Risks Specific to Layer 1

Failure modes that arise specifically at the NRD-lite layer. Each is preventable with disciplined drafting and counsel selection; none is exotic.

Risk	What it would mean	Likelihood	Mitigation
Property-category mismatch	NRD-lite is recorded but not honored as a property right by local courts; the Interest is treated as a personal contract; future owners are not bound	Medium in untested jurisdictions; low in jurisdictions where pre-clearance is done	Counsel category-mapping memorandum; test-record before live use; first deployment treated as pilot
Recording-office rejection	Document is technically deficient; cannot be filed; deployment delayed	Low if pre-clearance is done; high if it’s not	Pre-clearance with recording office on first use per jurisdiction
Term-limit collision	Civil-law jurisdiction caps below 99 years; deed’s stated term exceeds statutory maximum; recording office accepts at filing but term is unenforceable beyond the cap	Medium in civil-law jurisdictions	Per-jurisdiction templates use the maximum statutorily-permitted term, not always 99; counsel confirms cap before drafting
Holder not qualified	Wrapper entity does not satisfy local “qualified holder” requirements (e.g., IRC §170(h) in US states, indigenous-only holder requirements in some jurisdictions)	High for US §170(h) deductions	Either route through an affiliated qualified holder (proposed: Landseed Conservation Trust 501(c)(3)) or operate without the deduction with clear landowner disclosure
Drafting over-specificity	Counsel’s “just in case” instinct re-creates v1.2 bulk over time; per-jurisdiction templates grow from 15 pages to 50, 100, 200	Medium without discipline; low with discipline	Annotated commentary requires affirmative justification for any clause beyond the skeleton
Methodology pin breaks	EC-M-1.1 reference becomes ambiguous, unmaintained, or inaccessible; the deed’s substantive content cannot be determined	Low for digital archives in the short term; uncertain over decades	Three-archive maintenance + paper-backup exhibit; methodology stewards’ commitment in Foundation/Trust
Reference value updates not version-tracked	Reference values within EC-M-1.1 change without sub-version increment; properties experience involuntary methodology change	Medium; depends on methodology layer’s discipline	Methodology stewards must implement sub-versioning (EC-M-1.1.1, EC-M-1.1.2); flagged as Q-methodology-1 in 06-risks/
Term-end ambiguity	At year 99, unclear what happens to outstanding credits, residual treasury, on-going monitoring	Low; reversion clause is explicit	Reversion clause is explicit; methodology specifies post-reversion buffer; treasury winds down per DAO procedure
Easement holder blocks measurement	Conservation easement’s restrictive language is interpreted to prevent monitoring activities; the carve-out in element 10 is not honored	Low if drafted correctly; medium if not	The carve-out language must be explicit; drafted per jurisdiction with counsel review
Partial conveyance creates silent collapse	Landowner sells portion of property; if not handled, the conveyed parcel may not carry the VECR forward	Low if element 7 is in place; high if it’s silent	Element 7 is now explicit (was missing from v1.2); transfer covenants apply to partial conveyances
Cross-jurisdictional dispute	Property is in one jurisdiction; wrapper is in another; dispute spans both	Real for non-US properties	Forum-selection clauses, mediation-first dispute resolution; partner-organization advocacy in jurisdictions with slow courts
Wrapper entity dissolution	The named holder dissolves before term-end (corporate failure, jurisdictional statute change)	Low; mitigation in operating documents	Wrapper-entity operating documents include succession to a designated successor entity; in extreme cases, the VECR can be reassigned by court order
Recording office failure	Recording office digitization fails; archive of the recorded deed is lost	Very low for established offices; nontrivial for some Bangladesh/Madagascar offices	Independent copies held by Landseed; counsel maintains records; paper-archived recording office records are typically permanent

Cross-cutting principle

For most of these risks, the mitigation is disciplined counsel engagement and pre-clearance before live use. The architecture cannot prevent every failure mode, but the per-jurisdiction template work is designed to surface failure modes early — at template-drafting time — rather than late, at deployment time, when remediation is expensive.

Risks that escalate into other layers

Some Layer 1 risks have downstream consequences:

• Property-category mismatch affects Layer 2: if the deed isn’t a property right, the wrapper entity has nothing to hold
• Methodology pin breaks affects Layer 2 and 3: the DAO doesn’t know what to consume; the registry doesn’t know what to issue against
• Reference value updates affects Layer 2: DAOs face involuntary updates without governance authority
• Term-end ambiguity affects post-term operations across all layers

The mitigations span layers. The methodology archival commitment, for instance, is a Landseed-PBC-level commitment that supports all NRD-lite deeds simultaneously.

Risks that escalate to architecture-level

Some Layer 1 risks rise above the architecture and require business-level response:

• All five named jurisdictions fail Test 1 (none has a tractable property category): would require architecture redesign, possibly with statutory advocacy work first
• §170(h) qualification path fails (no affiliated 501(c)(3) is feasible): would require US business model adjustment for landowners seeking deductions
• Methodology archival commitment unfulfilled (Landseed cannot maintain three archives over decades): would require business-continuity restructuring (methodology Foundation/Trust formation accelerated)

These are escalation triggers. Encountering any of them requires Alex + the co-architect sign-off on remedial action.

What we do not consider Layer 1 risks

For clarity, things that are not Layer 1 risks (they belong in other folders):

• Smart contract bugs → 02-governance-templates/ and 06-risks/
• Securities-law characterization of benefit units → 04-perimeter/
• Coalition entity creep → 05-interfaces/
• co-architect risk-aversion pulling back the architecture → 06-risks/ and 07-execution/

Each of these has its own folder for analysis. Layer 1 is about whether the deed itself works.