Blockchain and Land Registration

NEWS

17 Dec 2019

Land registration systems record property rights and provide evidence in relation to property title holders. Regardless of a country’s implemented land registration system, the primary aim of all such systems is to ensure title certainty. Underdeveloped and/or non-transparent land registration systems, as well as inadequate land laws and enforcement procedures can have a negative effect on the whole registration system leading to a situation of title uncertainty. In addition, a land registration system which is centralised and paper-based could potentially lead to the loss of rights following a natural disaster.

A step-forward from having a paper-based land registry is to actually digitise the system. By digitising land records, land registration systems would be reducing certain risks which are primarily ascribed to paper-based systems, resulting in an increase in the registry’s reliability and transparency. Nevertheless, digitised systems would remain vulnerable to fraud, error or the alteration of records, thereby bringing into question the very integrity of the records.

Utilising blockchain technology can help by eliminating these risks, eventually providing us with trusted and reliable records of registered land titles. Blockchain is a type of distributed ledger technology (‘DLT’) which has been defined as an encrypted, distributed and shared database which serves as an unalterable and incorruptible repository of information.

Blockchain is all about ownership over digital assets, whereby the owner’s details can be stored within such systems to allow for more traceability in relation to the owner of the asset in question. Blockchain systems may be either public, private or hybrid in nature. Whilst public blockchain systems, which are completely decentralised, allow anyone forming part of the network to carry out transactions and/or to be involved in the authentication and verification process of such; private blockchain systems are not open and public to everyone, as permission is required from the owner of that blockchain, essentially reflecting a traditional online database.

Hybrid blockchain systems seem to provide us with a middle ground; i.e. they allow us to merge certain characteristics of public and private systems into one. Hybrid systems may take different forms, and as such may have differing levels of centralisation. It is possible to implement hybrid systems which allow for public read access with regards to the transactions which are held on the ledger, whilst still leaving the authorisation and the verification of such transactions to an authorised individual/entity or any other authorised node (i.e. network participant). Thus, the information which is stored on the ledger can only be entered and reviewed following the verification of a central entity; however, the information would then be able to be viewed by everyone on the network and as such would provide more trust than a completely centralised system. Furthermore, this would make it easier to regulate in comparison to simply using a public blockchain system.

Notwithstanding the different types of blockchain systems which may be implemented, one finds that there are universal characteristics which are innate to blockchain technology.

  • A major characteristic of blockchain is its immutability. It is almost impossible for information stored on a blockchain system to be illicitly altered or modified in any way and as such provides for near absolute certainty that what is stored within the system is legitimate.
  • Transactions recorded on a ledger are assigned a time-stamp with the creation of each block, which provides for a complete, irrefutable and encrypted transaction history.
  • Another important element is that there is no single point of failure. Due to the fact that the data is not stored in a single centralised location, it is not possible to lose stored information, as data is accessible and held on each node connected on the system.

It is due to these characteristics, which effectively provide a high degree of trust, that the use of blockchain technology is seen as an advantageous system when compared to traditional alternatives which are susceptible to the illicit manipulation or destruction of data, or the loss thereof due to events such as natural disasters. 

Land registration systems record the relationship between the object (i.e. the property), the right at law (i.e. rights in rem and rights in personam) and the subject (i.e. the right-holder who holds the property in question by way of ownership or any other right). This tripartite relationship is oftentimes complex in nature, in view of the different rights over the same object which may be held by different subjects and/or in multiple shares. Thus, when implementing a blockchain land registration system, this complex relationship must be factored in and the system must be adapted accordingly.

Ultimately, utilising blockchain technology in land registration systems would guarantee the authenticity of a transaction; i.e. it would provide evidence as to what time a transaction happened and guarantee the identity of the involved parties. However, it is not a means to ensure the validity of the content itself. That is why great care must be taken to ensure that the information being inputted on the blockchain is in fact true and accurate. The vetting and validation of such information could be further enhanced by utilising smart contracts and relying on the input of designated oracles which would be able to verify the data which is being stored. In this way blockchain land registration systems would be moving a step-forward by reducing the many problems concerning title uncertainty, which arise from mistakes/errors, when it comes to storing information in traditional systems.

It is also essential that the information stored within a blockchain land registration system is kept up to date. Countries must ensure that their national legislation safeguards against the possibility of transactions pertaining to property being carried out off-register; and if so, they must make the necessary legal amendments to ensure that such transactions are eventually registered within the blockchain system.

Conclusion

Land registration systems are crucial to protect an individual’s fundamental right to property, a right enshrined in national constitutions and international conventions. On the other hand, there exist several limitations with land registration systems currently implemented by countries which affect land title certainty. Advancement in technology may aid with providing a more tamper-proof and secure registry which would ultimately lead to further protection over an individual’s property rights.

Blockchain technology has many characteristics which may provide for further certainty over the contents which are to be stored in the land registry. Having a complete record is a must, as otherwise doubts and uncertainties will always be present. Thus, it is of utmost importance that a country’s legislation requires that anything affecting property rights be recorded within the registry (regardless of the system used). This includes inter alia the recordation of property transfers, lease agreements, overriding interests, usufruct rights, etc. It is only after this is ensured that a blockchain-based land registration system would be able to provide us, with certainty, a true picture of what rights are held by a person (legal or natural) over a specific property. 

One is to note that Malta, is once again at the forefront when it comes to adapting and implementing the use of blockchain technology. This can be seen from an announcement made by the Maltese government stating that lease contracts are to be recorded on a blockchain system. Having lease agreements registered on the blockchain shall make the system more complete. However, it is essential that all leases are recorded, and thus it must not be the case that certain types of leases, including past lease agreements be left out of the system. Additionally, more has to be done so as to have a fully complete land registration system (such as requiring that all overriding interests be registered). It is only after everything is reflected on the system, that title certainty will finally be realised.