The commercial real estate market in Texas may be changing, at least when it comes to how transactions are conducted. This is because of new technology referred to as blockchain, a digital ledger that works on a decentralized system. It’s an appealing method of exchanging funds because it basically cuts out the middleman with digital contracts. However, there is still some debate over just how this form of encrypted digital technology will impact the commercial real estate world.
The general consensus is that blockchain won’t dramatically affect the commercial real estate market all at once. Instead, changes in how transactions are conducted will happen over time as blockchain evolves and gains wider acceptance. The main impact will be in how property transfers are handled. Credible transactions can be completed with “smart contracts” without third party involvement.
Some municipalities are already using blockchain technology to streamline their records processes. During a pilot program, a Vermont city moved real estate conveyance documents via a blockchain, which sped up the process of transferring a condominium to an LLC for one property owner since the entire transaction was completed online. On a wider scale, this technology could attract more investors because all information is accessible from a decentralized database, which gives possible investors more insights into property assets.
The technology could be even more appealing to small-to-midsize companies and foreign investors by minimizing entry barriers. As for security, there are anti-money laundering regulations and other customer laws that have to be adhered to when tokenized assets are exchanged. Blockchain may not affect everyone making commercial real estate transactions. Even so, most experts on the subject stress the need for companies to understand the process.
Regardless of how a CRE transaction is handled, an attorney can provide helpful guidance throughout the process. Legal counsel could set up contracts and negotiate the specifics of the deal.