Real World Assets is the next trend
Binaryx registers a separate legal entity as an LLC in Wyoming, USA, for each property. Under local laws, this entity issues tokens on the blockchain. By purchasing these tokens, investors become co-owners and gain the ability to manage the LLC as a decentralized autonomous organization (DAO) through token-based voting. Once sufficient funds are raised, the LLC acquires the targeted property. A partner management company then finds tenants, collects rental payments, and distributes them via the blockchain to token holders.
Every property on Binaryx comes with an extensive set of documents, which can be challenging to review without specific knowledge. It's normal to feel uncertain about where to look and what questions to ask — legal nuances aren't easy without prior experience. This guide is here to help you navigate the documents, identify key details about the legal status of the property and the entity owning it, and understand your rights as an investor and how to protect them.
How to Read This Article?
The article is divided into three main parts, each corresponding to a specific category of documents. Within each part, you’ll find chapters that address key questions. This structure helps organize the documents and clarifies which document is needed for specific information and how to analyze it properly.
Part I. Organizational and Legal Structure (DAO LLC Documents)
- What is a real estate token?
- Which legal entity does the investor become a partner of?
- How to confirm that the purchased token represents a partnership in a DAO LLC?
- Who is authorized to act on behalf of the DAO LLC?
- How is the activity of the DAO LLC regulated?
- How Can Investors Influence DAO LLC Operations and Property Management?
Part II. Legal Review (Due Diligence)
- Legal review of rental properties in Bali: What to look out for?
- Legal review of properties under construction: What to pay attention to?
Part III. Key Agreements
- Agreement Confirming DAO LLC Rights for the Property in Bali
- Compensation agreement detailing the payments for the property.
- Property management agreement listing the rights and responsibilities of the management company.
- Investment agreement (for properties under construction).
Part I. Organizational and Legal Structure (DAO LLC Documents)
This section will explain how the legal entity owning the property is structured, why this specific structure was chosen, and how investors can verify their association with this entity.
What Is a Real Estate Token on the Binaryx Platform?
A real estate token on the Binaryx platform represents the corporate rights of a legal entity (DAO LLC) issued as tokens under W.S. SF0038 law. By purchasing even one token, you automatically become a partner and co-owner of this legal entity. As a Binaryx investor, you don’t directly own the property or any part of it; instead, you own a share in the company that owns the property.
Which Legal Entity Does the Investor Become a Partner Of?
When investors buy a real estate token on Binaryx, they partner with a Limited Liability Company (LLC) registered in Wyoming, USA. Each property on the platform comes with its own separate LLC. This LLC operates decentralized, with all partners participating in decentralized decision-making through a Decentralized Autonomous Organization (DAO) via token-based voting. To join as a partner, buying a token suffices.
Wyoming stands out for a reason: in 2021, the state passed the pioneering W.S. SF0038 law. This legislation provides a clear framework for investing in tokenized real estate, offering investors protection in both the physical and digital realms. The law specifically allows the formation of LLCs that issue tokens, granting holders corporate ownership rights. It also mandates that these LLCs operate as decentralized autonomous organizations (DAOs), where all token holders share management authority.
You can confirm your status as a partner of a specific DAO LLC managing a property by checking with the Decentralized Autonomous Organization Limited Liability Company Articles of Organization document on the property page. This document is also accessible on the Wyoming Secretary of State's website. The document includes vital details about the DAO LLC — its name, addresses, authorized representatives, and other information that verifies the entity’s existence and legality. For instance, the Karra Loft 5 property document confirms the company's registration under Binaryx Bali Asset 4 DAO LLC. The document concludes with a certificate signed by the Wyoming Secretary of State.
How to Confirm That the Purchased Token Belongs to a DAO LLC?
Under Wyoming law, a DAO LLC that owns real estate operates as a decentralized autonomous organization. Partners who own tokens issued through a smart contract manage this entity. The smart contract acts as an algorithm that sets the terms of the agreement and ensures automatic control and fulfillment of obligations. This contract verifies that anyone who buys a token automatically becomes a partner and co-owner of the DAO LLC. You can find the address of this smart contract in the DAO LLC Articles of Organization document under item No. 6.
- On the object page, in the "Documents" section, click on "DAO LLC Reference."
- You will be redirected to the website https://wyobiz.wyo.gov/, where you can find the documents for the LLC. Navigate to the "History" section and download the relevant file (Filing ID).
- In this file, locate item 6 - "Public identifier," which will contain the smart contract address.
- To verify the link between this smart contract and the tokens, on the object page, in the "Documents" section, click on "Token" — this will open the token page in the blockchain explorer. Compare the address in the document with the address on the page.
On the same page in the Polygon blockchain explorer, you will also find the token's characteristics, all transactions, and a list of token holders' addresses.
Who Is Authorized to Act on Behalf of the DAO LLC?
To establish a DAO LLC, a registered agent in Wyoming (an individual) must submit the registration documents on behalf of Binaryx co-founders. Currently, Robin Jones fulfills this role, registered at 30 N Gould St Ste R, Sheridan, WY 82801, USA. His responsibilities include filing documents and handling correspondence. His authority stops there, as he holds no additional rights to act on behalf of the DAO LLC.
Authorized representatives of the DAO LLC receive appointments and have the right to sign documents on the company's behalf. This means they validate essential papers personally or through a power of attorney. The representatives and their specific powers are listed in item ten of the DAO LLC Articles of Organization.
How Is the Activity of a DAO LLC Regulated?
The activity of a DAO LLC follows its operating agreement. For Karra Loft, this agreement is the Operating Agreement of DAO Binaryx Bali Asset 4 LLC, a Decentralized Autonomous Organization.
This agreement outlines key aspects of the DAO LLC's operations, including:
- Rights and responsibilities of partners
- Goals and objectives
- Types of activities
- Capital structure
- Management
- Areas of responsibility
- Taxation
- Liquidation procedure
How Can Investors Influence DAO LLC Operations and Property Management?
Decision-making in a DAO LLC relies on token-holder voting. Each token grants proportional voting rights. As a token holder and partner in the DAO LLC, you can propose and initiate a vote on the Binaryx platform. If the majority of token holders support your proposal, the DAO LLC’s executive representatives must act according to the decision.
For example, you could propose a vote to change the property management company. If the majority supports this, the authorized representatives of the DAO LLC will terminate the agreement with the current company and find a new one. You could also propose an early sale of the property. In that case, the property would go up for sale, tokens would be revalued at the actual sale price, and all token holders would receive funds proportional to their shares in their wallets. In 2023, such a vote took place on the Binaryx platform and independently on Snapshot.
Part II. Legal Review (Due Diligence)
In this section, we will cover the process of legal review (Due Diligence), which differs for properties under construction and ready-to-rent properties. To carry out Due Diligence, Binaryx collaborates with a local consulting partner, whose information can be found in the partners section. This partner also facilitates the notary transaction, with the notary serving as the document depository.
The Due Diligence process involves thoroughly analyzing the seller's documents, verifying the property’s compliance with building codes, identifying any usage restrictions, legal disputes related to the property or its owner, and other critical factors. After completing the review, the consulting firm provides its recommendation. Tax considerations related to the jurisdiction of the property also come under review during this process. You can find the list of verified documents and final recommendations in the Legal Due Diligence file on the property’s page.
Due Diligence for Rental Properties in Bali: What to Look Out For
For Karra Loft 5, a rental property in Bali, Binaryx engaged Bali Business Consulting to conduct the Due Diligence. The report's first page includes a list of documents and a brief summary of the direct landowner, who holds the Hak Milik certificate confirming ownership of the land.
Property Ownership Features in Indonesia
Hak Milik represents full land ownership, available exclusively to Indonesian citizens. The structure of property rights in Indonesia differs from what most Europeans are familiar with. We have prepared a separate article covering all types of property rights for a more comprehensive understanding.
For this guide, it’s essential to highlight Hak Sewa, known as leasehold right. Since foreigners cannot own land in Bali, they purchase leasehold rights for 25–30 years, with an option for a guaranteed extension for up to an additional 80 years. Due Diligence must confirm that the property is suitable for lease or sublease, that no issues exist with the holder of the Hak Milik certificate, and that the lease extension rights remain valid even in case of the certificate holder’s death. The Due Diligence report should include an appropriate conclusion if everything meets these requirements.
How to Determine if a Property in Bali Is Suitable for Rental?
Not every property in Bali can be rented out short-term — this is only allowed for properties located in specific zones. To maximize rental income for investors, Binaryx selects only properties that meet these requirements. The lawyer conducting Due Diligence and analyzing the Regional Spatial Planning (RTRW) verifies whether the property is in a zone permitting short-term rentals.
You can also check if the property falls within the appropriate zone by searching its cadastral number on the relevant service.
Due Diligence for Properties Under Construction: What to Look Out For
Legal review for properties under construction involves more complexity and requires analyzing additional documents. Since the property will be rented out once construction is completed, verifying the key aspects reviewed for ready-to-rent properties: clarity and transparency of ownership and whether the land is suitable for the intended rental strategy is essential. Beyond this, the construction process and financing scheme must also be evaluated.
This involves reviewing all documentation that grants the developer the right to build. The set of documents may vary by jurisdiction but typically includes the building’s architectural plan, construction permit, expert assessments, permits for utility connections, and contracts with contractors and subcontractors. These documents are attached to the Due Diligence report. The review concludes with a brief roadmap containing recommendations for further actions.
Part III. Key Agreements
Agreement Confirming DAO LLC Rights for the Property in Bali
For property in Bali, the rights confirming document is a land lease agreement that includes its structures and guarantees a lease extension. This notarized act certifies the lease rights to the land where the property is located. The agreement, written in Indonesian, is called Perjanjian Sewa Menyewa. The word sewa translates to "lease" in Indonesian.
Here are the key points to save you from going through the document in Indonesian. First, agreements in Indonesia require signing in the presence of witnesses, which ensures their authenticity and allows verification later. Witnesses play an essential role in confirming the signing by specific parties if disputes arise. The Perjanjian Sewa Menyewa lists the names and details of these witnesses.
The document also specifies the parties involved: the landowner and the authorized representatives of the DAO LLC. It outlines the rights and obligations of the parties, as well as the terms of the lease transfer — detailing what, to whom, and in what scope.
The agreement includes a description of the property and its characteristics. For instance, in the case of Karra Loft 5, the property covers 70 square meters and is located on leased land.
Compensation Agreement
The compensation agreement confirms that all payments for the property have been completed. The document specifies the exact cost of the property — for Karra Loft 5, this amount was 2.9 billion rupiah.
Property Management Agreement
The property management agreement confirms the existence of an arrangement with the management company responsible for renting out the property. This document clearly outlines the rights and obligations of both parties. The agreement appears in full on the property’s page, as seen with Karra Loft 3A, where Bali Invest Club acts as the management company.
Additional agreement may be included to specify conditions from the original agreement with the management company, as Karra Loft 5 is not the first property managed by Bali Invest Club under its arrangement with Binaryx.
Investment Agreement (for Properties Under Construction)
The investment agreement serves as the primary document for properties under construction, replacing the three agreements mentioned earlier until the property is put into operation. This agreement is made between the DAO LLC, which issues the tokens, and the developer. The main goal of investing during the construction phase is to commit funds at a lower price than the final value of the completed property, secure ownership rights, and have an exit strategy upon project completion. The investment agreement regulates this process and provides the investor with a clear understanding of the deal terms between the DAO LLC and the developer.
The agreement outlines funding rounds through which the DAO LLC pays for construction in stages, provided the developer meets obligations and deadlines. On the Binaryx platform, this process is reflected in the gradually increasing the token’s value as more funds are raised: the earlier you invest (buy tokens) and the fewer funds collected, the lower the token price and the more profitable the investment. Once funding reaches 100%, the developer commits to completing the property, and the DAO LLC becomes its full owner.
Conclusion
We hope that, as an investor, you now feel confident navigating the intricacies of documents related to real estate on the Binaryx platform. Understanding these details is essential — it helps you make informed decisions and strengthens your investment confidence. A logical follow-up to this article could be another one: “What to Do if Binaryx Disappears: The Fate of Your Tokens and Action Plan”.
Understanding these matters on your own is always the right choice, as it provides independence and greater control. If you have any questions or need further clarification, don't hesitate to reach out in the chat. We’re always here to help.
The Binaryx Team.
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