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Blockchain reshaping real estate disputes but adding risk

In the last few years cryptocurrencies and blockchain technologies have undeniably influenced an array of markets. Until now the real estate market remained largely unchanged, but it will not fully escape the blockchain disturbance.

Last fall the first property transaction using blockchain technology took place. The sale could usher in a new era of digital commercial real estate transactions.

In person and on paper

Historically real estate purchases do not take place through digital channels. Most transactions occur through face-to-face engagements between a buyer and seller after in person visits to the property. Government and real estate agencies store information about land titles offline. The recording of transactions involves signed documents; landlords and sellers rely on a paper trail for leases and purchase agreements.

Transitioning to digital records and purchases

Commercial real estate disputes frequently arise from misunderstandings with lease terms, nondisclosures and payment issues. Advocates argue that the use of blockchain could prevent common commercial real estate disputes related to title legitimacy and payment automation while reducing fraud.

Utilizing blockchain could reduce the lengthy process of recording and transferring titles, resulting in transparent titles free from potential claimants. Blockchain would also offer real time information about the property.

The use of smart contracts between a landlord and tenant could automate repetitive small-scale processes, such as rent collection. The landlord would be able to take money via the lease’s terms, avoiding nonpayment and late fee penalties.

Disadvantages to digital transactions

Overall blockchain would speed up the transaction process, increase transparency and store data securely online. Transactions utilizing smart contracts would be traceable, transparent but also irreversible.

Databases are subject to human error as people enter data and inputted information is only as accurate as it was recorded. Lack of regulatory oversight across the cryptocurrency sector translates to risk for all parties.