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Will the £17million ‘Bitcoin Only’ sale of a West London mansion herald a new era in crypto-property purchases?

In what is believed to be a first for the London property market, anyone interested in purchasing the £17m Notting Hill mansion that’s about to go onto the market will have to pay in Bitcoin (or more accurately using today’s exchange, approximately 5,050 bitcoins).

Lev Loginov bought the house in 2013 for his property investment company, London Wall, who have spent 3 years converting it back from 5 individual flats into a single residence.  He told the press he wants to “shift all the perceptions on cryptocurrency” and use this sale to pioneer Bitcoin deals in the notoriously cut-throat London property market.

Mr Loginov said:

"We think in future it is going to eliminate the need for solicitors and property title and is really going to change how real estate transactions are conducted.”

While this is undoubtedly a brave stance, our worry is it may be little more than publicity-friendly grandstanding as one of our partners Richard Howlett explains:

“The bitcoin element doesn’t affect a solicitor’s duty to investigate title.  Investigating title is the legal process of making sure the seller is entitled to sell, checking HM Land Registry Records, asking questions of the seller and ensuring there are undertakings in place to discharge any mortgages on the property.  All of this will still need to be carried out regardless of the means of payment.  Similarly, there is also suggestion that using bitcoin will somehow reduce Stamp Duty and the commission a buyer pays to the estate agent.  To us that seems odd.  It is the seller that pays commission to the estate agent, not the buyer and Stamp Duty is calculated on a flat percentage and paid to HMRC after the purchase has been completed and cannot legally be avoided.” 

“When you add all of this together, I just can’t help thinking this is a publicity stunt rather than a seismic shift in the way residential property is bought and sold in London.” 

Admittedly Bitcoin has already been offered as a payment option in London property transactions – for example in the sale of the £1.7m townhouse in Peckham that went onto the market in September – but this is the first time we believe it has been the only option.   The fact the vendor is insisting they will only accept bitcoin also causes Richard concern:

“If we look at this rationally, there are probably only a handful of people around the world who hold this amount of bitcoin and even if a buyer did have that amount of bitcoin, are solicitors in the UK geared up to facilitate transactions in bitcoin?  Our feeling is most don’t really know what bitcoin is!” 

“For this to work the conveyancing solicitor would need to be authorised to accept bitcoin whilst meeting all of the usual undertakings involved in a conveyancing transaction.  Meanwhile the buyer - who would have to be subject to MOLA regulations - would have to find a solicitor that meets all of these regulatory stipulations to take on the sale.  Whilst I have no doubt that in a few years this could potentially become the norm for a transaction, at this stage it is totally impractical.  To undertake this transaction you will need two bitcoin-friendly law firms.  At this stage the only one I know is Selachii and we don’t undertake residential property work.”

 “Again, all of this just makes me think this is a clever way of generating publicity for the property and I would be hugely surprised if, when push comes to shove, the vendor will not accept a more traditional currency once it’s on the table.”

However, despite Richard’s concerns, reports from Russia suggest the London sale is not unique. 

Last week The Moscow-based real estate company, Kalinka Group, announced they’d put a provincial Russian mansion with an area of 930 square meters up for sale for 3,000 bitcoins.  They believe this is the first case of an “elite house” in Russia being sold solely for bitcoins.

However in addition to all of the points Richard’s raised, the Russian case has thrown up two new potential issues.


The first is the potential effects of a volatile exchange rate on a sale.  When the Russian mansion was valued that amount of bitcoins was worth around $8 million.  It is now worth over $12 million but the price has remained at 3,000 bitcoins.

The second is that there is currently no legislation in Russia that sets out how bitcoin or any other crypto-currency should be treated in a real estate sale.  This means that despite the vendor’s desire to sell in bitcoins, until the associated legal questions are answered and the required legislation is in place, the deal will probably have to be done in Russia’s domestic currency.  Whether this debate will cause further confusion within the London property market remains to be seen.

If you would like any assistance clarifying the legal position around any sale or purchase of Bitcoin or any other crypto-currency or would like to explore the benefits of employing a bitcoin custodian to add an extra layer of security to your bitcoin or blockchain activities, please call us today on 020 7792 5649 or email us at info@selachii.co.uk

 

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