Real estate recording systems rely on a process for verifying title whose origins go back to 1086 and the innovations of land registration conceived in the times of William the Conqueror. However, the entire process of how we guarantee that someone owns a parcel of land may be about to change with the development of blockchain technology. Last week, one of the first reported U.S. real estate transactions was closed in Vermont using blockchain. While I do not pretend to understand much of how blockchain works, the idea is, through an application, information is packaged in a block of data that is assigned a unique identifier or “hash.” The hash is like a fingerprint and very difficult to alter. When the block is transferred from one person to another, the transferee receives the block with the transferor’s hash and a new hash. The block now has the data, the old and new hash. This is just like a chain of title. The deed corresponds to the block and contains information about the of the old and new owners, the address, the description of the land, the amount paid and so forth. The hashes are the title references and correspond to the book and page where the deed is recorded.
Some jurisdictions are starting to beta-test this technology. Cook County, Illinois has finished a pilot program and the results can be reviewed at this link: http://cookrecorder.com/ccrd-releases-blockchain-pilot-final-report/ Some of the takeaways from the Cook County pilot were interesting, including the observation that use of blockchain does not necessarily require an “all or nothing approach” to land recordation. Aspects of blockchain could be incorporated into our existing systems to improve recordkeeping.
Since the technology is open source, it remains to be seen whether governments, lenders, title insurers, lawyers, real estate agents and investors could come together around a single system for implementing blockchain for registering title to real estate. Adoption of a new technology that would radically change how we track title to real estate will not and should not be easy. All the stakeholders would have to trust the integrity of the new system and the real estate profession is notoriously slow to accept digital innovations. More important are the financial implications of blockchain to the recording system. The real estate recordation and title insurance industries would be entirely disrupted if blockchain technology were widely used to record real property transactions. But watch this space: my guess is that blockchain could transform the way we record the transfer of real estate.