What is the attraction of the metaverse?
As both a digital ad space and marketplace, the metaverse could present an opportunity for brands to reach new audiences and increase sales. You can buy virtual clothes for your avatar, for example, or real clothes that are sent to your physical address. People in the metaverse also can attend a virtual concert, fashion show, or art auction, among other events. As a result, there is an emerging opportunity for real estate companies to create shopping areas and gathering places where people can buy products and attend events.
How do you buy or lease digital real estate?
When you buy property in the metaverse, you are buying a non-fungible token, not actual real estate. You can purchase the NFT with cryptocurrency, and the transaction typically is documented with a “smart” contract. There is no recording of deeds with the clerk and recorder. Instead, the transaction is recorded in the blockchain. In general, there are no property taxes in the metaverse, and buyers can expect reduced transaction costs and accelerated closings. A lease in the metaverse works much like a lease in the physical world. Transactions are documented with “smart” leases. Rent generally is paid monthly. And if you don’t pay rent, you can be digitally evicted.
What are some risks to consider in the metaverse?
Unlike real property, an NFT potentially could disappear with the push of a button. The metaverse is privately owned and it has no government or police to help protect your property interest, although some platforms are operated by non-profit organizations. Doing business online may carry a higher risk of fraud, and cryptocurrency values fluctuate and can be volatile.
What role do attorneys play in the metaverse?
Attorneys have an important role to play in helping clients do business and invest in real estate in the metaverse, particularly as it relates to eliminating or reducing risks. Going forward, attorneys will likely help clients create “smart” purchase and sale agreements and leases and assist with platform and neighborhood self-regulation, such as use restrictions, governance structures and planned community agreements.
In addition, attorneys may be needed to draft property-specific rules and requirements to help ensure the orderly operation of businesses and the safety and security of customers. As in the physical world, attorneys may also have a significant role in the financing of digital real estate assets. And finally, wherever people are conducting business, there is almost sure to be a need for attorneys to assist with litigation and dispute resolution.