HM Land Registry is currently looking into the potential use of blockchain technology as part of its Digital Street project. This supports HM Land Registry’s aim to “become the world’s leading land registry for speed, simplicity and an open approach to data”.
But how would this work in practice and what are the issues which will need to be resolved to make this a reality?
What advantages could blockchain technology bring to land registration?
Blockchain presents clear advantages over the existing land registration system, specifically:
• Security: blockchain is considered secure and could significantly reduce property fraud. Records are cryptographically protected, with each property being given a unique code and linked to a smart key held by the owner. The database is distributed across a network of computers, making it hard to hack.
• Speed: changes in property ownership would be recognised almost instantly, speeding up the time taken to complete transactions. Smart contracts could take this a step further and allow a transaction to be completed automatically once the specified contract pre-conditions (eg payment of funds) are satisfied.
• Cost savings: completing transactions more quickly and securely would inevitably lead to cost savings for land registries and the parties concerned. Further, having real-time property information available would facilitate better decision making and more efficient property management.
Will it make the conveyancing process redundant?
No. Whilst any change in ownership could be recorded instantly, parties will still want to carry out prior due diligence and agree the terms on which the transaction is to be completed. It is usually this part of the process which takes the time and blockchain doesn’t eliminate the need for this. Blockchain may make it easier to access due diligence and title information about a particular property if such information is also recorded on the blockchain.
How will it protect confidentiality?
This is one of the biggest challenges. One of the advantages of blockchain is its transparency, as it requires all members of the network to view and approve changes. In practice, this would be a largely automated process, with nodes checking that each transaction submitted to the ledger is valid and that the chain has not been corrupted.
However it raises questions regarding how access to data would be controlled. Currently, most property ownership information is publicly available and it is unlikely we would see a situation where blockchain would make this more restricted. Most likely, there would need to be a public site (like the current HM Land Registry website) where the public could access title information held on the blockchain. However steps would need to be taken to ensure that confidential transaction information (eg personal side agreements) are not made publicly available – whether by keeping this information off the blockchain in the first place or restricting access to such information to specified members of the network.
Does it completely eliminate the risk of fraud?
No. It has been argued it would be harder to hack information contained on a blockchain given there are multiple copies of the database, however hacking is not impossible and for determined hackers the stakes will be temptingly high.
Are there are any other hurdles to overcome?
Yes. Legislative change would be needed to support blockchain transactions in a real estate context as currently, for example, certain transactions can only be effected by deed. There will also be time and cost implications to HM Land Registry in implementing blockchain technology.
The UK is not unique in considering the use of blockchain to modernise its system of land registration. Internationally various other countries (including the Ukraine, Georgia, Sweden and Dubai) have all announced plans involving blockchain. The case for modernisation is arguably more compelling in countries which do not have an established and well-respected centralised system for land registration as we have in the UK. However there are still clear benefits to using blockchain technology which HM Land Registry is right to explore. As the technology continues to evolve, it is vital that our transactional process continues to keep pace.