How to develop simple templates can be learned very quickly. But, as with most endeavors, developing skills is important to building complex and polished templates that are easy to use and that maximize time savings and the integration of knowledge. A law firm or law department can train existing personnel, hire professionals experienced in document automation as employees, or hire one of the many document automation consultants that develop templates for law firms and law departments. Some consultants are also willing to train existing employees how to create templates. All template development work can then be performed in-house, divided between in-house personnel and outside consultants, or entirely performed outside the firm.

The time it takes to develop a template is an important factor. For example, it will rarely make sense to invest 100 hours to develop a template that is used at most twice a year when it takes only 10 hours to draft the document in a conventional manner. On the other hand, it usually will make sense to invest 20 hours to develop a template if an hour can be saved each time it is used, and it will be used 100 times a year.

Generally, it is better to start out developing simple templates to achieve some quick and early suc-cesses and to build confidence in the value of the software. Over time, more and more knowledge can be built into templates that start out as simple versions, and with experience, it will become more feasible to develop more complex templates.

Some people believe document automation ought to be limited to relatively simple documents, because, they claim, legal thought is too complex to capture and build into a template. Others point out that more complicated documents with great amounts of incorporated knowledge yield the best return on investment. Complex templates should produce the greatest time savings and the greatest quality enhancement. Good returns can be obtained on both simple and complicated templates, so long as they are used with enough frequency to justify the cost of creating them.

Build in Knowledge

So how can you build knowledge into a template? Actually building it in is easy. Identifying the knowledge to include is the time-consuming part. This requires the time and knowledge of those lawyers in the organization who know all of the issues that must be dealt with in drafting a document or particular set of documents. The experts must indicate the document points where revisions should be made depending upon the facts involved. For example, if a set of mortgage documents is automated, the expert must supply the variations to the interest rate provisions that will be required under interest rate scenarios that are likely to be encountered in actual transactions. Wording will be different depending on whether the loan has a fixed rate, a variable rate based upon U.S. Treasuries, or a variable LIBOR rate. The expert will know not only that the interest provisions have to change depending on the rate structure, but also that the prepayment, maturity, and nonrecourse provisions might require changes as well. The expert must be able to specify with a high degree of precision the circumstances under which optional language will be included or excluded. Once this is done, the person coding the template has a fairly easy job to incorporate the knowledge. One incidental benefit from having experts review documents to provide instructions for dealing with optional language are actual improvements to the form documents resulting from a very careful consideration of all parts of the documents. A well-done template should allow an inexperienced lawyer or paralegal to generate an excellent first draft, which has taken into account all of the issues the experts would consider, in a fraction of the time the drafting would take using conventional word processing.

The person using the software to generate the document from the template will be asked a series of questions about the transaction. Depending upon how the user responds to the early questions, additional lines of questions might be asked. For example, in a mortgage loan transaction, if the user indicates that the loan is to be secured by a hotel, questions about licensing and management arrangements will be asked that would not be raised if the mortgaged property were of another type. Questions will be asked to determine if any of the conditions exist for including or excluding optional language as specified by the experts. By using the system, the inexperienced person is made aware of otherwise unknown issues, and the system serves as a training vehicle.

Of course, without automated templates, inexperienced lawyers must query their experts for advice in drafting before, during, and after the drafting takes place. How many times should the experts be required to convey the same knowledge? Once for each associate being trained? Will such advice be fully retained and recalled whenever needed? Repetitions will be required for each inexperienced associate. What happens when the experts are not available to be consulted for various reasons? This delays the drafting process further or gives rise to the possibility of a draft that has not taken into account all of the relevant issues. Why not leverage the knowledge of the experts by building it into automated templates, making that knowledge continuously available to associates, and permitting the experts to devote more of their time to higher value work?

Automated templates are effective vehicles to ensure that newly gained material knowledge is properly used in preparing documents. In drafting documents, the drafter must take into account changes in a client’s business policies, developments in the law, and material knowledge gained during transactions by the drafter and by others in the organization. Lawyers and paralegals in a legal organization will be advised of these changes by memoranda or discussion. Some developments may require drafting changes only under certain circumstances. Will all important details be remembered and recalled when needed? There is no  better way to ensure this knowledge is properly taken into account for future drafting than by making appropriate changes to automated templates. Then no special changes to the documents will be inadvertently omitted. Updating well-prepared and well-documented templates is usually notdifficult.

What usually attracts people to document automation initially is speed. I believe, however, that the most important attribute is enhanced quality. Speed is definitely important and a well-constructed template will provide this benefit. Improving turn-around time for clients is always critical in a competitive environment. Improving quality and consistency is even more critical, not only to be competitive but also to limit liability exposure of the client as well as the lawyer.

Technology—Property Editor: Gerald J. Hoenig, 8495 Caney Creek Landing, Alpharetta, Georgia 30005,