The Texas Blockchain Council (TBC), part of the Texas Innovation and Technology Caucus, is a bipartisan group of Texas lawmakers focused on advancing the state’s tech sector.
The Governor appoints the 16-member Work Group. On their agenda? A pilot project for blockchain-based recording of real estate deeds.
Why Apply Blockchain to Texas Real Estate? A Few Good Reasons
Today, many local governments rely on physical files when recording property deeds. These documents can be incomplete or ambiguous — thus the need for a title insurance industry. Some have errors in the property descriptions.
The most common and ordinary agreements can turn into complicated title histories. For example:
- Different parties can claim interests in the same piece of real estate. There can be multiple mortgages and other liens for debts. There can be many kinds of easements, and so on.
- Water, mineral, and even air rights can be divided and transferred separately from the land.
- Boundaries can change as erosion and other dynamics modify the landscape.
- Forgery and fraud can undermine an innocent property owner’s rights.
No wonder title searches sometimes turn up surprises that put transactions in jeopardy. Confusion in a chain of title can be very costly to the parties involved, their heirs, their lenders and insurers, and society in general.
The Texas Blockchain Work Group states that blockchain technology could “revolutionize ledger records,” finally providing the real estate industry with an “immutable, secure, and efficient data management system.” Given its transparency, says the Work Group, blockchain technology is a “perfect fit” for managing local records like property deeds.
Blockchain, Crypto and AI: Now They’re in Texas Real Estate Law
The updated Section 2054 of the Texas Government Code says:
Each state agency and local government shall, in the administration of the agency or local government, consider using next generation technologies, including cryptocurrency, blockchain technology, robotic process automation, and artificial intelligence.
The Work Group will guide adoption of blockchain-based systems statewide. Its members envision blockchain becoming the state’s main deed records system. Blockchain, says the Work Group, provides an immutable, fraud-resistant ledger. It brings cost-cutting opportunities, too. This is due to its potential to reduce paperwork in cities and counties. Blockchain-based recording could drastically cut down on problems caused by human mistakes.
Blockchain would also lower the number of people in the middle of any real estate transaction. Why? Because a property transfer and the deed recording would merge into a single act.
Next Steps: Work Group Looks to the “Tech-Forward Counties” of Texas
The lawmakers know they’re asking Texas deed recording offices to change everything they do. Where are the local officials even supposed to start?
The answer is in a series of preliminary tests that are first used as backup systems. This phase would “assist in identifying the legal impediments that must be modified to accommodate blockchain-based recordation and transfers of real property,” the Work Group explains.
Meanwhile, the Work Group says, counties that rely on paper recording systems will need to digitize all those physical files. Texas has 254 counties. Some have yet to adopt policies for filing eRecordings. In fact, current Texas law has no language directing local recording offices to accept electronic deed recordings.
For this reason, says the Work Group, “we expect that larger, more tech-forward counties would be the ideal counties to implement this pilot program.”
If the pilot systems in these counties pan out, traditional title recording will gradually go digital, until blockchain-based ledgers are the norm across Texas. The Work Group expects the state to shift, ultimately, to this new way of tracking all liens, claims, and changes that impact Texans’ property rights.
OK, tech-forward counties of Texas. We’re rooting for you.
Supporting References
Texas Government Code § 2054.601.
Texas House Bill 1576.
Texas Work Group on Blockchain Matters: Membership.
The Texas Work Group on Blockchain Matters Report, including law and policy recommendations, and a proposed master plan to expand the Texas blockchain industry, in compliance with House Bill 1576.
Southern Methodist University, via SMU.edu: Texas Work Group on Blockchain Matters Releases 2022 Legislative Report and Master Plan (Nov. 15, 2022).
And as linked.
Photo of Dallas, TX by Jacoby Clarke, via Pexels.