An Idea: The Property DAO
I have a new idea, inspired in part by the exploits of constitution DAO and the various DAO’s trying to buy sports teams around the world. I wondered if we could run with the concept and make property/land ownership a DAO?
Before you protest to much, I know there are some hurdles to get over around legal entity and ownership in the DAO world. However I believe the following could work, and longer term evolve into the norm.
Imagine if we use the Aragon platform to create a fund-raising DAO which acts as the main hub for this experiment. After raising some capital we form a traditional limited company, probably based here in Guernsey, where I live, because of it’s favourable regulation and tax regime. The limited company has a set of rules added to it’s articles of association which ensure the will of the DAO is reflected in the running of the company. We then start buying properties here in Guernsey and across the globe. The properties are legally owned buy the company but are controlled by the main DAO initially.
For each property we buy the ownership is encoded as an NFT, a membership DAO is created which owns the NFT and issues tokens. These tokens are then sold to people who wish to live in the property, while they own the tokens they effectively own the property and can act in the same way as they would if they owned a property in the traditional way.
By using tokens we can fractionalise the property ownership, so if a group of people wish to group together and own a shared house they can. The tokens can be sold on an open market, like any other token. Property ownership becomes liquid and democratised, we remove the need to many of the complex steps required in conveyancing.
Along side the property DAO we also create a lending DAO which acts like a mortgage company, they can buy a proportion of the tokens for a house on your behalf and then over time you buy back the tokens from the lending company. Gradually increasing your ownership. If you fail to keep up the agreed schedule of buying back tokens from the lending company they can have you evicted. In the same way a traditional mortgage company might. A smart contract representing the agreement is held by the DAO.
We also need to consider what happens if work is carried out on the property, or inspection sare completed, or any other issues which can effect the property and it’s viability. I suggest that all the paper work, such as planning permission, building regulations etc is stored as NFT’s within the DAO along with the main ‘Title Deed’ so that anyone considering purchasing the property tokens can query the DAO data and see all they need, rather then requiring a lawyer to performs these checks.
So what about rental properties? Well those who own the property, via DAO tokens, can choose to rent a property in the same way anybody else would. The rental agreement is stored within the DAO as a smart contract.
The concept as a describe is not without risk, however I think they can be minimised with careful structuring.
- The original Limited company will always be the legal owner of the property (at least until we can change the law) in theory the directors could pull the plug. However I think this can be protected against with robust covenants inside the memorandum and articles of association for the company that mandate they must follow the Main DAO’s votes. Then each property DAO will own a token in the main DAO. Therefore giving each property voting power over the holding company.
- The legal rights are a grey area. I believe this is mitigated as above, due to the legal rights of a limited company being well defined.
- Revenue will be needed for the holding company to stay afloat. We will introduce a mechanism for the company to earn a minimal revenue from each sub DAO to meet their minimum regulatory filling and admin requirements. Some of this can also come from the lending DAO.
- Tax is unclear right now but it seems that as the Holding Company never sells the properties there will be no tax due when buying or selling the properties through the DAO. A considerable advantage.
This is very top level exploration of the concept, but I truly believe this is an experiment worth pursuing. I hope to start the process shortly in you fancy joining me then drop me a line.