Smart Use of Smart Tech in Commercial Real Estate: Wiretapping Laws

Recently, I obtained an app called Tunable for my iPhone. This amazing $3.99 app replaces three electronic devices musicians used to have to carry around with them: an electronic tuner, recorder, and metronome. And it does so better than the electronic devices.

For the tuner, not only can a musician play a pitch to match to tune an instrument, but the musician also can set the tuner to match the instrument family, frequency of the pitch, tuning style (e.g. even temperament), and even vibrato width. The tuner also can evaluate a performance and produce an intonation score from 1 to 100. The recorder not only records the musician’s performance but it can analyze intonation in the performance and provide real-time feedback letting the musician know how close each note is to being in tune.

An online program called MusicFirst offers basic feedback for music educators evaluating student performances. Some teachers base student grades on the “quality” of the student performances, even though these apps can’t evaluate musicality and may interpret a superior musical performance as flawed.

These apps, and ones like it, create the possibility of revolutionizing the music industry by helping students and professionals alike to hone certain of their skills by using an app on their phone or tablet. Yet, they are not without drawbacks.

Teachers who give grades based upon an app’s numerical score encourage robotic accuracy at the expense of moving music. And, an audio recording of homework delivered to the teacher might violate wiretapping laws if it includes private conversations in the student’s home.

Smart Tech in Commercial Real Estate.

Commercial real estate has experienced a similar influx of technology with “smart” technologies being implemented into property operations. Cameras which previously were monitored by closed circuit TV now may be streamed into web storage. These cameras can recognize faces and may unlock doors for known individuals.

Keyless entry systems have moved from fobs and key cards to phone apps. Motion sensors can turn lights or HVAC systems on or off in a room depending upon whether it is occupied. Window shades can be programmed to open or close based upon outside sunlight, and parking garages can be outfitted to monitor where there are vacant spots.

Real estate investors and property managers can and should leverage technology to provide safer and more tenant-friend environments. However, like the music apps, smart technology in commercial real estate can create legal problems. This is the first in a series of articles discussing how property owners can use smart tech without creating undesirable legal issues.

Security Risks of Smart Technology in Commercial Real Estate

Most security risks of smart home technology also exist when smart technology is used in Commercial Real Estate. Some of the security risks generally include:

  • Passwords which are easy to guess, shared, lost, or forgotten;

  • Failure to install manufacturer software and firmware updates needed to maintain security;

  • Data breach in cloud-based data storage;

  • Security breaches of on-site WiFi; and

  • Devices being lost or stolen with smart technology app and password stored on them.

Wiretapping Concerns of Smart Technology in Commercial Real Estate

In addition to security risks, smart technology raises unique legal challenges when used in commercial real estate. A common concern involves running afoul of wiretapping laws.

State wiretapping laws developed after the invention of the telegraph, which allowed for communications through wires. Businesses, desiring to gain information, hired private investigators to “tap” into those wires to obtain information. Congress passed the first federal wiretapping law in 1934.

Every state allows the parties to a conversation to record it if both agree. Federal law requires only that one person to the conversation agrees. But sometimes state law, rather than federal law applies. And many states do not allow conversations to be secretly recorded with the permission of just one party.

As the public learned when Linda Tripp was charged with wiretapping for recording conversations with Monica Lewinsky, Maryland, where I am located, is one of those two-party states where both parties to the conversation must consent before it can be recorded. Other two-party states include California, Connecticut, Florida, Massachusetts, Montana, New Hampshire, Pennsylvania, and Washington.

Smart technology that includes audio recording, as many cameras do, can cause wiretapping concerns. There are no “zero-party” states, nor does federal law allow recording of a private conversation without consent of either party when the parties have an expectation of privacy. So, it’s usually not legal to bug a conversation if neither party knows about it.

Real Life Example: Camera in Office

Several years ago, a client who rented commercial office buildings came for advice on how to tell a tenant that two of its employees were embezzling. At first, it might seem this landlord was showing good business practices by informing a tenant of disloyal employees.

When I asked for proof of the theft, the situation was more complicated. Tenants had been complaining about overnight thefts from offices. In response, the building owner had secretly installed hidden video cameras in the office because it thought that its night cleaning staff were stealing from desks.

When the cameras were installed, the owner was focused on capturing video to see whether night cleaning staff were opening desk drawers and removing property. But the cameras had an audio feature.

While reviewing the recordings, the landlord noticed they had recorded the conversations in the private office during the work day. The video showed nothing irregular, but the audio of one conversation included a discussion between two of a tenant’s employees describing their embezzlement.

Employers frequently have new employees sign a consent to video and audio surveillance in the workplace. But the landlord didn’t have consent to record the tenant’s business dealings or its employees.

Therefore, the audio recording put the landlord at risk of being charged with criminal wiretapping. Even if the landlord avoided criminal charges, this did not make for good tenant relations. Tenants could have considered the recording a breach of their leases or perhaps even a breach of the warranty of quiet enjoyment of the leased premises.

Smart Use of Smart Tech

Before installing cameras in an office building, property owners should:

  • Know the camera’s features. In the example, the owner wasn’t interested in audio recording, but the cameras it installed had this feature.

  •  Notify people they may be recorded. Most of us have seen signs in elevators, parking garages, or buildings notifying us that the area may be monitored by video camera. This is good business practice for anyone who installs a camera.

  •  Obtain permission for recording. Property owners should include a consent to video and audio recording in tenant leases. Employers should include a consent to audio and video recording, and computer monitoring, in new hire packets.

  •  Know your state’s law. Property owners should know whether they are in a one-party or a two-party state. In a one-party state, the owners can record if one party to the conversation is aware of the recording. Audio recording is riskier in two-party states.

  •  Don’t use audio recording features. Although it video recording isn’t risk free, when it comes to wiretapping laws, video cameras are far less risky. Even if property owners and employers have written consent, it is best to avoid audio recording. This is especially so where there is a possibility of capturing conversations among people who have not consented to recording.

Smart property owners can use smart tech to their benefit. Cameras, in particular, can be a valuable security tool for commercial property owners. They can both deter crime and help catch criminals who are caught on camera. Cameras also can protect property owners from fraudulent claims. However, audio recording, in particular, risks and should be used only with caution and after consulting with an attorney.


© 2019 by Elizabeth A. Whitman

Any references clients and their legal situations have been modified to protect client confidentiality

DISCLAIMER: The content of this blog is for informational purposes only and does not provide legal advice to any person. No one should take any action regarding the information contained in this blog without first seeking the advice of an attorney. Neither reading this blog nor communication with Whitman Legal Solutions, LLC or Elizabeth A. Whitman creates an attorney-client relationship. No attorney-client relationship will exist with Whitman Legal Solutions, LLC or any attorney affiliated with it unless and until a written contract is signed by all parties and any conditions in such contract are fully satisfied.