In most jurisdictions, safety deposits are intended to render landlords alongside a fiscal guaranty against nonpayment of rent or excess harm to a rental belongings during tenancy. In the past times the principal manner to render this guarantee has been for the tenant to deposit funds, inward trust, alongside the landlord. The landlord takes custody, but non ownership of the funds. The obvious work is that, aside from ethical as well as legal obligations, a landlord has no incentive to render a tenant’s safety deposit – which is why almost everyone who has been a renter has a “they-didn’t-return-my- security-deposit” story.
Custodial safety deposits introduce the same problems every bit most custodial accounts. Custodial accounts are slowly to “borrow” from. In the instance of safety deposits, the penalties for misuse of funds are comparatively depression to the vantage of keeping the money as well as most tenants volition non genuinely sue to recover a deposit. While precisely about jurisdictions demand that landlords grip safety deposits inward a split upward account, precisely about don’t. In the terminate it genuinely doesn’t affair whether the funds are inward a split upward work organization human relationship or non because they’re controlled exclusively past times the landlord alongside little, if any, oversight past times tenants or anyone else.
Unfortunately, many landlords have got a criterion practise of non returning safety deposits regardless of the status of the premises. When the tenant receives a shape uncovering that they’re non getting their deposit back, they’re faced alongside 2 choices: larn by or walk away. Often the deposit amount but isn’t plenty to justify taking fourth dimension away from work, traveling to a jurisdiction where they may no longer live, as well as presenting prove earlier a courtroom where success is never guaranteed. Undocumented residents as well as those hiding from domestic abusers cannot larn to courtroom to recover deposits. Regardless of the reason, many tenants but walk away. Angry at the landlord. Angry at the system.
We tin do better.
Using bitcoin’s multisignature address characteristic nosotros tin do a 2-of-3 address, where the tenant is a signer, the landlord is a signer, as well as a trusted disinterested 3rd political party holds the 3rd key. In minutes, as well as from anywhere inward the world, the tenant, landlord, as well as 3rd political party tin combine world addresses to do a multi-signature address alongside a 2-of-3 signing configuration. Once the address is created, the tenant funds the address. All parties tin verify on Blue Planet blockchain, inside 10 minutes, that the funding has occurred as well as inside nearly an lx minutes the landlord tin last confident that the funds volition last at that spot at the terminate of the term. Then naught happens for a year. Or more. The landlord cannot misappropriate funds, every bit it takes 2 signers to motion funds out of the account. At the terminate of the lease, the tenant creates a transaction transferring the entire deposit to precisely about other tenant-owned address. The tenant sends the transaction to the landlord for signing. If the belongings is damaged the landlord tin shipping a counter transaction as well as enquire the tenant to sign. The landlord as well as tenant tin as well as thence negotiate amid themselves. If they cannot make agreement, they tin larn the 3rd political party signer involved.
Alternatively, a transaction tin last structured to admit the most mutual scenario – where at that spot is no harm to the premises as well as the deposit should last returned in-full to the tenant at the terminate of the lease. To brand the deposit refundable past times default, at the foremost of the term, both the landlord as well as tenant sign a transaction refunding the deposit at a futurity date. Bitcoin’s nLockTime characteristic allows them to do a post-dated transaction that cannot last processed earlier a stated date. By signing an nLockTime transaction, dated for the length of the lease addition xxx days, the landlord volition have got xxx days to brand a claim as well as larn the 3rd political party to override the transaction. H5N1 time-locked refund transaction shifts the burden of proof to the landlord, who must brand a claim as well as essay damages inward club to obtain deposit money. If the landlord as well as tenant grip to extend the lease, the funds tin last relocked alongside 2 uncomplicated transactions.
With or without nLockTime, bitcoin’s multisignature addresses are superior to traditional custodial landlord accounts because they ensure landlords do non unlawfully commingle, keep, or pass the tenant’s funds. It balances the ability betwixt the parties as well as provides world oversight through the network. Importantly, the 3rd political party is non involved if the landlord as well as tenant grip on the refund amount themselves. This keeps costs downwardly as well as encourages communication. Finally, the parties are nonetheless protected past times traditional landlord/tenant laws as well as the 3rd political party would last required to follow those laws. This is i instance of ensuring due procedure through technology.
So oftentimes inward fintech nosotros come across solutions inward search of problems. In this case, applied scientific discipline tin quickly, easily, as well as cheaply solve a existent work for millions of renters. While inward the short-term toll volatility as well as the lack of incentive for landlords to adopt this solution may larn inward less probable to gain widespread adoption, neither minimize its potential. Bitcoin’s built-in multisignature characteristic tin simultaneously protect landlords as well as tenants spell righting the grossly imbalanced ability dynamic betwixt the two. With multisig y'all could genuinely larn your safety deposit dorsum in-full without going to court. Imagine that!
Photo modified from BTC Keychain / CC BY 2.0