The Smart Tenancy Contract is online software for independent landlords or property managers to manage the cashflow of their property portfolios. The innovation this technology brings is the automation of many cashflow duties by using a system of ‘smart contracts’.
The benefits are:
- Less time spent reconciling cashflow transactions for rent payments and property expenses.
- Full transparency and control for overseeing and approving property expenses.
- A reduction in accounting, compliance and property management costs.
The key features this technology delivers are:
- Security of Bond Deposit – Funds are held in a secure account for the term of the lease. Funds are release upon dual signing by tenant and landlord with any deductions paid to the landlord as agreed by both parties.
- Reconciliation of Tenancy Ledger – Revenue from rent deposits are automatically reconciled with the tenancy ledger. This means that bank statements do not need to be imported into our software to verify that rent has been paid on time.
- Expense Management – Property maintenance and ad-hoc expenses are be paid via rent revenue or the tenant’s bond deposit.
At the heart of this technology is a smart contract that replaces the traditional tenancy agreement between a landlord and tenant. Unlike a traditional contract, it is digitally signed by both parties and published on the Midasium Blockchain. Once published, it is activated and executes transactions using a payments bridge to control the flow of funds between accounts, as specified in the terms of the contract.
The contract is programmed to expect funds to be received from the tenant in either the form of a deposit for a bond payment or direct debit for a rent payment. If the transaction is a bond payment then the smart contract will hold these funds until the termination of the lease. If the transaction is a rent payment then the smart contract will automatically reconcile these transactions with the tenancy ledger and disburse the funds to the appropriate account.
Read more – Midasium Contracts.
Creating a Tenancy Contract
The customer behaviour between a landlord and tenant for creating a new Smart Tenancy Contract is as follows:
- Landlord creates a Smart Tenancy contract with the key attributes of the tenancy such as property details, tenant details, rent amount and payment frequency.
- Tenant is notified and reviews the terms of the contract, which can be seen in a traditional legal format as they would when reviewing any other standard tenancy agreement.
- Tenant agrees to the terms, which they accept by digitally signing the contract using a digital key that represents their identity. If this is the tenants first time, then they must complete registration in order to receive their digital key. Registration involves completing a 100 point identity check.
- Landlord also signs the contract which now becomes a legally binding digital document published on the Midasium blockchain.
The Flow of Funds
The following describes the flow of funds that is controlled by the Smart Tenancy Contract.
- In order for the lease to be activated, the tenant must deposit their bond. The smart contract places these funds in a secure account. This is a special account that will only allow the funds to be reversed to the tenant’s account or an agreed proportion disbursed to the landlord’s account if both parties agree.Note: This step is optional for the tenant, as in some jurisdictions there is a centralised public body that handles bond deposits.
2. The Smart Contract debits the tenant’s account every month. The funds are instantaneously dispersed to the landlord’s account. In the case where there is an outstanding invoice that needs to be paid for any property related work such as maintenance of ad-hoc repairs performed by a third party, then the smart contract allocates a proportion of the month’s rent to settle the invoice.
3. Upon termination of the lease the tenant’s deposit is disbursed to the tenant and landlord according to what has been agreed between both parties to cover any damages or other expenses.
Source Read more – Midasium Contracts.
A Midasium Contract is simply a small computer program. It is a digital representation of the mutual agreements contained in a traditional real estate contract as lines of software code that self-executes and self-enforces. It has the power to move funds between bank accounts, transfer property titles and reconcile payments. At any time a Midasium contract can be converted to a traditional contract form for legal purposes.
The advantages of a Midasium contact over a traditional contract are:
- Trustless – The open-source nature of the Midasium contract means that it will execute exactly as the source code dictates. This allows one entity to confidently transact value directly with another entity without relying on a third party to stand between them and ensure that each honours the transaction agreement. For example, during a traditional contract of sale, a public notary will act as the intermediary to hold the property title as funds are settled. This is a significant feature that removes friction in traditional processes, creating efficiency, lower costs and increasing integrity.
- Autonomous – A Midasium contract exists on the Midasium Blockchain where it will self-execute according to the pre-agreed contract conditions without any direct human involvement.
- Self-sufficient – Midasium contracts are stored permanently on the Midasium Blockchain where they have all the resources permanently available to them in order to execute and remain in existence. Once published a contract becomes irrefutable, irreversible and unalterable. This means that all participates have very high confidence in execution surety of the process.
The innovation with Midasium contracts over any other smart contract technology is that are:
- Tailored specifically for real estate agreements and configurable to any real estate transaction.
- Legally binding and enforceable as they are convertible to a traditional legal format.
- No crypto-currency is used for processing payments, instead contracts interface directly with banking systems to process payments in real fiat currencies (USD, EUR, GBP etc).