The biggest headache in any property transaction is the assurance beyond any doubt that the title that an investor holds is genuine and holds true to the promise of ownership as printed on the paper.
Investors often go to lengths to ensure that a title is legit through numerous searches of property records at the Ministry of Land to ascertain the authenticity of the title of a unit they intend to purchase.
Many a time, this process is still not foolproof enough and some investors find themselves on the wrong end of the sanctity of the title they are holding.
Nothing is more disastrous to a buyer than to expense their resources only to find that after payments have been made and property assumed to have exchanged hands, the title was a fake and they have been duped into buying a none existent property.
The courts are awash of incidences and cases of fake titles or titles issued in duplicates where one property has more than one title and one or two buyers or more have been conned into the same property.
According to experts, the issue of verification of titles can be addressed through blockchain technology.
Amos Kinuthia, founder of Deliberate Plc, one of the few blockchain companies in Kenya says the technology is tamper-proof and can address the issue of fake title deeds.
“As long as all the title data entered into the shared ledger or database is a true and original copy of the title of a property, no one can execute any transaction based on a fake title on the same property if the verification of the title at the time of conveyancing is done on the blockchain,” says Mr Kinuthia.
“To make this work, the process of uploading the titles into the blockchain database must ensure that what is entered is a correct and true representation of original titles. Otherwise, the whole process would be based on a false title and false premise.”
So how does blockchain technology work to make it so tamper-proof?
Blockchain technology uses a shared ledger or database system that is fed into a network that is encrypted with anonymous loaders and validators of that information.
In the case of property conveyancing, the validators in the shared ledger can be the buyer asking to buy a property, the seller offloading the property, the surveyors who know about the property or who are stationed around where the property being sold is located and can attest to the trueness of the title and bankers who are funding the transaction.
Lawyers undertaking the conveyancing too will be part of the verifiers.
“Blockchain functions on peer-to-peer communication that is encrypted,” notes Paul McOlaka, a blockchain expert.
“The system will then alert all the verifiers of the query and all verifiers will remotely authenticate the title and give a go-ahead on the transaction without consulting amongst each other or knowing the exact particular details of the property.”
Blockchain experts say that the shared ledger system allows for fractionalisation of assets like property and can be used for example in Real Estate Investment Trusts (Reits) to better price and transact easily and efficiently at very low costs per transaction or undertaking as opposed to the current arrangement.
Experts say that blockchain also stands to reduce the time and cost of verifying titles as it’s a shared smart ledger that is instantaneous in executing commands.
Currently one has to go through a lawyer to conduct a search which can take as long as six months to yield results and even then so forgery cases still manage to sneak through.
Property players with an interest in blockchain say that while the technology holds a lot of promise of transforming property conveyancing, a number of legalities on its operationalisation need to be looked at.
For example, how does the system identify the loaders and validators of say, the title information and where and how will it be stored and who will be responsible for the system infrastructure?
In Kenya, blockchain has been successfully used in payment systems.
Some of the most notable names using blockchain include coinbase, paxful and a local invention called Kotani Pay. Other areas that blockchain can be used include public equity, fixed income, and commodities trading.
In 2018, the Kenyan government called for applications from interested qualified individuals to explore how blockchain can be used to streamline government functions, especially in Lands, Health, and Treasury ministries to eliminate forgeries of titles, and secure disbursement of government finances to the intended recipients.
“Technology holds a lot of potential to streamline how we do things. We are yet to even scratch the surface,” said McOlaka.
