While there are legal risks that companies should avoid when engaging in the Metaverse, perhaps the greater risk for real estate businesses not involved in the Metaverse is that they will be left behind by companies that can capitalize on its potential.
Metaverse and its real estate potential
The concept of the Metaverse is still in its infancy, with several companies competing to define, develop, and operate it. However, the term broadly refers to the merging of the physical and digital worlds in a way that augments reality.
In the real estate context, the metaverse offers several opportunities.
For example, creating a digital version of a physical property in the metaverse allows prospective tenants and buyers to virtually “visit” that property, increasing the scope for immersive and interactive real estate experiences. Masu. Visitors can, for example, open doors, walk through floors, and climb up. That way, you can better understand the space they are likely to acquire. This technology is particularly beneficial for international or remote buyers and has the potential to expand the reach of real estate agents.
The Metaverse is also becoming home to leisure and event spaces. Ariana Grande and Justin Bieber are among the pop stars who have already hosted concerts in the Metaverse, recognizing that the Metaverse can lift restrictions associated with physical events, such as the number of people who can attend. For real estate companies, the potential to provide leisure and event spaces in the Metaverse offers the potential to increase revenue and further increase brand awareness for real estate companies and their customers.
Architects, designers, engineers, and construction contractors can also support the creation and operation of real estate assets in the Metaverse. For example, architects and designers can interactively explore various potential layouts and design options, while engineers and contractors can remotely survey and plan construction sites in a realistic digital environment, eliminating the risk of mistakes and trips. can minimize time and costs.
As the balance between office and remote work shifts, the Metaverse also provides scope for immersive collaborative environments across geographic boundaries.
Further benefits can be achieved by reducing costs and emissions, improving customer experience, and generating new revenue, such as from digital rights associated with creating metaverse versions of existing real estate assets.
Opportunities abound across the real estate industry
Real estate owners and managers, designers and contractors, retail tenants, real estate asset developers and investors all have opportunities related to the Metaverse.
For example, a property owner may be able to retain digital metaverse rights to the property even if they sell, lease, or license the physical land rights. Alternatively, they can demand higher fees for land sales, leases, or license rights along with metaverse rights.
For example, a shopping center owner can grant leases for lots within the center along with licenses for the same lots that correspond to the metaverse. Rights under the license include, for example, the right to place signs and advertisements on the facades of physical and metaverse building equivalents, the right to project images onto physical buildings, and/or the right to create may occur. Commercial use of space in augmented reality applications.
Property managers and operators can use virtual reality technology in the Metaverse to improve or differentiate operational services for end users. For example, these sales offices can use such virtual reality technology to offer hybrid working solutions to their tenants. There may also be opportunities for property managers to improve the way they manage their buildings by operating technologies such as “digital twins” in the metaverse. Many operators are already using cloud-connected devices to monitor and meet the planned preventive maintenance (PPM) requirements of their property owner customers. Further developments in this area are likely, and in the future carriers may be able to leverage multiple different technologies to offer a single, integrated metaverse solution to their clients. there is.
For designers and contractors, there is an opportunity to enable the integration of spaces into the metaverse. For example, architects can use virtual or augmented reality technology or create digital twins to inform building design, allowing clients to explore and explore proposed buildings in a virtual environment before construction. You can make it an experience.
Retailers occupying physical premises on high streets and shopping centers can also enhance the customer experience by offering online consumers a ‘3D’ digital environment in which to browse and shop that challenges even the best online retail experiences. We can turn to the Metaverse for this. Competitors can provide.
Developers and investors in the real estate sector can look to every opportunity to maximize their returns.
Risks as your real estate business moves through the metaverse
While there are vast opportunities, engaging with the Metaverse comes with legal and commercial risks. Real estate operators should be aware that legal “ownership” of rights in the metaverse currently does not have the same legal protections as rights to physical real estate. In the future, ownership of the Metaverse will be protected through methods such as registration in a centralized database, or through the use of non-fungible tokens (NFTs), similar to the protections available for rights to physical real estate in most jurisdictions. may be able to protect you. ) or other blockchain technologies. However, it is unlikely that the relevant institutions will continue to function in the same way, and while ownership of physical real estate is very clearly established and understood, it is clear from the outset that this is not currently the case in the Metaverse. It is important to .
When addressing the metaverse, real estate companies need to be clear about what they are referring to in their contract scope, clauses, and core definitions. Lack of contractual clarity is a common source of conflict, and in the context of the metaverse, disputes over access rights and obligations can arise. The coexistence of physical and virtual rights can lead to confusion if not properly addressed in the contract. To reduce the risk of legal challenges as the metaverse evolves, it is important to maintain contracts as far into the future as possible.
Inadequate contractual arrangements for marketing activities can also lead to disputes over fees, allocated space, and appropriate advertising content for digital real estate assets operated in the Metaverse. Breach of advertising standards and related guidance may also give rise to other risks such as regulatory action and reputational damage.
Intellectual property (IP) rights may also be attached to the creation and operation of digital real estate assets in the Metaverse. For example, a company may have scope to trademark a unique building if the public associates the building’s shape with the company’s brand. Failure to protect and enforce intellectual property rights in virtual assets and marketing content may provide leeway for third parties to use your intellectual property in ways that damage your brand reputation. Insufficient technical measures or contractual guarantees may expose the parties to intellectual property disputes and financial liability.
A further risk to address is that digital real estate assets, or the systems residing within them, are operating in silos. Whether due to contractual or technical limitations, a lack of interoperability can limit potential partnerships and collaborations. Failing to address cross-jurisdictional data sharing and conflicts of laws can create legal uncertainty and hinder cross-platform efforts.
It is also conceivable that personal data of staff and customers will be processed by real estate companies when those individuals engage with digital real estate assets in the metaverse. Among other data protection issues, real estate companies should develop appropriate privacy policies and practices, implement appropriate data security measures, and address the risks associated with transferring personal data to other jurisdictions; You need to avoid the severe financial penalties, damages claims, and reputational damage that can result. From compliance violations.
Companies must also be aware of the fact that to operate effectively in the Metaverse, contracts must include “change of law” clauses. This reflects the fact that regulations in the digital world are rapidly evolving. Failure to monitor and respond to regulatory developments can expose stakeholders to legal uncertainty and liability.
Without appropriate commercial contract protections in place, real estate businesses involved in the metaverse risk loss, intellectual property control, and other legal risks. However, the answer is not to back down from exploring the possibilities that the Metaverse offers. Doing so risks being left behind by competitors who do.
Co-authored by Charlotte Tsang and Santos Howe of Pinsent Masons.