One of the most important parts of the home buying and selling process is conveyancing – the legal act of transferring home ownership from the seller to the buyer.
But it can be a slow, frustrating and cumbersome process, which has led to calls in recent years for ways of speeding it up.
A solution that has been discussed in the past is the use of blockchain in property transactions. Here, we take a look at what it is and whether it’s the answer to making conveyancing less laborious for all involved.
What is blockchain?
Blockchain, which is the technology that enables bitcoin and other cryptocurrencies to function, is an open, digital and distributed ledger which records transactions between two parties in an 'efficient, permanent and verifiable way'.
It aims to create a world where contracts (both property and otherwise) would be transformed into digital code and protected in shared, transparent databases, free from doctoring, deletion or corruption. The digital trail would also mean the contracts are easily validated and easy to track down.
Land Registry explores blockchain
As part of its two-phase digitisation programme, to work out how innovative technologies can make the house buying process smoother and quicker, HM Land Registry has been working with specialists to explore the possible benefits of blockchain
for the property market.
The digital transformation project – known as Digital Street – has been analysing ways of improving the property buying process in the future, with Land Registry rigorously testing blockchain and recently successfully using a prototype of the technology to highlight how buying and selling a home can be made simpler and quicker by demonstrating a digital transfer of ownership.
To show how the emerging technology could be used to cut uncertainty and delays when people are buying a home, a trial was carried out on the sale of a semi-detached house in Gillingham, Kent.
“It was really straightforward,” said Stefan, the seller of the house in Gillingham who took part in the trial. “It shows how technology like this can help make everything so much quicker and you can see clearly what’s happening at every stage. If this is the way forward, it’s going to make everything easier.”
HM Land Registry’s prototype blockchain technology was developed through conversations with stakeholders across the property market, and tested with the close cooperation of Mishcon de Reya, Premier Property Lawyers, Shieldpay and Yoti.
At present, the Land Registry’s trials with blockchain are merely exploratory – and a way of proving that the technology can be used to speed up the conveyancing process.
“We wanted to work with the industry to make sure that we understood how forms of the blockchain network could work to benefit the industry as a whole,” a Land Registry spokesman said.
“We’re looking to take all we have learned from this successful test and discuss it further, internally and with members of the Digital Street community – which is comprised of regulators of conveyancers, mortgage lenders, and technologists.”
“Land Registry is often cited as a potential use case of blockchain, so we thought we should be doing thorough due diligence [and] seeing what it can actually bring to the property market in the UK,” the spokesman added.
With delays to the buying process causing stress and, in some cases, the total collapse of the sale, anything that can be done to speed up currently slow property transactions will be welcomed by buyers and sellers alike.
While HM Land Registry isn’t yet ready to roll out blockchain technology to the masses, the successful recent trial suggests it could be a part of the conveyancing process sooner rather than later, reducing the risk of transactions failing or being abandoned at considerable cost to both parties.
Further trials and purchases by blockchain
Recently, a number of key PropTech players behind a trial of blockchain claimed that the technology can reduce the time of a transaction from the typical three months to something much closer to three weeks.
While few details of the trial have emerged, a statement from Instant Property Network (IPN) said it had successfully completed ‘a global trial of a new distributed ledger-based system, demonstrating the potential to speed up property transactions by months.’
The latest trial, facilitated by a blockchain software firm, ran transactions using test data through a new ledger system to simulate property sales over a five-day period and claims to have shown how costly duplications in the transaction process could have been removed.
“It’s estimated that, with the addition of off ledger business process and consumer decisions, the end to end buy/sell process could be reduced from over three months to less than three weeks,” IPN said.
According to IPN, each property transaction currently involves, on average, eight parties plus the buyer and seller, with data shared through dozens of documents, platforms and databases. This, it says, can cause errors, increased costs, uncertainty and delays in transactions.
To solve this, IPN has created a system where participants can join up their business processes and transact directly. Although the network does not store data itself, it has the capability to integrate with a company’s existing technology.
“This means that each party retains control over their own data - negating the risk of breaches and compliance issues and vastly reducing risk and the cost of continuous reconciliation of facts and data,” the statement continued. “The trial revealed that most companies will be able to deploy the platform in a matter of days, opening the door to widespread adoption throughout the property industry.”
The trial involved 40 organisations in 23 countries, with several familiar to UK transactions, such as Barclays, Clifford Chance, AXA XL, Royal Bank of Scotland, BBVA, Search Acumen, Shieldpay and Swiss Re.
Blockchain has, however, already been used in some house sales. In October 2017, electronic property transaction platform Clicktopurchase claimed to be the first to complete an online property transaction by blockchain for a home in Trowbridge, Wiltshire, while the same platform was later used by HS Property Group to sell a four-bed HMO in Oldham, Greater Manchester.
More recently, at an auction held by London-based Clicktopurchase, a Dublin house was sold
using both blockchain and artificial intelligence (AI).
In this case, a verified bidder was able to submit an offer on behalf of a buyer, in turn creating an electronic offer with a legally binding electronic signature. Once the offer had been accepted by the agent, solicitor or seller operating the dashboard, a second electronic signature was added and an immediate online exchange of a property contract took place.
From the above, there certainly seems to be evidence to suggest that blockchain (and other types of new technologies) can play a key role in speeding up the conveyancing process, making transactions safer, quicker, simpler and more transparent.
A mass rollout still seems some way off, but the trials taking place and Land Registry’s high-profile digital transformation programme suggests a faster, more tech-led approach to property transactions is on its way. The days of frustrating delays and high levels of stress could soon be a thing of the past.