Blockchain Applications: Blockchain Pilot Project at Cook County Recorder of Deeds. Part 2. Records in the state of Illinois
The state of Illinois does not have a requirement for transactions involving real estate properties to be included in an official ledger with a registrar’s office. This means that recording a transaction with a registrar does not have an impact on the validity of the transaction. To change ownership, a deed does need execution, acceptance, and signing according to the law, but a deed that has been created according to the law and has not been recorded with the registrar’s office is just as valid as a deed that has been recorded with the office. This provides the real estate industry with a lot of blockchain-related opportunities because it means that in the State of Illinois is it possible to have real estate transactions without having to include them in government’s ledgers.
If someone was to create a decentralized ledger that people would trust, this ledger could de facto replace registrar’s offices. This being said, in the current state of affairs submitting information about a transaction to the registrar’s office provides the new owner of a property with a lot of protections and many parties would use the records from the registrar’s office as proof of ownership. These parties are often banks and lenders because many of real estate transactions include borrowing money that is contingent on the transfer of the property. Banks that issue mortgages use data from Recorder’s Offices as proof that a transaction has indeed happened. This means that while it is technically and practically possible to store information about real estate transactions on the blockchain, banks may not accept blockchain entries as proof for legal and regulations purposes while accepting proof from a Registrar’s Office is something they are accustomed to and have been doing for a long time.
At the same time, in the state of Illinois records about real estate may be hard to find because, and this is very surprising to the absolute majority of people, the state does not have a single official government agency that is in charge of real estate transactions and ownership transfers. This is yet another reason why people often have to hire several third parties or visit several government offices in different locations when gathering information about a parcel of land. Many of the people also do not realize that it is possible for scammers to forge a deed and try to record a new deed, which is something that scammers can do my mail.
All of this is bad news for those who had to use multiple third parties in the past and who are currently in the process of conducting real estate transactions in the state of Illinois because of all the inefficiencies, yet it is good news for those who would apply blockchain technology in the real estate industry because the potential to streamline the process and solve inefficiencies is absolutely enormous.
Another issue and misconception is certification of records. Because entries on a blockchain network are impossible to change or delete, entries that track a specific unit, be it funds or ownership records, can be full and complete because it is possible to go to the very inception of the network and historically backtrack the entries. This makes a lot of sense, which is why many people think that when a government agency certifies something, it attests to the legitimacy of that something. In reality, this is not the case at all. For example, with real estate records in the state of Illinois when a Record’s Office certifies documents, it does not certify that the documents contain information that is true. Rather, certification means that a copy of a document corresponds to the record that the office has, without the office making any claims about the information in the documents.
This may seem ridiculous, but the laws in the state of Illinois say that a property deed can be legitimate and valid, yet at the same time it can be in a format that does not allow the Recorder’s office to record the deed. For example, if a deed does not contain information about the preparer of the deed on the first page of the document, the Recorder’s office can reject it even when all parties in the transaction accept the transaction as valid.