The rental economy is a big one. We rent just about anything: houses, cars, even puppies to play with. But no solution is without its own set of problems.
In this article, we take a look at security deposits which is a key issue in rental agreements, and how blockchain startup RxEAL refuses to sit back and accept the current (sometimes broken) model. The company is on a mission to bring blockchain’s trustlessness into this crucial – but often highly problematic – aspect of the rental market.
The Rise of the Rental Economy
We live in a world where everything is available at our fingertips.
Can’t afford a house, or need a property for only a short timeframe? Not to worry, just rent one. Paying cash for a depreciating asset like a vehicle not your style? Lease it. Need an important piece of equipment for a project but find the price too expensive or the buying process unnecessary due to limited-period use?
There are a plethora of companies in just about every industry waiting to temporarily part with their rentable assets just as soon as you sign the dotted line.
The Dark Side of Renting
No rental agreement is complete without that wallop of cash you hand over in the form of a security deposit. And this is often where renting becomes far less yay and very much nay. Theoretically, the inclusion of a security deposit is a simplistic process: pay deposit, lease, end lease agreement, have deposit returned to you.
However, humans being human, this can turn into a nightmare situation that sees you dropping more than your fair share of rants on Facebook just so someone can agree that you’re right and the other party is wrong. Not to mention the even darker side, which is when lawyers and small claims courts need to be involved to get that lump sum back.
Everyone who’s ever been on either side of the rental coin agrees on one thing: security deposits can be a pain. What no one has managed to do, however, is to change this widely accepted fact so that a pain point can become a plus point. Not until now, anyway.
Where RxEAL is Stepping in to Change Things
Applications for the Real Estate Industry
If you’ve ever taken part in real estate rental, whether as a lessee or lessor, chances are you’ve had your share of headaches with rental deposits.
We accept such issues as an unavoidable part of property rentals, much like claiming phone insurance: sounds straightforward enough upfront, but just you wait till it’s time to deal with it.
Renting a Property? What Could Go Wrong?
While this is clearly a rhetorical statement – for who hasn’t dealt with burst pipes or clogged up drains? – there’s one aspect of renting a property that one does not usually foresee.
A security deposit is paid to a lessor with the understanding that, upon conclusion of the rental agreement, this deposit will be returned to the lessee. This is not always the case.
Lessors are infamously lax to return security deposits, whether on time or at all, whether warranted or not. Disputes often set in, costing time and money should either or both parties wish to resolve the matter with lawyers and court cases.
According to CEO Dmitrijs Orlovs:
RxEAL addresses a pressing, long-standing problem in rental markets – the high rate of security deposit disputes. Data shows that globally almost half of all security deposits are subject to disputes, because the involved parties disagree about how the security deposit should be handled at the end of the rental period. The majority of these disputes are raised on the basis that funds have not been returned or the amount returned has been lower than expected. With the currently available solutions, it can take weeks for a lessee to receive their deposit back, and solving these disputes in court is lengthy, complicated and costly for both sides.
How Lessees Benefit from Using RxEAL
Thanks to RxEAL, lessees are afforded peace of mind, knowing they share equal control of their deposit with their landlord, that their deposit will be returned to them almost instantaneously upon termination of their contract, and that should a dispute arise, it will be conducted at minimal cost.
How Lessors Benefit from Using RxEAL
If you’re a lessor, multi-unit landlord, or property developer, RxEAL just might be the solution you’re looking for to make your life a whole lot easier. As a rental security deposit protection platform, RxEAL adds value, replaces costs, and saves time by offering smart contracts as a trustless, transparent method of managing such deposits.
The RxEAL platform ensures secure deposit storage and provides efficient dispute resolution. By using the RxEAL platform, lessors are able to improve their service reputation, attract marketing attention, and build their client base based on the principle of trustlessness as opposed to actual (fallible) trust.
Applications for the Automotive Rental Industry
In 2018, car rental revenues sit at US$21,801 million. With a compound annual growth rate of 2.8% per year, this industry will generate an estimated US$24,391 million by 2022.
With user penetration rates currently at 1.6% (climbing to 1.7% in 2022), it’s clear that this growing market will welcome blockchain’s ability to improve existing systems, such as managing deposits.
Applications for the Equipment Rental Industry
The global equipment rental industry is a vast one. “Equipment” may mean anything from a piping bag to a forklift, and objects of just about shape and size in between.
The construction equipment rental market alone is set to increase at a compound annual growth rate of 11.5% between 2016 and 2020. Valued in 2017 at US$192 billion, this is a big industry that will only get bigger.
And with the rise of the sharing economy, it’s no longer multinational and formidable national companies who are in a position to lease equipment of any nature. Your neighbor could be leasing their vacuum cleaner to an eager customer as we speak.
All in all, equipment rentals is another industry that will benefit from adoption RxEAL’s blockchain application.
RxEAL’s Revolutionary Approach
By using the RxEAL platform, lessees transfer security deposits to a mutually-controlled Ethereum smart contract. These funds are stored inside a specially-created smart contract for the duration of the rental period, or until such time as a mutually approved action is triggered.
Until then, the lessor is unable to access these deposited funds. Returning a security deposit occurs in compliance with contractual conditions. Subject to Ethereum’s network conditions, this usually takes place within 10 minutes (as opposed to a period of up to 30 days under traditional rental terms). Only by mutual agreement can funds be withheld.
Should a dispute arise, it is dealt with by independent, qualified arbitrators on the RxEAL platform and comes to an average cost of under US$10. As a unified standard in safeguarding security deposits, RxEAL has the potential to become the golden standard in the cross-sectional asset rental market.
With this business model, RxEAL is set to transform the security deposit storage by streamlining the process for lessors and lessees alike. The importance of introducing trustlessness and transparency for both parties cannot be overstated.
Simultaneously, from a logistical and reputational perspective, the ease with which RxEAL’s smart contract-system functions greatly smoothens the experience for everyone involved. Security deposits, consider yourselves disrupted!