Pryor Cashman Partner Hans H. Hertell, a member of the firm's NFTs, Media + Entertainment, and Intellectual Property Groups, spoke with Law360 about potential use cases for NFTs and blockchain in real estate transactions.
In "Why Real Estate Lawyers Should Keep An Eye On Blockchain," Hans talked about a recent transaction in which a blockchain-driven real estate company used a non-fungible token (NFT) for a residential property sale:
"I looked at [the deal] and realized we're still talking about a traditional real estate transaction," said Pryor Cashman partner Hans Hertell. "At the end of the day, the purchaser was buying ownership of an LLC that owned title to the property. They had to have wet-ink signatures on the deed when title was transferred."
But some of those steps could ultimately move online, perhaps even making use of blockchain technology, Hertell said.
"It's an open question as to whether, in the future, we'll be able to overcome the traditional wet-ink signatures and deed transfer documents that have to be filed with the government and whether all this can be automated in a smart contract," he said. "We're not there yet; the law is not there yet."
Smart contracts, software code that can automatically execute when the specified criteria are met, aren't yet recognized by the legal system. There's also transfer tax considerations and a host of other paperwork requirements, Hertell said.
One place blockchain may eventually play a role is in helping automate title systems, he said.
"Ultimately blockchain is about cryptographically verifying transactions, and where that becomes compelling is in the provenance space: clear chain of title," he said. A more automated title system could have "everything on the blockchain, verified, and you wouldn't have to sift through a state registry that's not up-to-date."
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