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Hans H. Hertell, Partner at Pryor Cashman, a member of the firm’s NFT, Media + Entertainment and Intellectual Property groups, spoke with Law360 on potential use cases for NFTs and blockchain in real estate transactions.
In “Why Real Estate Lawyers Should Keep An Eye On Blockchain”, Hans discussed a recent transaction in which a blockchain-based real estate company used a non-fungible token (NFT) for the sale of a residential property:
“I watched [the deal] and I realized that we were still talking about a traditional real estate transaction,” said Hans Hertell, partner at Pryor Cashman. “Ultimately, the buyer was buying the property from an LLC that owned title. They must have had wet ink signatures on the deed when the title was transferred.”
But some of those steps may eventually move online, perhaps even using blockchain technology, Hertell said.
“It is an open question whether in the future we will be able to overcome the traditional wet ink signatures and deed transfer documents that have to be filed with the government and whether all of this can be automated in a smart contract,” he said. “We’re not there yet; the law isn’t there yet.”
Smart contracts, software code that can run automatically when specified criteria are met, are not yet recognized by the legal system. There are also transfer tax considerations and a host of other paperwork requirements, Hertell said.
One place where blockchain could potentially play a role is to help automate securities systems, he said.
“Ultimately, blockchain is about cryptographic verification of transactions, and where that becomes compelling is in the provenance space: a 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automated title system could have “everything on the blockchain, verified, and you wouldn’t have to sift through an outdated state ledger.”
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