How can smart contracts automate commercial leasing?

1 What are smart contracts?

Smart contracts are self-executing agreements that are written in code and stored on a blockchain, a distributed ledger that records and verifies transactions without intermediaries. Smart contracts can automatically execute predefined actions based on certain conditions or triggers, such as payments, delivery, expiry, or performance. Smart contracts can also enforce the terms and conditions of the agreement, such as penalties, disputes, or termination, without the need for human intervention or third-party arbitration.

2 How can smart contracts automate commercial leasing?

Smart contracts can automate various aspects of commercial leasing, such as lease creation and signing, rent payment and collection, and lease management and maintenance. The contracts can generate customized and standardized lease agreements based on the input of the parties, such as rent, duration, security deposit, maintenance, utilities, etc. They can also facilitate the payment and collection of rent using cryptocurrencies or stablecoins. Additionally, smart contracts can monitor and manage the lease conditions and performance with notifications, requests, or actions triggered by data collected from sensors, smart devices, or oracles. For instance, a request for maintenance service when a sensor detects a leak or adjustment of rent based on market rate can be automated by the smart contract. Moreover, all of this is done digitally with cryptographic keys creating a legally binding and immutable contract stored on the blockchain.

4 What are the challenges of smart contracts for commercial leasing?

Smart contracts come with a number of challenges for commercial leasing, such as legal and regulatory uncertainty. Smart contracts are still a relatively new technology and their enforceability is not clear or consistent across jurisdictions. This may lead to conflicts or gaps between the smart contract code and the existing laws and regulations. Additionally, smart contracts require a high level of technical and operational expertise and infrastructure to design, develop, deploy, and maintain. They are also subject to technical and operational risks, such as bugs, errors, hacks, or network failures. Furthermore, smart contracts may not capture or address all the nuances, contingencies, or human factors that may arise in commercial leasing.