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            How will Blockchain disrupt the Real Estate sector?

            Hailed as the biggest digital innovation since the internet, Blockchain is the virtual infrastructure that is changing the way we work.

            Blockchain will disrupt your industry.

            Real Estate companies are starting to look at how the technology has the potential to optimise their processes and facilitate Real Estate transactions.

            First the basics: Understand blockchain in 6 minutes by watching our animation

            Skip video to: How Blockchain works >

            Skip video to: What Blockchain means for business >

            How is Blockchain affecting Real Estate?


            Blockchain allows transactional information to be stored, traced and traded securely and privately between multiple users. Beyond Bitcoin and Cryptocurrencies, there are a number of opportunities for the Real Estate industry.

             

            Sale and purchase transactions

            The property listing market is dominated by centralised, sometimes monopolistic, platforms which are often subscription-based, charging high fees and subject to human error. These intermediaries have cut off the direct connection between the asset owner and customer.

            A blockchain-based listing gives the connection, and valuable information about users, back to the asset owners and allows users to view information such as the properties location, history, ownership and the title information.

            The use of blockchain for the property search process will ultimately reduce transaction costs and be more secure and efficient.

            Conducting due diligence

            Currently the due diligence process in a real estate transaction is predominantly offline and highly labour intensive, with documents surrounding proof of identity for the history of property ownership, tenants and modifications. A blockchain solution for digital identities and title registers enables a streamlined and secure due diligence for both the buyers and the lenders, eliminating much of the potential for human error and fraud. This would also open up opportunities in countries with no mandatory land register and/or field book as sensitive information secured on the blockchain contributes to the credibility of the information.

            Sales execution

            Self-executing (smart) Smart contracts will help to facilitate, automate as well as make secure exchanges for items such as payments or titles through self-execution on the Blockchain. 

             

            Property and cash flow management

            Smart contracts (sitting on the blockchain) can be used to create dynamic tenancy agreements. This enables details of the contract such as rent value, payment terms and information around the state of the property to be agreed and signed digitally between the landlord and tenant. Following this, the payment of the lease and eventual return of the deposit and payments to agreed contractors can all be executed automatically via the smart contract once the agreed criteria has been met. Once again meaning a more efficient, auditable and legally enforceable process.

            Title management

            Blockchain could be used to create or support a land registry where all components of the process are held together in a secure and transparent way. This would enable users to track the history of ownership and other information necessary for various purposes. For instance; title transfer, land register registrations, to name a few.

            Smart contracts will also enable us to manage and track payments to and from the owner of the property, again leading to more efficiency within the process. 

            The future

            These are but a few examples of how Blockchain might disrupt the Real Estate Sector, and there are even more impacting factors to take into consideration when including cryptocurrencies and tokenisation within the sector too.

            Blockchain will undoubtedly change the way we purchase, lease and manage property portfolios. It will make the transfer of valuable information and assets more secure and efficient, enabling Real Estate investment to be more accessible through this decentralised ledger.

            Have you thought about the legal implications of Blockchain?

             

            Jurisdiction

            • Which legal framework will apply?
            • What forum should be used to resolve disputes?
            • How do you govern entities that exist purely in cyberspace (known as “decentralised anonymous organisations” or “DAOs”)?

            Liability

            • How is ownership/control determined?
            • Where does the liability lie when something goes wrong?
            • How can businesses limit their exposure?

             

            Smart Contracts

            • How do you create a blockchain based contract (a “Smart Contract”)?
            • When will Smart Contracts be enforceable?
            • Can code determine issues of fairness?
            • How should disputes be resolved?
            • How do you govern decisions made by an AI?

             

            Regulation

            • How will regulatory authorities choose to approach blockchain?
            • How will blockchain interact with existing regimes such as those relating to consumers or finance?
            • How will tax laws apply to transactions a blockchain system?

            Terms and Conditions

            • What terms do you need to include to cover the particularities of blockchain such as payments in cryptocurrency?

            Data Protection

            • Who are the controllers and who are the processors?
            • How can privacy be protected on an open system?
            • How can you obtain all the necessary consents?

            How we can help 

            DWF’s market leading Real Estate experts have come together to explore how Blockchain is disrupting the industry. We understand this complex technology and its legal ramifications and our Real Estate sector experts are here to guide you through what the changes may mean for your business.

            Click here to view what is happening within our Real Estate sector >

            Toby Askin

            • Partner // Head of Real Estate Group
            • T: +44 (0)3333 203 170
            • M: +44 (0)7921 396931
            • F: +44 (0)121 212 2210
            • E: wal.fwd@niksa.ybot

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