Blockchain in property transactions – Could lawyers and estate agents soon be redundant in property transactions?
“Millions of UK workers at risk of being replaced by robots within 15 years”, claimed a report by consultancy firm pwc in 2017. As a property lawyer, technology plays an important part in my working day, but surely artificial intelligence will not drastically change the nature of a property solicitor’s work?
Maybe not, but technological innovation and enhanced methods of communication could spell trouble for intermediaries in transactions. In particular, by allowing digital information to be distributed in the form of continuously growing lists of records or blocks, aka Blockchain.
What is Blockchain?
Blockchain is technology which can keep track and record transactions, exchange data, transfer and verify information. A well-known example of Blockchain is the cryptocurrency Bitcoin.
It is based on principles of peer to peer networking allowing strangers to share a trusted history of transactions. This potentially removes a need for involvement of intermediaries such as estate agents, and solicitors to assist in certain types of transactions as the information is available to everyone who uses the network.
Could Blockchain be utilised in property transactions?
Depending on the country, property transactions can involve many documents spread across different sources and countries to be reviewed and agreed between lawyers or notaries. Often the documents or information can be missing which can require further investigation and cause delays.
Furthermore, lawyers are entrusted with verifying the identity of parties involved and carrying out anti-fraud and anti-money laundering checks.
Lawyers will also usually need to obtain original signed property contracts or deeds and receive monies necessary to affect the transactions. Compiling this can become a lengthy and costly process, particularly if parties involved are based across different jurisdictions.
There is undoubtedly an increasing need for a creation of a central database for all documents and information necessary in real estate transactions. Using Blockchain technology in property transactions could potentially simplify this process.
Potential advantages of Blockchain for conveyancing
Blockchain allows for all the transactional data to be stored in one place. A property transaction history could therefore be available and transparent to all parties involved and a risk of documents created in previous dealings going missing would be removed.
Blockchain could also store accurate records of the identity of current property owners and provide a proof that the owner is indeed a true owner of a property. This could make transactions less likely to be affected by property fraud.
- Moreover, Blockchain makes it possible to programme smart contracts which could be automatically created, executed with actual virtual signature assigned to every user, and enforced based on specific encoded history of instructions. This could speed up many transactions.
Do lawyers still have a role to play?
Buying a property can potentially be fraught with risk. Lawyers can add value by guiding the parties involved through the process by sharing their knowledge and expertise.
Although database for property documents in England and Wales could be improved, many documents are already held in databases such as the Land Registry portal. Many property documents can also be prepared using templates.
Solicitors also make very specific anti-fraud checks required by the legislation and the requirements are constantly being reviewing and improved thereby reducing risk. Also, solicitors themselves can be held accountable for negligent or fraudulent actions as they are regulated by governments whereas it arguably could be harder to seek compensation from a digital platform as effectively a user of Blockchain technology has to trust other peers in the network.
Property transactions via Blockchain have already been tested in some countries, it is not therefore a complete fantasy. Buying a property can be a big step and investment for some and is even more important that those involved are guided by experiences professionals and fully understand the implications of entering into transactions. Human involvement is invaluable especially when both parties disagree, and further negotiations are involved.
Personally I meet with every first time buyer I act for and I know how important personal interaction is for them. And Blockchain doesn’t offer an outstanding cup of coffee!
At Fletcher Day we provide personal assistance to many first time buyers making complex issues simple to understand.
For more information or help with your residential property transaction, please contact Olga Maczynska. Olga is a property solicitor at Fletcher Day, working in residential and commercial property departments and fluent in Polish.
The contents of this article are intended for general information purposes only and shall not be deemed to be, or constitute legal advice. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of this article.
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