Real Estate and the Metaverse
For those not in the know, the metaverse is a virtual reality world where virtual experiences can either simulate the real world or imagine worlds beyond it. It can be used to create digital stories and experiences as well as better understand people, their cultures and our planet.
Two of the biggest metaverse platforms are Decentraland and Sandbox, who have recently hit news headlines with virtual real estate transactions in excess of $106,000 million. Such real estate transactions include the purchase and creation of virtual cafes, stadiums, auction houses, virtual homes and retail stores.
Sales and purchases work a little like they do in real life, with virtual platforms acting as estate agents, allowing sellers to list their properties and for buyers to negotiate. Once a transaction is agreed, transactions are secured on blockchains using smart contracts. Smart contracts are programs coded into the blockchain automated with conditions. Once the transaction is completed, there are deeds which contain the legal description of the property you own, a little like the Land Registry does for real life property, and the NFT describes the asset which they represent. At the moment, there are no additional intermediaries involved and no ability to amend or negotiate the documentation.
Investment into the metaverse is via crypocurrencies and because of this there is no guarantee that the value of the land will go up. It is still a largely unregulated market, meaning there is little recourse against the seller if things go wrong. The other potential complicating factor is that real world property is finite, there is only so much land to develop in the UK and the population is steadily increasing, meaning in general it is accepted that property prices consistently increase in value. In the virtual world, the amount of available land is potentially unlimited if demand continues to rise.
As we see real estate agents, brokers and developers start to venture more and more into the metaverse it seems that there is a need to start incorporating some of the practical customs and principles of real property law. It may be that property owners could draw up covenants or restrictions which could help better protect investments of a particular property or area for example to control the development of nearby land, much like is often the case in real life. There could also be a similar requirement to register a loan agreement, or mortgages, in a way that governs the borrower’s obligations and restrictions and secures the lender’s interest, and the value of the property as it would in real life.
I can see a future whereby Real Estate lawyers and Intellectual Property lawyers will need to find a way to collaborate with software coders to ensure that virtual spaces are managed properly, legally and effectively as well as physical property would be in real life.
I am excited to see how the metaverse evolves and continues to disrupt the way we work and live. In the meantime, however, if you have any real world Real Estate property needs, I would be delighted to assist so please do not hesitate to reach me at:
