A PropTech transaction

20 July, 2018

“Technology is a useful servant but a dangerous master.”

The property industry has, over the past 2 years, seen a massive uptake in embracing tech to make efficiencies.  Attitudes of the larger real estate operators are changing (as seen in a recent KPMG survey).

In light of this, we take a look at the latest innovations to sweep the property transaction now and in the not too distant future.

Blockchain

Blockchain is a digital database which records every step of a transaction chronologically, transparently and securely – sounds like a dream for a property transaction, right?

Experts believe we could get to the stage with blockchain in the UK where you would be able to digitally carve up a building and be able to sell a small interest in that building in seconds, with full transparency.

In March the UK had its first residential sale using blockchain on the Clicktopurchase platform.  Each stage of the transaction was recorded on the blockchain but currently, the purchase must still be registered manually at HM Land Registry on completion.  Although the uptake of blockchain in the UK property industry has been slow, it has been picking up overseas.  In 2017 the Dubai Land Department announced it would become the world’s first government entity to use blockchain for all real estate transactions.  Sweden and Georgia are already moving their house registries on blockchain.

Payment

Bitcoin is a digital currency that has no central bank, managed on the blockchain.  Last year saw the first homes in the UK sold using Bitcoin.  One of the first buyers actually intended to rent the property out using Bitcoin.  HM Land Registry even offers the option of recording the purchase price in Bitcoin but this is unlikely to be taken up due to the complications in calculating capital gains tax.  However, concerns have been raised over the use of Bitcoin for property transactions due to its volatility in value.

Due diligence

Blockchain tailors itself well to speed up due diligence on transactions.  An example of this is Cloudscraper.  “Cloudscraper is not an advice system“, says chief financial officer Matt Webster.  “It’s a system that allows buyers, sellers and lenders to be able to connect and share information and put deal teams together.”

Cloudscraper users can upload information about properties in their portfolio that they want to sell and share that information with other users of the platform.

Searches

HM Land Registry is building the foundations for a national Local Land Charges Register and will be working with local authorities to migrate their records to a centralised digital register.

Providers such as Search Acumen currently offer an early warning system for potential risks to a property at the outset of a deal by offering access to data that previously required long and costly local authority searches.

Mortgages

This year the UK’s first ever digital mortgage was signed.  HM Land Registry claim it is “building for a future without the need for a witness to watch as the homeowner applies an ink signature to a paper mortgage deed, saving time and providing a more secure service to homeowners, lenders and conveyancers.”

With UK homebuyers being the world’s most digitally active house hunters with 93% using online channels to research prospective properties, digital mortgages would likely be a welcomed addition.  The digital mortgage is part of HM Land Registry’s plan to become the world’s leading land registry.  Their leading innovation project at the moment is ‘Digital Street’, an ongoing research and development project set up to think about how technology can be used to revolutionise land registration and conveyancing.

Tech at Cripps

It seems we are not far off from a PropTech Transaction.  At Cripps, our innovation team regularly review new legal services technology with a view to identify technologies that might enable us to offer more efficient solutions to clients.  For example, we are currently reviewing artificially intelligent machine learning to find key information within legal contracts.  The machine learning enables clauses, documents, currencies, locations, governing laws to be automatically tagged for faster navigation of documents.