A Model Proposal on Smart Contracts For Commercial Property Leases

Merve Engür and Kerem Yavuz Arslanli

ERES from European Real Estate Society (ERES)

Abstract: The commercial real estate sector is being transformed by technology and PropTech. Companies are increasingly looking for new alternatives and Blockchain has the potential to solve the issues about challenges, regarding liquidity and transparency by offering fresh alternatives for commercial real estate investors. The main problem examined is that the complexity of the leasing processes and the handling of the process with different actors make the whole process open to errors. Smart contracts using blockchain technology promise to solve this complexity in the contract process. Smart contracts are also claimed to form a structure where reliability and transparency are guaranteed. The purpose of smart contracts is to ensure that the lease agreement is signed, the rent is paid on time, and the contract termination is implemented in accordance with the terms. This research explores the application areas of smart contracts based on Blockchain technology and potential application innovations in the commercial property market and finds criteria for using smart contracts in property leasing. Smart contracts are an important example of the use of Blockchain technology in commercial real estate leasing. Therefore, it is essential to find criteria that allow the use of smart contracts in commercial property leasing. The criteria that smart contracts must meet in order to be preferable to the existing contract type are questioned and if these criteria are met, whether smart contracts can be used in the shopping center rental process has been researched. The criteria considered in the current lease agreement process, and the use of blockchain technology in the commercial real estate industry are explained. In commercial real estate contracts, the application areas of smart contracts are explored. The importance of the criteria in this process is determined through a survey of employees in commercial property leasing companies. The survey investigating the criteria for smart contracts to be used instead of existing lease contracts will be made to the target people and the survey results will be evaluated by a scoring method. The AHP method is used to integrate the criteria into the hierarchical structure and show which criteria are effective in the selection decision for the leasing contract process. The scoring system determines which criteria are more important than the others. Participants in the interview were asked which criterion they preferred over the others. The criteria that resulted from these surveys were scored using scoring matrices. The survey using the AHP method revealed the criteria and features that the leasing process must promise for the use of smart contracts. As a result, the opportunity for smart contracts to be integrated into the commercial property leasing process is being pursued.

Keywords: blockchain; commercial property; Property Lease; Smart Contract (search for similar items in EconPapers)
JEL-codes: R3 (search for similar items in EconPapers)
Date: 2023-01-01
New Economics Papers: this item is included in nep-pay and nep-ure
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