According to research in 2015 by Quick Move Now, move than one in three property sales fall through. Of those, nearly 30% of sale fall throughs can be attributed to slow sales progression and conveyancing issues which is no surprise as purchasers can wait anywhere from 4 to 8 weeks to exchange and complete. Could blockchain technology and conveyancing be the perfect solution of is there something far more simple
Iain White, former MD of Romans, states “The current system is antiquated over complicated and without doubt a factor contributing to some people shying away from the moving at all” and asks “why is more not being done to modernise the conveyance process?”
PropTech is currently a very exciting sector but the legal side of the industry seems to have escaped attention for the time being. Personally, I believe the thought of changing a system, whose foundations harp back to the times of the Norman Conquest, could be quite daunting. If ever there was a sector ripe for a timely disruption, it is this one.
Just look at the recent case involving the fraudulent sale of the property in Fulham. A tenant changed their name by deed poll, obtained a passport and then “sold” the property for £1.35million. Fortunately the property was never legally sold as the Land Registry eventually spotted the problem but not before waving the purchaser’s funds off to foreign lands.
The underlying technology that allows the Bitcoin to exist, the Blockchain, could have prevented this situation but, before I explain its potential, there are other, more immediate, technologies and processes that could help speed up or secure your conveyancing.
Housebuilders need security and knowing that an interested party will exchange quickly is key. Enter sites like ClickToPurchase, described by its founder, Neil Singer as “a unique and proven online execution platform which enables agents and vendors to sell by online private treaty, “best offers” or real time auctions”.
It has had immense success in the commercial market, with over £125 million so far executed by “bringing control to their sale process and removing the frustrations of a slow conveyancer”. Its recent tie up with EasyProperty suggests it needs to be considered in residential sales too.
Once a potential buyer has a verified account (all done online and a few steps involving agreement with their solicitor), they can submit their offers online, generally after their solicitors have approved a legal package that a developer would need to supply, and, using digital encryption, can exchange contracts immediately. Exchanges can also be considered subject to matters like finance. Having a penalty in place should someone pull out of the deal, offers that much needed security.
Adding instant security will certainly help both sides but equally, there needs to be a more efficient way for solicitors to carry out their conveyancing; enter Online Case Management (OCM). According to Curtis, CEO of Hoowla, a firm that is leading the charge in this area, “security and entering duplicate data across multiple systems are two of the big issues facing solicitors today” and with OCM all this can be taken care of. Giving developers, agents and solicitors one system to work with, that will speed through a lot of the administrative fog, will undoubtedly speed up the process but also, and perhaps, more importantly, “reduce the amount of times data are re-entered for search ordering and land registry forms, reducing the possibility for human error”
Tools like Click to Purchase and Hoowla working together can certainly help your deal progression and this is especially true of the more convoluted overseas deals. However that is the “now”, what about the “next”? This is where Bitcoin comes in, the crypto-currency that many of you may have heard about.
This isn’t about people buying properties using Bitcoin – though there is growing evidence that this has happened as it is an attractive option for foreign investors not wanting issues with bank accounts or currency transactions – but about the underlying technology that allows Bitcoin to exist. It is called the Blockchain.
Blockchain is a “completely open source, disruptive, free and decentralised system for organising and exchanging all types of information” according to Zach Aarons of MetaProp NYC. In effect, it is one large public ledger that cannot be hacked and lays the foundations for Smart Contracts especially in property title management.
Blockchain and Real Estate
There are three areas that the Blockchain could impact;
- purchasing real estate
- escrowing real estate and
- recording the transfer of ownership of real estate.
Currently, the process uses the common law system and requires a time consuming examination of past deeds every time a parcel of land is bought or sold. We rely heavily on title insurance to mitigate against this risk. We all know the rigmarole of conveyancing so imagine that all deeds, mortgage information and public land records were held in this decentralised public ledger (it isn’t as farfetched as it sounds seeing that Honduras are just in the process of doing this).
Whether it be a developer buying land or a potential buyer buying a property, important legal information could be pulled up in minutes, on mobile devices, rather than weeks through a lawyer. Equally, given it is tamperproof, it will make fraud exponentially more difficult to accomplish. As Holland & Knight, a US legal firm, suggests, “it will stop lawyers arguing about largely academic issues and focus their attention on those provisions that truly affect the economics of a transaction”
This will not be a technology for today; Ragnar Lifthrasir, President of the International Bitcoin Real Estate Association suggests “the future of bitcoin and real estate isn’t a question of technology but of implementation and adoption. We already have the software tools we need. Onboarding property owners, investors, title insurance companies, government agencies, escrow companies and realtors. Its slow unglamorous work and is accomplished one person at a time”
It isn’t an easy innovation to get your head around and I have deliberately scratched the surface in this article but to quote Bloomberg recently “
Ultimately, this column tries to outline the processes and new technologies that are either happening now or are around the corner; this article hopefully shows how you can reduce the friction between intention and action in the legal process. It’s certainly time for a change
This article originally appeared in ShowHouse Magazine where I am the regular Technology columist.