We were recently asked to provide some clarification on what exactly one should say to a legislator (or anyone else) when speaking about how blockchain (distributed ledger technology) relates to the recording process and why we should care. So, forget for a moment that blockchain has anything to do with computer servers distributed around the globe or cryptocurrency. Think of it THIS WAY … Blockchain is just another way to execute a transaction, including the exchange of real estate from one party to another. However, it is a wholly different form than what you traditionally think of as the way a transaction is executed. The transaction happens electronically and is affirmed electronically; there may be nothing that looks like a traditional document involved (deed or mortgage). If this technology is legal for executing a transaction, and the parties agree to do it this way, and the affirmation of ownership is handled through the blockchain, how are we assured that the rest of the world knows? A blockchain won’t/can’t put a transaction in the public record, even if it is a so-called “public” blockchain. There’s no inherent way to “give notice” to the world that the property has changed hands. There must be a way to mediate between the block chain and the public land registry.
The public land registry, through the recording process, is the mechanism used to “give notice.” There may be private land records databases, and there may be private title plants, but the public land registry is the universal source for notifying the world about who owns what property, along with any attendant legal or financial information. The public interest, and the interests of everyone working in the real estate industry, are served through the recording process.
Iowa has now legalized blockchain transactions. This begs the question, If someone sells property in Iowa using blockchain technology, what gets recorded in the public land registry and how? House File 2443 answers this question. It basically says, you can use blockchain to buy and sell propertyin Iowa, but if you do – you still have to file for recording “a document that complies with the provisions of chapter 558.” The bill further states that the document must conform with “document standards as established by the electronic services system” – meaning Iowa Land Records, as we are most commonly known.
In the future, a blockchain system may wish to establish a means to transmit this information for recording in an electronic format for recording. When that day comes, The Electronic Services System and Iowa Land Records will work to facilitate that process – perhaps through a publicly published application programming interface (API).
In summary, here are the key points to be remembered:
- Blockchain can now be used in Iowa to buy and sell property
- When that happens, there needs to be public notice – just like any other real estate transaction
- The chain of title is important to abstractors, realtors, attorneys, financial institutions, buyers, sellers and more
- The universal source of information for all parties is the public land registry in the recorder’s office
- When blockchain is used to sell property, the parties must be required to submit the necessary information for the public land registry
- Legislation should be adopted to ensure that this happens
This is new territory, and there is still much to learn. We’ll have to wait and see how it unfolds. ESS and county recorders will be ever mindful of the interests of the public and the real estate industry.