Land Registry: A Big Blockchain Use Case Explored

With distributed ledger technology being promoted as a benefit to everything from farming to Fair Trade coffee, use case investigation has emerged as a full-time fascination for many.

In this light, one popular blockchain use case that has remained generally outside scrutiny has been land title projects started in countries including in Georgia, Sweden and the Ukraine.

One could argue land registries seemed to become newsworthy only after work on the use case had begun. However, those working on projects disagree, asserting that land registries could prove one of the first viable beachheads for blockchain.

Elliot Hedman, chief operating officer of Bitland Global, the technology partner for a real estate title registration program in Ghana, for example, said that issues with land rights make it a logical fit.

Hedman told CoinDesk:

"As for the benefit of a blockchain-based land registry, look to Haiti. There are still people fighting over whose land is whose. When disaster struck, all of their records were on paper, that being if they were written down at all."

Hedman argued that, with a blockchain-based registry employing a network of distributed databases as a way to facilitate data exchange, the "monumental headache" associated with a recovery effort would cease.

Modern real estate

To understand the potential of a blockchain land registry system, analysts argue one must first understand how property changes hands.

When a purchaser seeks to buy property today, he or she must find and secure the title and have the lawful owner sign it over.

This seems simple on the surface, but the devil is in the details. For a large number of residential mortgage holders, flawed paperwork, forged signatures and defects in foreclosure and mortgage documents have marred proper documentation of property ownership.

The problem is so acute that Bank of America attempted foreclosure on properties for which it did not have mortgages in the wake of the financial crisis.

Readers may also recall the proliferation of NINJA (No Income, No Job or Assets) subprime loans during the Great Recession and how this practice created a flood of distressed assets that banks were simply unable to handle.

The resulting situation means that the property no longer has a 'good title' attached to it and is no longer legally sellable, leaving the prospective buyer in many cases with no remedies.

Economic booster

Land registry blockchains seek to fix these problems.

By using hashes to identify every real estate transaction (thus making it publicly available and searchable), proponents argue issues such as who is the legal owner of a property can be remedied.

"Land registry records are pretty reliable methods for maintaining land records, but they are expensive and inefficient," David Reiss, professor of law and academic program director at the Center for Urban Business Entrepreneurship, told CoinDesk.

He explained:

"There is good reason to think that blockchain technology could serve as the basis for a more reliable, cheaper and more efficient land registry."

Over time, Reiss is optimistic that this could restore economic activity that he argues has been depressed since the housing crisis.

"When people and organizations do not have to worry about the legitimacy of their investments in property, they will have no problem investing in increasing the value of their properties," he said.

Macro concerns

Outside of the US, though, problems with titling become more pronounced.

In some countries, government actions, unethical interventions from corporations and the destructive actions of Mother Nature compound the difficulty of getting a 'good title'.

In Haiti, for example, natural disasters, forced evacuations and the corruption of dictatorships have made the prospect of figuring out who actually owns the land one lives on impossible.

Likewise, in the Gaza Strip, the current land speculation is bedeviled by conflicting claims by both the Israeli government and the Palestinian Authority, as well as the possible intervention of third-parties.

"Land title issues are very complex by default due to different international standards," Reiss said, adding:

"You throw in the nuances of post colonial-states and corruption, then you find that clearly a solution is needed, and the idea that blockchain land registries are nothing but a ‘solution seeking a problem’ is clearly removed from reality."

Compounding matters is that, for most individuals, creditworthiness is determined by their homes and real estate properties.

Without a clear line of ownership, tools for financial mobility – such as seed loans for new businesses – cannot be obtained, leaving affected communities with few options for improving their fortunes.

Authenticity not accuracy

That's not to say that the same design considerations aren't being approached by innovators in the developed world.

John Mirkovic, the deputy recorder for communications for the Cook County Recorder of Deeds, indicated that the county's upcoming findings would address 'nuisance properties' and the possibility of land title fraud.

A blockchain registry, advocates say, would make it easier to locate nuisance properties, such as properties seized on tax liens, abandoned properties and properties without 'good titles' – all likely targets for fraud.

As argued by the Vermont legislature in its position paper on blockchain use, such a system cannot be used to address the accuracy of the titles, but rather seeks to clarify the authenticity of the title.

"Blockchain technology offers no assistance in terms of the reliability or accuracy of the records contained in the blockchain; if bad data is used as an input, as long as the correct protocols are utilized, it will be accepted by the network and added to the blockchain," the report notes.

It goes on to conclude, however, that the tech could have real benefits.

New world order

Such innovations are not in a silo, however, and come at a time when governments are increasingly considering getting out of the land registry business altogether.

In Australia’s New South Wales, the government has sold management rights to its land title registry for AUS$2.6bn, placing the ownership mechanism for the state's residential real estate in the hands of a hedge fund.

NSW, though, is far from alone in its desire to push its land registry problems onto others.

In Canada, both Ontario and Manitoba have leased management of their registries to Toronto-based Teranet, though privatization in Canada saw a steep increase in registration.

While other jurisdictions may be hesitant to give up land registries, though, entrepreneurs are optimistic about the possibility.

"The blockchain is not a panacea, but it is the best tool we have to fight corruption and inefficiency," Bates said, concluding:

"The blockchain is not going to 'replace government' concerning how land is registered and monitored. It will make governance of land registration the simplest and most corruption resistant possible."

Land parcel image via Shutterstock