TPX FAQs Rev 3.0 August 30, 2021
How do I list my property on the Blockchain Property Registry and TPX?
Property owners with mortgage and lien-free property can list their property on the TrustMe Property Exchange (“TPX”) after the property is provisioned and registered on the Blockchain Property Registry (“BPR”). This process is referred to as an Initial Property Offering (“IPO”) much like the Initial Public Offering process for a public company. The BPR functions in the same manner as an official property registry. Property is listed by its legal description, supplemented by maps, property diagrams, purchase history, and relevant market information provided by on-line property companies (e.g. information on local crime, schools, etc.) creating the most complete description of the property available. Checks normally done upon the sale of a property are conducted at this stage (survey, title search, insurance, etc.) using the same resources as in more traditional real estate transactions. Once this “genesis” record is created and the property has been properly registered, the property owner can offer up to 49 percent of the property’s value on the TPX. BPR entries will be the most complete and comprehensive record of offered properties available and will be updated as needed to reflect the most up-to-date information. Approved land agents/realtors who are familiar with TPX and BPR procedures are available to facilitate the BPR process and such professionals will be paid a commission by the TPX when the process is completed, and the property listed. Property owners pay a fee for the offering – currently one percent (1 %) – and for a modest fee and out-of-pocket expenses incurred by the BPR in carrying out the required due diligence activities.
Is the BPR a for-profit company?
BPR is a trust held by the Universal TrustMe Engine Limited, a UK company, and is structured as a non-profit trust entity. The BPR will recover its costs and generate an operating surplus by charging fees for listings and for changes to listings in the normal course of business. The initial BPR will be in the UK. Additional BPR’s are contemplated in the US, Canada, Australia and France.
How are Property Certificates created?
BPR registered properties are entered onto the blockchain (‘blockified’) using TPX’s proprietary algorithms and technology and divided into fractions entered as Property Certificates – usually valued at 250 pounds (or the equivalent in other currency) – each of which reflects a share ownership in the property itself. Property Certificates may also be denominated in square feet, meters or yards. The unique capabilities of blockchain technology make this operation possible. Property Certificates act as smart contracts, pre-programmed to carry out instructions without intervention, assuring confidence in their operation. Shares of blockified properties are traded on the TPX (e.g. are bought and sold) with current ownership reflected in the Property Certificate. The initial owner is the property owner registering the property and listing the desired number of Property Certificates.
Do Properties registered on the BPR change their status on the HM Land Registry (or equivalent official land registry at the state or local level)?
No. Ownership reflected in the HM Land Registry does not change. However, in certain circumstances, a Property Certificate can, in accordance with its terms, trigger a change in ownership would ultimately be reflected as a change of ownership in the HM Land Registry (e.g. in the event of default).
Is the creation or initial trading of Property Certificates taxable?
As no transfer of ownership has taken place during the BPR registration and TPX listing process, there are no tax or accounting implications. Once a Property Certificate is sold, such event may be taxable to the property owner selling the Property Certificate. As for the creation and sale of the Property Certificate, UK Stamp Duty does not apply to property transfers of less than 500 Pounds. Of course, you should consult your own legal and tax advisors with regard to your own tax treatment and the tax treatment of your property.
What is my continuing responsibility with regard to the property in question?
Property owners have an on-going responsibility to maintain and insure their properties and to keep them free from liens (the same requirements as would apply to a traditional mortgage). Should this fail to occur, the BPR registration process will include granting the right to meet contractual obligations through liquidation of unsold Property Certificates held by the property owner up to foreclosure and sale of the property. The on-going obligation to meet these obligations is a feature built-in to the Property Certificates which contemplate certain defined steps in the event of a series of events or circumstances.
Do I have to sell 49 percent of my property?
No. The entire property must be registered on the BPR and property owners may sell up to 49 percent of their property but there is no minimum requirement for offering on the TPX.
Will my neighbors know that I have ‘blockified’ my home?
No. There is no change to the HM Land Registry by registering your home on the BPR or listing it on the TPX (unless there is an intervening event after listing that triggers a change in ownership).
Why is this method of unlocking equity superior to instruments like home equity loans or lines of credit?
Registering property on the BPR and listing such property on the TPX creates a ready-source of cash from the equity in a particular property. Home equity loans require similar steps (survey, title search, etc.) but also require the payment of interest. The selling of Property Certificates generates interest-free cash.
Can I list commercial properties on the BPR and TPX?
No. At this time, TPX is focused on the 2.1 trillion pounds market of mortgage-free, high-end residential real estate in the UK. It is possible that TPX will expand to include commercial property as well as public and jointly-owned land in the UK (public buildings, golf courses, parks, etc.).
If I register my property on the BPR and list it on the TPX, can I control who buys the Property Certificates?
No. Subject to AML/KYC and local regulations, there is no restriction on who buys Property Certificates.
How do the Property Certificates work?
Property Certificates are smart contracts in that they contain instructions that execute instruction automatically and without intervention. For example, if a property owner owes delinquent property tax, the necessary amounts of unsold Property Certificates owned by the Property Owner and offered on the TPX can be automatically sold on the TPX with the proceeds going to pay the delinquent amount automatically. A more serious delinquency can trigger a liquidation of the property and a transfer of ownership which would be reflected on the HM Land Registry. The buying and selling of the Property Certificates is also reflected in the certificate itself. The BPR is charged with maintaining the integrity of Property Certificates and underlying property and for ensuring that respective properties are properly maintained, and tax and insurance requirements satisfied.
What if I change my mind and want to sell 100 percent of the property via traditional means?
Property Certificates can be ‘called’ or redeemed just like traditional bonds and this feature is built in as a smart contract feature. Property Certificates listed on the TPX but not yet sold would simply be cancelled and returned to the property owner. Property Certificates sold would be redeemed to the bearer at the current market price and returned to the property owner.
What if - in such a case - the value of the Property Certificates for the 49 percent is greater than the retained 51 percent ownership?
In this event, the cost to redeem the sold Property Certificates would be part of the cost of the sale and the Property Owner’s interest in the 51 percent would be the source of funds to complete the redemption. This process is similar to paying off a second mortgage or home equity loan at the time of sale.
What if - in such a case- the value of the Property Certificates exceeds the retained interest?
Property Certificates have smart contract features which would restrict the market price or limit further sale of unsold Property Certificates to assure equilibrium between the retained interest in the property and the total value of issued and sold Property Certificates.
What if I want to sell my retained 51 percent of the property?
Any sale would be treated as a 100 percent sale of the property triggering features in the Property Certificates leading to cancellation of unsold certificates or redemption of sold certificates in accordance with their terms.
What if the property in question is destroyed or seized by operation of law?
In the event that a property offered on the TPX is destroyed then insurance proceeds must be used to rebuild the property (just as a mortgage company would require such a step in the event of damage or destruction) as a property owner is charged with maintaining the underlying property. Should a property seized by operation of law (e.g. to satisfy a tax lien), the operation would be treated like a 100 percent sale of the property, and outstanding Property Certificates would be cancelled or redeemed in accordance with their terms.
What if the property is bequeathed in the event of death?
In the event that a property owner dies, the obligations imposed by the BPR registration and TPX listing process could automatically run with the property and apply to the next generation. Should the new owner decide to sell 100 percent of the property, the Property Certificates would have to be redeemed as with any other sale.
Would death tax apply to such a transfer?
Consult your tax advisor. If the inheritor of the property prefers to pay death tax (or any such tax) out of the proceeds of selling linked Property Certificates, they could be redeemed as needed in accordance with their terms and the current market value can be paid to the new owner to satisfy tax obligations.
What if my property becomes subject to bankruptcy?
In the event of bankruptcy, the ultimate disposition of the property will trigger the appropriate action via the smart contract mechanism in the Property Certificate. For example, if the property is transferred, the Property Certificates associated with the property may be cancelled, liquidated or maintained. If a bankruptcy court determines that the creation of Property Certificates is not allowed, such certificates will be automatically cancelled or liquidated.
Who can buy and sell Property Certificates?
Property Certificates are openly traded. Anyone purchasing Property Certificates from the TPX will be subject to stringent AML/KYC review pursuant to applicable law and regulations. Property Certificates – due to the process of blockification – are transparent with regard to the property address, ownership and other details – giving an investor the unique opportunity to own shares of unique properties. It will be clear from the Property Certificate where the underlying property is located as well as any additional information available from the BPR.
Does the TPX Offer Off-Network Transactions:
Property Certificates are the equivalent of bearable notes reflecting a specific share in a specific property. As such they may be exchanged off-example between willing buyers and sellers. Such transactions will be recorded on the Property Certificate by the TPX.
Can I use a Property Certificate as collateral for other investments?
As a Property Certificate has the characteristics of a bearer instrument, it can be used in any lawful manner including being used to secure a debt or provide collateral. However, whatever smart contract features are built into the Property Certificates when created will continue to apply to the Property Certificate (e.g. the ability to redeem the Property Certificate in the event of a sale, etc.) which would be a transparent feature of the Property Certificate.
How does the TPX assure liquidity in the trading of Property Certificates?
The Initial Token Offering process which provides the initial funding for the BPR and TPX will itself provide liquidity via a broad sale and distribution of tokens redeemable for Property Certificates on the TPX. TPX will also provide liquidity via market makers trading Property Certificates at a slight discount using treasury funds held by the TPX itself.
How does the TPX make money?
The TPX will charge a registration fee, trading fees, custodial fees and subscription fees just like other similar exchanges. TPX will eventually be connected to trading systems in conventional brokers giving investors a broader choice of investments for their respective portfolios.
Can property owners outside the UK list their property on the BPR and TPX?
The initial BPR and TPX is for London property only. Property owners must follow a rigorous process to facilitate a listing. An owner of London property but resident in another country can list their property on the BPR and TPX subject to any UK-specific limitations. Additional BPR’s and TPX’s are being built in the US, Canada, France and Australia.
Can I buy Property Certificates on the London TPX if I am outside the UK?
Traditional UK rules apply for the buying and selling of financial instruments. Contact your broker or financial advisor. It is contemplated that, over time, Property Certificates will be freely tradeable on all TPX exchanges subject to local rules.
How is the BPR and TPX regulated?
The issuance Property Certificates and the functioning of the TPX come under Collective Investment Scheme and MiFID II rules (as well as applicable GDPR and data protection rules). TPX is the in process of obtaining needed approvals.
How secure are Property Certificates and TPX activities?
Providing a secure environment for BPR and TPX activities is a key undertaking. TPX utilizes industry-leading security tools to maintain integrity of the TPX and underlying assets.
Can Property Certificates be created for other types of property?
The TPX is initially focused on unmortgaged residential property. Other projects underway include the creation of ‘Green” Property Certificates for protected land trust and conservancy properties which would permit the purchase of Property Certificates representing ownership in protected properties, generating a source of funds for land stewardship and further land acquisition and protection. The TPX development roadmap includes expanding the TPX process to residential rental properties and commercial properties worldwide.