I’m a property lawyer; what’s blockchain got to do with me? At least that’s what I thought until presented with purchase of commercial property for a client which had to be exchanged in less than a week using the Clicktopurchase® website at www.clicktopurchase.com.
Blockchain is a decentralised, distributed and often public ledger that is used to record transactions across many computers. It is the same technology which underpins cryptocurrencies like Bitcoin. One of the main benefits is that the ledger cannot be altered or tampered with retrospectively without alteration of all subsequent blocks. So far, so good.
How does it relate to property law which dates back to the Law of Property Act 1925? How does it impact on the work that solicitors do? Having spent over 15 years dealing with property purchases in a particular way, this was something new to me. However, I’m clearly late to the party: Clicktopurchase® has already sold properties worth over £247m in the UK and Ireland, with the first completing back in 2018.
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The process was simple and similar to buying a property at auction. The seller’s solicitor provided the sales pack through the online portal which gave me access at all times of the day and night. This enabled me in a very short timescale to complete the due diligence process. The contract is standardised but with the ability for the seller’s solicitor to add special conditions. We had to amend a few points but this was straightforward.
The main difference is how the exchange is conducted and, rather than solicitors agreeing to exchange with physical documents, exchange occurs by the client agreeing to exchange through the website by clicking on the relevant links.
Verification of identity, digital signatures on exchange and details of the online exchange are all held electronically on the blockchain.
• shorter timescales
• the buyer can control when exchange occurs rather than having to sign documents, send to their solicitor and then wait
• less negotiation on the underlying contract; solicitors not fighting over minor legal points.
• upfront legal costs for the seller, regardless of the sale
• badly drafted special conditions still require negotiation, although overall the time spent should be reduced
• a sales pack needs to be put together properly, otherwise, additional time can be wasted over further additional enquiries.
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Given the above, it is clear that having a good solicitor is the key to getting the transaction completed quickly and with the right conditions.
The legal world is changing
Whilst I could try and bury my head in the sand, I can see how the legal world is changing and solicitors have to adapt to clients’ needs and technological changes. As more investors buy and sell properties through online portals using blockchain, the traditional sales process will change and solicitors’ roles will change. This doesn’t detract from the underlying legal work that solicitors will need to do, it will just be done in a different way. I for one am looking forward to the new challenges that this presents.
Finally, I was intrigued about the ramifications of signing electronically and I will be writing another piece about the law behind this. The Law Commission issued its report on the electronic execution of documents in September 2019 and came up with a number of conclusions and recommendations. Given the importance of technology to business, I suspect there will be further changes to how we conduct property transactions in the future. It’s about time too.