AI tools can produce answers in second and are increasingly used by people researching legal issues and reviewing agreements. AI can be useful, but it is not always accurate.It may provide incomplete, outdated, or entirely invented information while often presenting the answers confidently. AI’s limitations are important to note when buying or selling land as relying on even the smallest error can have financial and legal consequences.
Where does AI get its information from?
Most generative AI tools are based on “large language models.” These systems are trained using large collections of text, which may may include publicly available websites, books and articles, reference materials, and licensed databases. An AI tool generally predicts what words are most likely to follow a prompt. It does not necessarily search for and verify the legally correct answer in the way your lawyer would.
Depending on the tool and its settings, AI may not:
- Have access to current information,
- Know whether a source is authoritative,
- Distinguish New Zealand law from overseas law,
- Understand the full context of a property transaction, or
- Verify that a case or statutory provision even exists.
How accurate is AI?
AI can be useful for explaining general concepts, summarising material and producing a draft, however, its accuracy varies significantly. One significant problem is an AI “hallucination.” This occurs when an AI tool generates false information, including a non-existent court decision, an invented legal principle, or a convincing but incorrect explanation of the law. The answer may sound authoritative and include detailed citations, however, those citations are often incorrect.
A well-known example is the United States case of Mata v Avianca, Inc. Lawyers filed submissions containing cases generated by ChatGPT that did not exist. The court found that the lawyers had failed to verify the material and imposed sanctions. This is often the case where output is relied on without proper verification.
Can AI review or negotiate an agreement for sale and purchase?
AI can explain common terms, but relying on it to review or negotiate a an Agreement for Sale and Purchase carries significant risks.
AI may:
§ Apply overseas law instead of current New Zealand law,
§ Rely on an outdated ADLS/REINZ agreement,
§ Misunderstand special conditions,
§ Overlook property-specific risks including finance, title, LIM, building report insurance, GST, unit title or cross-lease issues,
§ Misinterpret the effect of legal wording, and
§ Miss critical dates or conditions, objections or settlement.
Even a small drafting error can significantly affect a party’s rights. For example, a poorly drafted due diligence condition may not provide the cancellation rights a purchaser expects.
A lawyer or conveyancer considers the complete transaction, including:
- confirming ownership and the legal description;
- reviewing the record of title and registered interests;
- advising on the agreement’s conditions and further terms;
- reviewing a LIM, unit title disclosure documents or other records;
- identifying issues requiring further investigation;
- liaising with the bank, real estate agent and the other party’s lawyer;
- arranging the transfer of title and funds;
- completing settlement; and
- advising on remedies if the transaction does not proceed as expected.
While AI might be useful as a very early starting point, it simply cannot perform the above functions. In property transactions, there is minimal room for error. A purchaser could become unconditionally bound to buy an unsuitable property and a vendor could accept unnecessary obligations.
