Will the good old leasing contract be replaced by smart contracts? Blockchain could be just the thing for leasing digitization. Three Swiss enterprises are developing solutions to make life easier for both the lessor and the lessee.
How could enterprises use blockchain, concretely? Whenever this question is asked at events, the answers mostly come in two kinds. Either a speaker goes into technical explanations to challenge the knowledge of the audience, or there is a firework of promises that hail blockchain as the solution for all possible scenarios.
Tim Weingärtner, Professor of the Department of Information Technology at the Lucerne University of Applied Sciences (HSLU), chose a different approach. On the blog of the HSLU he told a story of a farmer. This farmer wanted to rent out his chalet to tourists but did not want to use platforms like Airbnb. So he installed a smart lock on the door that lets tourists check in with a QR code. The lease is automatically activated and deposit is held. Upon check-out, the lock is locked again, the deposit is returned, and the farmer receives the rental amount. With blockchain or smart contract technology, all this should function safely, reliably, and with minimum time. “His chalet could conclude contracts with the tourists without the owner,” Weingärtner wrote about the farmer’s experience.
Although the example of the smart Swiss chalet is still fiction, but the real estate industry’s interest in the blockchain is quite real. Just over a year ago, a Swiss investment company Swiss Prime Site announced a partnership with a Zug-based IT consultancy firm Inacta to develop solutions based on blockchain and smart contract technology. Inacta aims to develop a digital leasing contract, says Markus Fischer, Business Development Real Estate. Today, a lot of paper, negotiation, and manual work is still involved in the leasing process. Blockchain, with its strengths – automation, traceability, immutability, and secure data transfer – could greatly simplify this process. “Today’s contract content with its complex leasing rules would be expressed as a software code,” Fischer says. However, it will take a few years before the familiar paper-based lease disappears. For one, the technology is still in its infancy. The other reason is that some real estate companies are skeptical about blockchain.
Mortgage Bank Lenzburg goes one step further and wants to use blockchain as a basis for digitization of the entire leasing process. “The involved parties should be able to conduct all interactions digitally – from the initial expression of interest in a rental property to the payment of the security deposit after the termination of the lease,” says CEO Marianne Wildi. The platform will be ready for the market in the first quarter of 2019. In the second phase, a digital ecosystem with further services for tenants and landlords such as scheduling and coordination of maintenance appointments will be set up. All this could theoretically be offered digitally without blockchain, admits Wildi. But as more processes and parties join in, the technology offers opportunities to create transparency and clarity.
Nikolai Kalinin, CEO of the Baar-based start-up PrepayWay, also sees the paper-based leasing contracts disappear in the medium term. However, certain legal and technical hurdles would have to be overcome. For example, international law does not yet provide for rules for digital signatures. A far more serious challenge is the replacement of the classic contract by smart contracts. There are still too many unanswered questions why conventional and smart contracts should co-exist for the foreseeable future. Therefore, PrepayWay is initially focusing on the stage of the rental process often fraught with misunderstanding and fraud – the reservation process.
There is still a lot to be done, Kalinin says. First, a solution to bring fiat money safely on the blockchain must be developed. Thus, some changes in the law, in the banking world, and in the mentality are still needed before blockchain could become a part of our daily lives when it comes to leasing. “There are always new challenges,” says Nikolai Kalinin. “If there are no more challenges, that means you are not moving forward.”
Source of image: ilkercelik