4 Ways Smart Contracts Will Simplify the Leasing Cycle in Commercial Real Estate


Problem: a lengthy and complicated leasing cycle with great transaction dependency

Each stage of a real estate transaction is accompanied by a growing number of parties and activities involved. The very nature of the CRE life cycle suggests a long-term contract. That is why it is important for brokerages that the leasing life cycle for each property is backed up by effective systems that will not slow down any of the leasing stages:

To give you a better idea just how complicated an average CRE transaction can be, here are some of the third parties typically involved, as well as brokers, landlords and tenants:

  1. real estate attorneys;
  2. insurance agents;
  3. title agents / escrow agents (typically, title agents act as escrow agents);
  4. accountants;
  5. contractors (e.g., designers or architects);
  6. independent auditors;
  7. third-party reports (e.g., appraisals, land survey, environmental reports, etc.);
  8. surveyors;
  9. lawyers;
  10. building inspectors, etc.

For clients and investors, a full and frictionless long-term leasing cycle is a priority and there is little point in continuing with relationships that do not share the same prioritization. However, brokerages can rarely guarantee a smooth transition from one stage to another due to the large number of third parties and ongoing transaction dependency.

4 ways Smart Contracts are a better alternative

Smart Contracts on the blockchain are capable of effective data exchange and conflict resolution while beating traditional systems in at least four aspects:

  • greater speed;
  • lower costs;
  • in full view of all parties;
  • subject to contract rules.

This will greatly accelerate the property leasing life cycle. In addition, it may no longer be necessary to use escrow agents or notaries to validate and store records.

We are confident that Smart Contracts will become the mechanics behind the CRE leasing life cycle in the years ahead. This means that all payments throughout various leasing stages will be near real-time while most of the paperwork and manual activities will be eliminated.

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