Owning Real Estate Through NFTs: A Legal Guide for Global Investors
With the rise of Web3 and blockchain technologies, the logic of real estate participation is undergoing a fundamental transformation. Today, an investor can purchase a digital share in a property in the form of an NFT, which grants them a fixed right to receive income, use the property, or participate in governance through a DAO.
This model enables developers to raise capital globally, independent of traditional banks, and allows investors from anywhere in the world to participate in real-world projects without physical relocation or complex local procedures.
But for this structure to work in practice, it needs more than just tokens or code - it requires a clear legal foundation: an SPV (Special Purpose Vehicle), a transparent charter, enforceable investor agreements, smart contracts, and the right jurisdictional framework. Only with this foundation can tokenized real estate become a secure and compliant model.
What Can Be Tokenized
Tokenization applies not only to residential properties, but to a broad range of asset types. Common examples include:
Hotels, resorts, and branded residences
Warehouses and logistics centers
Co-working spaces and flexible offices
Commercial buildings and mixed-use developments
Development land and pre-construction projects
Serviced apartments with rental income rights
Residences with fractional ownership models
Each type of property can be digitized through NFTs that represent a share of income, usage rights, or a hybrid model. These tokens are not just digital images - they are programmable instruments tied to real economic models and underlying physical assets.
Legal Nature of Real Estate NFTs
In real estate, an NFT (non-fungible token) does not mean legal title to land or property. Instead, it can represent:
A share in the company (SPV) that owns the asset
A right to receive a portion of the asset’s income
A fixed right of use (e.g. number of nights per year)
A vote in governance or DAO participation
The legal strength of the token only exists when it is backed by documentation: a public offer, investor agreement, company charter, and a smart contract. Without these, the token is just a representation - not an enforceable right.
Project Architecture
The foundation of every tokenized project is a Special Purpose Vehicle (SPV) - a company created specifically for the project. It must be registered in a jurisdiction that permits asset ownership, income distribution, and investment participation.
The SPV holds legal title to the real estate. Then:
The SPV charter includes rules on investor rights, profit distribution, voting, and limitations on the developer's actions
NFT issuance logic is defined, along with documents like the SAFT, Terms & Conditions, and a Whitepaper
Tokens are minted, each representing a specific right (income, usage, governance)
A platform or DAO interface is created, where investors interact with the system, and smart contracts automate the key operations
All parties - developers, investors, managers, custodians - operate under predefined and transparent legal rules.
How Projects Are Financed and How Developers Earn
Financing of the tokenized project begins with a developer's contribution, which may include:
Land or property
Architectural plans and permits
A functioning asset (e.g. hotel)
Initial capital investment
Operational know-how or brand rights
This contribution is structured as:
A loan from the developer to the SPV (reimbursed with interest)
Preferred equity with defined return terms
Intellectual property (IP) or brand contribution, with royalties
Once tokens are sold to investors, funds enter the SPV and are used to:
Repay the developer’s initial contribution
Finance construction or operational costs
Cover legal, technical, and platform expenses
Establish a reserve for risk management
The developer earns through:
Repayment of their investment with a return
Retained equity in the SPV and share of income
Management or licensing fees
Royalties (for brand or IP usage)
Future sale of tokens or equity on secondary markets
Importantly, the developer can retain strategic control even after selling most tokens - if governance rights are structured accordingly in the SPV and DAO.
How the Investor is Protected
Each investor receives:
An NFT linked to a signed agreement (e.g., public offer, SAFT, or smart agreement)
Access to a dashboard or platform with full reporting and income tracking
Governance participation rights (e.g., via DAO or board vote)
Automated income distribution embedded in the smart contract
Exit options: secondary market resale, buyback mechanisms, or redemption on exit
The combination of legal agreements, smart contract logic, and transparent governance protects investors from potential abuse by developers or platforms. Additional safeguards often include:
Escrow-based fund release mechanisms
Custodial services and external oversight
Mandatory audits and reporting
Platform and asset-level insurance
Full regulatory KYC/AML compliance
What Happens on Asset Sale or in Case of Problems
If the asset is sold, the SPV receives the proceeds and distributes them to token holders according to predefined terms. The NFTs may then be burned, converted, or transitioned to a new project.
If the developer exits or fails to manage the project, mechanisms can be triggered through the DAO or an investor board to appoint a new operator.
If the SPV is liquidated, its assets are sold, and proceeds are distributed to token holders. All these scenarios are governed not by ad hoc decisions, but by legally binding contracts and charters.
Secondary Market and Liquidity
One of the major advantages of tokenized real estate is liquidity. NFTs can be:
Sold to other investors on the platform or marketplace
Gifted or inherited
Bought back by the issuer under predefined terms
Redeployed into new investment rounds or upgraded projects (if DAO-enabled)
Unlike traditional real estate - where exiting a project often requires full asset sale - tokenization allows flexible entry and exit models, including fractional transfers.
Taxation and Regulatory Considerations
Tax and regulatory compliance form the legal backbone of any tokenized real estate project. Without proper structuring, even the most innovative model can run afoul of the law.
For the Investor:
In most jurisdictions, taxes arise from:
Income received (e.g., rental or profit distribution)
Capital gains (from selling tokens at a profit)
For the SPV
The company pays corporate tax in its jurisdiction of registration - if applicable. Some jurisdictions (e.g., the UAE, BVI, Cayman) offer 0% tax under defined conditions.
Key Consideration:
To avoid classification as a security (which would trigger licensing under capital markets law), the NFT must be structured as a utility token or asset-backed participation right - with no guaranteed income or investment promise.
This requires:
Clear utility definition
No promise of ROI
KYC/AML onboarding and limitations on public solicitation
Well-drafted terms, disclaimers, and investor agreements
Real Estate Tokenization in the UAE
The United Arab Emirates (UAE) is among the most advanced jurisdictions for launching legally compliant real estate tokenization projects.
1. SPV Registration
You can register an SPV in either:
DMCC (Dubai Multi Commodities Centre) - a free zone for commercial activity in Dubai
ADGM (Abu Dhabi Global Market) - a financial center with its own common law legal system
The SPV owns the property, which is registered through the DLD (Dubai Land Department). NFTs are not recorded in the DLD, but they reflect rights within the SPV, which is recognized as the legal owner.
2. Is a License Required?
If the token is not a security, no license is needed. To qualify, the structure must:
Avoid ROI guarantees
Emphasize utility or access rather than passive investment
Limit investor access through compliance checks
Include comprehensive legal documentation and disclaimers
If the token is structured as a security, a license from SCA (Securities and Commodities Authority) or a licensed platform is required.
3. Position of DMCC and ADGM
DMCC allows NFT issuance without a license, if the token grants usage or participation rights linked to the SPV
ADGM allows registration of DAOs, programmable ownership models, and asset-backed tokenization
Both support modern digital corporate governance models - provided legal form is respected
Land Department (DLD) and Property Registration
The DLD in Dubai allows SPVs to register property in their name. This means:
Investors do not appear in the land registry directly
The NFT is not recorded as a property title
But rights are anchored through shareholding in the SPV, governed by its charter and agreements
This makes the UAE one of the few jurisdictions where digital participation in real estate through tokens is legally grounded.
Common Questions from Crypto Investors, Lawyers, and Developers
Can tokens be sold on a secondary market?
Yes - through platform mechanisms, peer-to-peer transactions, or pre-agreed buybacks.
How are returns paid?
Through smart contracts or off-chain payment systems - in fiat or crypto - based on a fixed distribution schedule.
Can tokens or projects be insured?
Yes. Property, governance liability, and digital platforms can be insured. Captive insurance is also possible.
Is audit required?
Often recommended or mandatory, depending on the jurisdiction and investor class. Audits may be conducted at the SPV or platform level.
How can projects avoid security classification?
By removing any guaranteed returns, avoiding public fundraising, focusing on utility access, using disclaimers, and onboarding qualified investors with KYC.
How is transparency maintained?
The platform should provide:
SPV-level reporting and documentation
Public smart contract code
Real-time dashboards for income and token status
Governance mechanisms (e.g., DAO voting rights)
Full legal terms, risk warnings, and exit terms
Conclusion
NFT-based real estate investment is no longer an experimental concept - it's an emerging legal and financial infrastructure.
When built correctly - with a regulated SPV, enforceable contracts, DAO-compatible governance, and cross-border compliance - tokenization becomes a way to democratize access, increase liquidity, and align the interests of all parties.
For developers, it's a model for raising capital globally without losing control. For investors, it offers secure digital access to real-world projects. And for legal professionals, it presents a new role: not just contract drafters, but architects of digital trust.
Successfully Leading a High-Stakes Cross-Border Deal Amid Sanctions: A Milestone Achievement
Achieving Excellence in Complex Cross-Border Transactions.
Over the past two years, REDBRIDGE faced an extraordinary challenge representing a group of shareholders from Zurich, Switzerland, who had invested in a multi-million dollar manufacturing enterprise in Russia up until 2022. The sanctions imposed on Russia brought about significant legal hurdles, complicating the protection of our clients’ interests due to complex domestic and international legal requirements.
In a situation where conventional strategies were not enough, our team had to think outside the box to navigate the intricate legal landscape. Through innovative solutions and relentless dedication, we successfully safeguarded our clients' assets and secured their rights. We are proud to announce that the deal has been completed with full regulatory approval, allowing our clients to exit their shareholder positions and receive the full value of their shares.
This outcome highlights our ability to overcome significant legal challenges with creative and strategic thinking, reinforcing our commitment to excellence and client success.
Congratulations to Gevorg Tumanov, the Partner who led this case, and to the entire team of lawyers for their outstanding work and dedication.
MAC Affiliate Conference in Yerevan
Redbridge is honored to have served as the legal advisor for the recent MAC Affiliate Conference in Yerevan.
We are thrilled to have supported Europe’s biggest affiliate conference, which took place on May 30-31, 2024, in the vibrant city of Yerevan. This event brought together over 2500 attendees from 50+ countries, including industry leaders, marketers, and innovators, to discuss the latest trends and developments in affiliate marketing.
Our team at Redbridge provided comprehensive legal guidance to ensure the success and smooth operation of this landmark event. We are grateful to the organizers for their trust and to all the participants for their active engagement and insightful contributions. Witnessing the dynamic exchange of ideas and the collaborative spirit of the conference was truly inspiring.
We look forward to continuing our partnership with the MAC Affiliate Conference and supporting future initiatives that drive progress and innovation.
Gevorg Tumanov appointed to the AMCA’s roster of arbitrators.
He is included in the AMCA's “International arbitration cases” list of arbitrators.
The new rankings are live on IFLR1000.com
We are pleased to inform you, following the in depth research process, peer review, and client feedback, Redbridge has been newly ranked for: Financial and corporate.
Jurisdiction: Armenia
Practice area: Financial and corporate
Redbridge rating: Notable
Lawyers rating (Gevorg Tumanov): Notable practitioner
The ICSID ad hoc Committee’s Decision on Annulment dated 21 July 2023
In ICSID Annulment Proceeding (Edmond Khudyan v. Republic of Armenia) the Members of the ad hoc Committee unanimously decided as follows:
a. The ground for annulment under Article 52(1)(b) of the ICSID Convention has been made out;
b. The Committee concludes that the Tribunal manifestly exceeded its powers and upholds Mr. Khudyan’s application for annulment of parts of the Award under Article 52(1)(b) of the ICSID Convention;
c. Paragraphs mentioned insofar as it concern the Applicant and of the Award are hereby annulled;
d. The funds held in escrow in accordance with the Committee’s decision on the Applicant’s Stay Request, together with all interest incurred thereon, are to be paid to Mr. Khudyan; and
e. The Republic of Armenia shall pay to the Applicant the sums determined by the ad hoc Committee's Decision on Annulment.
Members of the ad hoc Committee:
Sir Christopher Greenwood, GBE, CMG, KC, President
Ms Tina Cicchetti, Member
Dr Ucheora Onwuamaegbu, Member
Representing Mr. Edmond Khudyan:
Hughes Hubbard & Reed LLP
Washington, D.C. 🇺🇸
Redbridge LLC
Yerevan 🇦🇲
CAN BANKS CARRY OUT INTERNATIONAL TRANSACTIONS WITHOUT SWIFT?
What is SWIFT?
SWIFT is a messaging service that substantially facilitates information exchange between banks and other financial institutions. Transactions transmitted via SWIFT are settled by payment systems that facilitate much larger volumes than SWIFT itself. For example, the U.S. Clearing House Interbank Payments System (CHIPS) is owned by large U.S., European, and Japanese banks and facilitates most large-value, cross-border, dollar-denominated payments. This system has internal messaging systems to facilitate payments without relying on SWIFT, but a large share of high-value, cross-border payments involve a SWIFT message.
Who owns and controls SWIFT?
- SWIFT was created by American and European banks, which did not want a single institution developing their own system and having a monopoly.
- SWIFT helps make secure international trade possible for its members and is not supposed to take sides in disputes.
Blocking Sanctions and Delisting from SWIFT
- These measures impose a prohibition on the provision of financial messaging services to delisted banks that are directly or indirectly owned (50% or more) by a delisted bank.
- Banks could carry out international transactions without SWIFT, but it is expensive, complex and requires mutual trust between financial institutions. It brings payments back to the times when telephone and fax were used to confirm each transaction.
Banning Banks from SWIFT
- The ban prevents banks from making or receiving international payments using SWIFT. This has negative consequences for the targeting economy.
- Banks can neither get foreign currency (as a transfer of foreign currency between two banks is generally processed as a transfer abroad involving a foreign intermediary bank) nor transfer assets abroad.
- Block states' foreign exchange reserves and prevents key banks from conducting global fast and efficient financial transactions.
Sanctions against the National Central Banks and assets freeze: Russian case
- As the EU has prohibited all transactions with the National Central Bank of Russia related to the management of the Russian Central Bank's reserves and asset freeze, it can no longer access the assets it has stored in central banks and private institutions in the EU.
- Russia cannot use this cushion of foreign assets to provide funds to its banks and thus limit the effects of other sanctions.
- The EU has also prohibited the sale, supply, transfer and export of euro-denominated banknotes to Russia. The aim is to limit access to cash in the euro by individuals or legal persons in Russia with a view to preventing the circumvention of sanctions.
- Remove Russia's access to capital markets, increase borrowing costs for the sanctioned Russian-owned financial institutions and progressively erode the country's industrial base.
International banks and the direct and indirect effects of financial sanctions
- Direct effect: European banks' equity prices dropped (compared to US banks) and the cost of equity increased. However, credit default swap spreads experienced a more modest decrease, suggesting investors' trust in banks' stability.
- Indirect effects: one of the major indirect effects is the impact on deposit insurance schemes, both in terms of higher bank payments and payouts to customers.
How is this latest ban impacting day-to-day operations within international banks?
- Financial institutions across the globe will be carefully assessing their exposure to Russia.
- Operations and compliance teams will be applying a major focus on accounts and relationships that may have connections to Russian entities and individuals, including politically exposed persons (PEPs).
- Financial institutions will quickly identify which clients (many of which have complex ownership and control structures) have beneficial owners with roots in Russia or exposure to Russian PEPs.
- Automating client due diligence and client behavioral analysis to ensure real-time identification of emerging risks.
Guidelines for compliance with the EU sanctions against Russia
- Sanctions include targeted restrictive measures (individual sanctions), economic sanctions and visa measures. The EU has also adopted sanctions against Belarus and Iran.
Who is being sanctioned?
- In total, also taking into account earlier individual sanctions imposed the EU has sanctioned 1.473 individuals and 207 entities.
What do sanctions on individuals and entities mean in practice?
- Sanctions on individuals consist of travel bans and asset freezes. Sanctions on entities consist of asset freezes. Asset freezes are also prohibited to make any funds or assets directly or indirectly available to them.
How is the EU’s trade with Russia being sanctioned?
- This means that European entities cannot sell certain products to Russia (export restrictions) and that Russian entities are not allowed to sell certain products to the EU (import restrictions).
What EU services to Russia are banned?
- Legal advice, accounting, auditing, bookkeeping, tax consulting services, business and management consulting, public relations services, IT consultancy, architecture and engineering services, advertising, market research and public opinion polling services, as well as product testing and technical inspection services.
What does the oil ban mean in practice?
- The Council adopted a sixth package of sanctions that, among others, prohibits the purchase, import or transfer of seaborne crude oil and certain petroleum products from Russia to the EU. The restrictions apply for crude oil and for other refined petroleum products. A temporary exception is foreseen for imports of crude oil by pipeline into some EU member states. The oil price cap is fixed.
What are the sanctions on transport?
- The EU has prohibited Russian and Belarusian road transport operators from entering the EU, including for goods in transit.
Aviation sector
- All Russian aircraft are banned from overflying EU airspace. No access to EU airports for Russian carriers. The EU banned the export to Russia of goods and technology in the aviation and space industry.
Maritime transport
- The EU has closed its ports to Russia's entire merchant fleet of vessels. However, the measure does not affect vessels carrying some goods.
SWIFT ban for Russian banks
- The ban prevents listed Russian banks from making or receiving international payments using SWIFT.
Sanctions against the Central Bank of Russia
- The EU has prohibited all transactions with the Central Bank of Russia related to the management of the Russian Central Bank’s reserves and assets. As a result of the central bank asset freeze, the central bank can no longer access the assets it has stored in central banks and private institutions in the EU.
Media
- The EU has also imposed sanctions on some media organisations and individuals.
What do EU sanctions against Russia NOT do?
- The sanctions do not block the export of and transactions related to food and agricultural products. EU sanctions explicitly exclude food supplies and fertilisers. The EU has also made some other exceptions within its sanctions.
