Digital land register with a blockchain — how the industry benefits

Digital land register with a blockchain — how the industry benefits


Is the Blockchain suitable for displaying extracts from land registers or building plans in digital form? Can it create a digital land register? Does it reform processes and procedures in house construction or asset management? How are digital solutions developing in the real estate industry? Are notaries in Germany threatened with extinction? We give a summary of blockchain-based applications in the real estate industry.

Blockchain in the real estate industry

The blockchain is a database in a network of several computers. These can use digital contracts, the Smart Contracts, to make votes and make decisions based on predefined parameters. Within the Blockchain, documents and data can be validated, identities can be determined, and these can also be controlled and managed.

The blockchain is already in use in many industries. Possibilities are also conceivable in the real estate industry, for example, as a digital land register. But experts see much more potential in the future of this exciting technology.

Many of the approaches conceivable today are already quite practical. But every solution also creates new applications. It almost seems as if the potential of the blockchain is being rediscovered every day.

Is blockchain conceivable as a digital land register?

The decentralized database can increase the transparency of registers of all kinds and protect them from subsequent manipulation. In Sweden, a project by Chromaway is already available for the national register. For this purpose, banks and brokers have been equipped with notarial skills as “trusted partners,” enabling them to verify transfers of ownership.

In Germany, legally secure land registers are kept by the land registries. There is, therefore, no need for a trusted partner in this country as in Sweden.

The transfer of ownership is a complex process. Every legally possible entitlement to property must relate to a specific transaction. Permits from third parties may also be required. There are also transfers of powers of attorney to use the property.

Cost reduction would be possible with Blockchain

The land registry fees are hardly significant, as they only make up a small part of the total costs of acquiring real estate. However, the blockchain could bring significant advantages in terms of the speed of transfers. However, it is questionable whether this factor alone is sufficient so that the Blockchain becomes generally accepted in the real estate industry.

With the help of Smart Contracts, it may be possible in the future to use the blockchain, for example, to draw up the rental and purchase contracts, to store and evaluate data required for real estate valuation, to commission service providers along the value chain, to map property data and to store sensitive data requiring protection. Source

However, there are other approaches besides using the blockchain as a digital land register. The blockchain could also increase efficiency and optimize processes in real estate management. These include the purchase and sale of real estate, rental and leasing, and financing and administration.

With the help of Smart Contracts, it will be possible in the future, for example, to draft rental and purchase contracts, to store and evaluate the necessary data for real estate valuation, to commission service providers along the value chain, to map property data and to store sensitive data requiring protection.

Digital land register needs interoperability

These processes are often characterized by a lot of paper and lengthy procedures. Paper land registers are still the standard in many regions of Germany. Property and facility management can increase efficiency, but the data’s quality presents major hurdles for the players involved. Poor data quality also entails time-consuming manual checking processes.

Besides, systems and interfaces are not interoperable. This makes it even more difficult for different departments to work together. Online access to data or digital inspection of the land register offers enough potential for conceivable solutions. The automated retrieval procedure is also streamlined and effective via the DLT.

In addition to the digital land register, construction projects are also a conceivable way of using the blockchain. For example, it could automate payments when the building owner has accepted certain construction phases.

In facility management, smart contracts are suitable for automatically sending reminders in the event of non-payment of rent. In principle, there are several processes in the management of rental properties where automation would be useful. So far, however, there is a lack of interoperability because systems and software are already available.

The industry will change in the course of digitalization: on the one hand, specialized niche providers with small but technologically mature solutions will establish themselves, and on the other hand, generalists with a broad service portfolio will (continue to) successfully serve the market, according to Michael Müller | Head of Real Estate Deloitte

Digital solutions alone are not enough because interoperability is crucial to the success of the core business.

Can the digital land register be inspected?

To retrieve information and view the land register’s current status, there must be a “legitimate” interest in rem. Not everyone can demand access to the land register because land ownership is an interest worthy of protection.

Electronic land registers have already been implemented in some cases, but authorities and courts do not yet have a central point of contact when you need documents quickly and securely.

The most important application scenarios for the Blockchain in the real estate industry are currently.

The tokenization of real estate:

+ Increase in process efficiency
+ Set up decentralized data structures
+ Prepare a digital land register
+ Real Estate Transactions

According to a survey conducted at the Word Economic Forum 2015, around 60% of experts believe that in 2025 10% of the information available worldwide will be stored in the block chain.

The inspection of the land register extract is important for banks, as they approve the loan based on these documents. The so-called mortgage lending checks could be carried out much faster with the blockchain and a digital land register. This, in turn, saves waiting times for building owners until the loan is approved. Possible transitional or interim financing is thus unnecessary.

Nothing works without notaries in Germany

German law provides for the obligatory involvement of a notary public when it comes to real estate transactions. This includes notarizations as well as the advisory and instruction function of notaries. Therefore, it may cause considerable problems to map the entire real estate system on a blockchain without adapting Germany’s legislation.

Currently, several instances ensure the correctness of the transfer of ownership. These include notaries, the land registry, and possibly upstream lawyers. For example, this occurs in the administration of communities of heirs or if there are legal disputes regarding a property or land.

However, instead of leaving notaries out in the blockchain, their work could be integrated into the blockchain. The verification of corporate accounts creates trust in digital processes and business relationships.

The Business Blockchain Network evan offers the first solution. Here a notarial verification is carried out, which saves a lot of bureaucracy.

The decentralized platform handles transactions between business partners securely, efficiently, automatically, and trustworthily. However, they do not have to give up their data sovereignty.

The network participants can have the verification carried out by independent notaries. They issue a digital certificate for this purpose. This establishes a link between digital identity and identity in the real world.

However, the notarial deed is so far only accessible to members of the evan—network. The documents are therefore not accepted by any other authority.

AO/X Staff
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