Page 15 - 2018 October Bar Journal

REAL ESTATE LAW

are satisfied, the investors could be the technology would allow the parties greater However, over time the accuracy and
automatically charged the agreed amounts, trust, potentially leading to easier processes completeness of the data will strengthen
admitted as members to an LLC, and title to and less waste. Similar to realtor.com or Zillow, through the Blockchain verification process.
the property is conveyed to the LLC. This a buyer could begin by searching a database Going forward, transfers and liens will not
could essentially make the purchase of a of available properties. With Blockchain, exist unless recorded on the Blockchain.
fractional interest in real estate similar to an the relevant property information would be
on-line stock trade. verified and reliable. Conclusion
Once the parties decide to enter into an The first home sale transaction completed
Title Examination and Deed and Instrument agreement, they would sign a smart contract and recorded on a Blockchain ledger closed
Recording with transaction-specific requirements and in Vermont in February, 2018. That was made
If title documents are stored on a Blockchain conditions. The buyer would then perform possible through a pilot process where the
network, title examination could become further due diligence, conducting searches City Clerk’s paper records merely referred
uniform and instantaneous. Any conveyances based on the information contained on to the Blockchain ledger. However, the City
or alterations to the status of the property, once the immutable ledger associated with the Clerk plans to keep moving forward until the
agreed upon by the seller, lenders, and other property, including title, environmental, Blockchain ledger replaces the paper records
interested parties, would occur as notations in leasing and cash flow, and engineering held at the Clerk’s office altogether.
the Blockchain. Changing ownership would records. The parties would also agree to The Blockland initiative is gaining
simply add a block to the chain, and all parties grant permission to access the network to momentum, and it will take the innovation
would see the entire chain of title. The shared prospective lenders. of buyers, sellers, lenders, and landlords to
access to information would hold each party Once all parties confirm all conditions are make a Blockchain-enabled real estate market
accountable for making a record of agreed- satisfied, closing is automatically executed. a reality.
upon title matters and reduces risk of disputing Buyer’s and lender’s funds are distributed to
title matters. If a title matter is not recorded on seller and its prior lenders and lien holders, and
the Blockchain — it does not exist. the title documents are automatically added to Mark Stockman is a partner with
the ledger associated with the property. Frantz Ward, LLP where he has
Closing Contracts ancillary to the conveyance developed a transactional practice
The closing process can become more can be set up as smart contracts, such as devoted to counseling clients through
efficient, reducing time and costs. Closing loan documents and escrow agreements. all phases of the real estate
conditions, such as approval of title, issuance Mortgage payments, insurance payments, development and construction process. He
of title insurance, transfer of funds from buyer and collection of taxes in escrow could all be routinely represents the interests of owners,
to seller, payoff of prior liens, etc., would be automatically triggered by closing. landlord, tenants, buyers, sellers, lenders,
agreed upon by the parties. Each party can Transaction procedures similar to this contractors, architects and engineers. He has
access the network to check the status and protocol can be applied far beyond the developed significant expertise in the development
fulfill their requirements. Once all parties purchase context. Blockchain platforms of condominium, planned residential community,
confirm completion, the transaction would are being rolled out to manage residential and urban mixed-use projects. Mark practiced
become self-executing and the transaction is leasing, carve up fractional real estate as a registered architect for 10 years, and his
automatically closed. ownership interests into Bitcoin-like combined experience provides a great depth of
“tokens” that can be traded, and to facilitate knowledge within the development and
International Uniformity record keeping. Systems can be developed construction industries. He has been a CMBA
Maintaining a single repository of for building design, construction contracts, member since 1996. He can be reached at
information and the creation of industry easements, financing, and building (216) 515-1651 or mstockman@frantzward.com.
standards could smooth out inconsistencies management, and all of these could even
in real estate transactions globally. Customs be integrated into one master “real estate
and currencies that vary between locations development” Blockchain protocol. Mia L. Ulery’s practice includes
could be homogenized by setting up a system counseling businesses on
of purchases, transfers, and payments that CHallEngES compliance and governance issues
is internationally accepted. Such a system The concept of reducing 200 years of related to data privacy and
would likely be a private endeavor rather ownership records, with all the multitudes of protection, including developing
than a governmental system, and would likely terms in deeds, easements, etc., to a simple GDPR-compliant privacy policies and practices.
function “on top of” local regulations as a and understandable ledger is daunting. A She also advises financial institutions, suppliers,
preferred, rather than mandated interface. new Blockchain record is only as good as the and other corporate creditors on several aspects
data that is input in to it, and verifying the of bankruptcy and commercial matters including
BlOCkCHaIn PUrCHaSE accuracy of the initial record of retroactive enforcing pre-bankruptcy creditor remedies and
TranSaCTIOn lIfECyClE data will be a significant process. A system for defending against claims for alleged preferential
A Blockchain-enabled transaction would disputing records will need to be established, transfers. She has been a CMBA member since
move at a much faster pace and would involve as well as the respective rights of property 2015. Mia can be reached at (216) 515-1625 or
fewer parties. The security and transparency of owners and other interested parties. mulery@frantzward.com.
OctOber 2018 Cleveland Metropolitan Bar Journal | 15