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Posted by: Katie Walters - Thursday, November 23rd, 2017
It’s undeniable that one of the key frustrations in conveyancing transactions is the time that it takes to reach the exchange of contracts, and then completion. In an age when most of our lives run instantaneously, at the swipe of a screen, the laborious process of retrieving documents from the Land Registry, verifying information through searches, and transferring funds between accounts can be excruciating. More than excruciating, it can be responsible for transactions failing to go ahead at all: statistics suggest that slow sales progression and conveyancing issues are responsible for 30% of all failed property transactions. The system that has been in place since Norman times is ripe for an overhaul – but the question is: what will replace it? Could blockchain be the future of conveyancing?
Blockchain is the distributed ledger technology (DLT) which is increasingly recognised as having the potential to revolutionise the property industry. By holding information in hack-proof, virtual ‘ledgers’ which are accessible to everyone involved in a transaction and updated simultaneously, many of the stumbling blocks that currently hold up conveyancing transactions are removed.
The tamperproof nature of blockchain makes it an ideal way to hold documents such as title deeds and mortgage information online. Rather than relying on a prolonged exchange of documents by post, the potential is there to have this information available in minutes, rather than the days (or even weeks) it can currently take. A recent Swedish pilot project demonstrated that blockchain could be used successfully to share land registry copies with all parties in property transactions. While the Swedes recognise that the technology needs time to mature in scalability, they envisage blockchain solutions being used regularly in conveyancing transactions from 2020.
This does not mean there will be no need for a land registry – there will still need to be an initial verification of a record before it is inputted into the digital system. What it does mean is that once the information has been verified and inputted, the blockchain allows for far more flexibility and speed because access to that record has been decentralised. It also becomes far easier to share the records.
Another exciting development that blockchain will facilitate is digital contracts that can execute release of funds or even exchange of contracts when payments have been received. One possible use of this would be to reduce the possibility of gazumping – a digital contract could include the possibility for a seller to pull out but to do so would trigger and automatic compensation payment to the buyer who has expended time and money building up to the sale/purchase.
Blockchain technology will allow digital contracts to speed up the financial aspect of transactions, with the ability for payments such as the deposit or stamp duty land tax to be triggered automatically.
As with all innovative technology, particularly something like this which is being heralded as a ‘gamechanger’, its ultimate success will depend on government, industry and the people whose money will be changing hands, adopting and embracing it. There are already platforms in the property sector utilising blockchain technology, but it’s not common place in the UK. Sweden is the only ‘first world’ nation to pilot the blockchain technology in its land registry – perhaps as their system moves beyond the initial small scale trial we will see it accepted in other jurisdictions.
Blockchain technology certainly seems to offer answers to many of the problems that dog conveyancing transactions in the 21st century. Here at Dezrezlegal we will be watching developments with interest.