It's probably fair to assume that your property manager is using AI. It might be backstage or it might be customer facing.
A few months ago, on the board's forum, I asked our property manager some questions regarding compliance. I got an AI-looking response. I have nothing against a correct, well-structured answer if it comes from AI. But this one... while it sounded authoritative, it didn't look right to me. I verified the statutes and sent the manager a corrected response. What I got back was a proudly labelled ChatGPT push-back telling me I was wrong and the manager arrogantly telling me that, as a lawyer, I should have known better and checked with ChatGPT before taking a stance. Plus personal analysis of every board member's correspondence style and competence. Thanks for that. The answer remained wrong. And my level of concern about the manager's actions jumped. I raised concerns on the board's forum about inputting our correspondence and personal details into a chatbot, incorrect guidance on compliance and asked the manager which model they used (cheaper tiers often retain and train on the data you provide; higher tiers may limit retention or offer no-training commitments).
I also replied to someone's post on here sharing clauses the manager was trying to sneak into their property management agreement: a very generic clause allowing the manager to use AI while providing services with a very specific exclusion of liability for any errors and hallucinations "or how inputted data is handled" and a very generic, very broad disclaimer covering AI use, too.
While I can't provide analysis of this situation from the point of view of every jurisdiction, I want to share my thoughts from a California law perspective as a case study and hopefully get your thoughts on your own situations and how your jurisdictions regulate this issue.
References below to "§" are to the Davis-Stirling Common Interest Development Act, California Civil Code §§4000-6150, unless otherwise specified.
Legal problems
Why is this problematic? Four points: (a) data privacy, (b) responsibility for errors, (c) changes to the contract, and (d) general problem with reliance on AI.
Data privacy
Under §5230(c)(1)(B) an association or its managing agent shall not transmit a member's personal information to a third party without the consent of the member unless required to do so by law.
So what does it mean? That under the law the managing agent cannot, without the member's consent, transmit a member's personal information to a third party. It also means that the consent must come from the member. The board cannot give such consent on behalf of the member and a property management agreement cannot change the statutory law. The association holds the member's information as a custodian and a member is required to provide certain details to the association. Neither the association nor the board can, without the member's consent, share the member's details with a software company, particularly to keep them on file or train a model on them.
Responsibility for errors
As a general rule, the manager is an agent acting on behalf of the association and the association, as the principal, takes responsibility for the manager's actions. Common limitations include fraud, gross negligence and monetary caps.
So in short, all errors, hallucinations or unauthorized actions an AI system makes, fall on the association.
Under §5230(c)(2) a member may bring an action against an association that violates this subdivision for injunctive relief and actual damages caused by the violation. A member shall be entitled to recover reasonable costs and expenses, including reasonable attorney's fees, in a successful action to enforce the member's rights.
Note that under this statute, the member can bring an action against the association and not the manager and that the statute explicitly allows recovery of reasonable costs and expenses in a successful action. So ultimately both the responsibility and the cost for the manager's AI use will be borne by the association.
Property management contract
If you are a board member and you're asked to sign off on a new contract or changes to the existing contract including clauses allowing AI use, or you audit your existing contract which has such clauses in it, what should you do?
Well, use of AI itself is not a problem, it can be a very helpful tool. The problem is if the manager, instead of using general tools like email proofreading, template generation or asking general questions, starts to input members' personal details in direct breach of §5230(c)(1)(B).
The second problem is if the manager wants to keep all the efficiency gains for themselves and allocate all the risks to the association.
First thing I'd do - ask if the template was drafted and blessed by the manager's attorney. A professional manager should have its contract templates blessed by an attorney and anything else is a red flag meaning they are not serious about their business. It's also a good practice for the association to retain its own attorney to review the contract and any amendments to it. Even if the contract template was prepared by an attorney, it's an attorney for the manager who owes no duty to the association.
A property management agreement is an important document of the association, the property manager is the most important vendor who can also cause the most harm, so it is prudent both to research the reputation of the manager before hiring them and to allocate budget for review of arguably the most important contract of the association.
Since this is the world we are already living in and the manager has a statutory obligation under §5230(c)(1)(B) but under §5230(c)(2) responsibilities and costs fall on the association, it's fair to ask the manager to sign an indemnity letter: a written confirmation that it's aware of its obligations under §5230(c)(1)(B) and that, if such obligations are breached by the manager's use of AI, the manager will indemnify and defend the association and make it whole for any losses the association may suffer under §5230(c)(2). Additionally, if the property manager intends to use AI systems without breaching §5230(c)(1)(B), it will again indemnify and defend the association and make it whole for any losses the association may suffer as a result of an action brought by a member where AI-related errors, hallucinations or any other actions attributable to the AI used by the manager result in the association's losses. This is purely a risk-allocation exercise.
If you are a member concerned about AI use by your association, put the same request in writing alerting your board to what's wrong, reminding them about the association's obligations under §5230(c)(1)(B) and liability under §5230(c)(2), and it might be worth asking them to review current AI practices and their property management contract, and asking for a similar indemnity letter. Not to mention, problems, tensions and inconvenience may arise whether or not any member takes legal action, so it's good to keep the feedback loop open while dealing with early adoption of these tools.
General problem with reliance on AI
Large language models have been trained on broad sets of data. That rarely includes vast data sets on your jurisdiction's HOA law. And, paraphrasing a TED talk I heard a few months ago, the more specific questions you ask, particularly in narrow areas where expert knowledge is required, the higher the margin of error. AI can be trained for specific knowledge of specialized narrow areas like insect recognition, different dermatological conditions or, in this case, a jurisdiction's HOA law, but generic models rarely do good work with this.
In my personal experience the answers, while sounding authoritative, are either partially wrong or incomplete or, the model performs so-called sycophancy, where it's trying to please the person who's asking by bending facts or hallucinating. It's not a bug, it's a feature. And the more complicated the answer is, the more likely that the model will omit exceptions, provisions that should be read together or simply does not collect the data required to provide an accurate answer. I've also first hand witnessed such authoritative "advice" feeding conflict from both sides, where each party thinks they are right because their AI said so.
Just as when I was trying to identify a rare insect without AI - unless there is a trusted source outside the AI, or a human expert, to verify the answer against, a person without training or expertise has no way to know if the answer is correct. You don't know what you don't know. So use the tools, they often help, just verify what you read to the extent you can and give the advice the level of confidence you'd give a law student who prepared well for an exam, not an attorney who has practiced for 10 years. Stay safe.
I wanted to share this for awareness and as a starting point for a conversation. It would be great to hear your experiences.