In todays email:

• 😰 Brief History Of Land Trusts

• 💸 Top Reasons To Use Land Trusts

Short History Lesson On Land Trusts

Land trusts have a long history that dates back to English common law, evolving significantly over time to become a vital tool in modern real estate and conservation efforts. Here’s a comprehensive overview of the history and development of land trusts:

Early History - Medieval England:

Origin: The concept of a trust originated in medieval England, where landowners would convey property to trustees to manage on behalf of beneficiaries. This was primarily to avoid feudal dues and ensure land was passed down to heirs.

Use for Secrecy and Control: Trusts allowed landowners to retain control and secrecy over their property holdings.

Early Development in the United States - 19th Century:

Illinois Land Trust: The modern use of land trusts in the United States began in Illinois in the late 19th century. The Illinois Land Trust, also known as the Chicago Land Trust, allowed landowners to keep ownership private and simplify property transfers.

Privacy and Flexibility: These trusts provided benefits such as anonymity for the landowner, ease of transferring property interests, and protection against judgments and liens.

Growth and Diversification - Mid-20th Century:

Urban Development: In the mid-20th century, land trusts gained popularity in urban areas for real estate development. They enabled investors to assemble parcels of land for large-scale projects without revealing their identities or intentions, which could have driven up prices. Walt Disney used Land Trusts to obtain an upper hand in expanding his empire.

Community Land Trusts: The concept of community land trusts (CLTs) emerged during the Civil Rights Movement in the 1960s, aimed at providing affordable housing and promoting community control over land. The first CLT, New Communities, Inc., was established in Georgia in 1969.

Conservation Efforts - Late 20th Century:

Conservation Land Trusts: By the late 20th century, land trusts began to play a significant role in environmental conservation. These trusts acquire and manage land to protect natural habitats, preserve open spaces, and maintain biodiversity.

The Nature Conservancy: Founded in 1951, The Nature Conservancy became one of the largest and most influential conservation land trusts globally, preserving millions of acres of land.

Modern Usage - Legal Recognition and Structure:

Statutory Recognition: Various states in the U.S. have enacted statutes recognizing and regulating land trusts. Illinois continues to be a notable example, providing a model for other states.

Land Trust Agreement: A typical land trust involves a trust agreement where the trustee holds the title to the property and manages it according to the terms set by the trustor (the property owner) for the benefit of beneficiaries. Land trust agreements are that not difficult to setup when buying residential real estate. However, it can become more complex especially when using for conservation purposes (like a conservation land trust or nature conservancy).

Legal and Regulatory Issues:

Complexity: Setting up and managing land trusts can be complex and may require legal and financial expertise.

Regulation: Varying state laws and regulations can affect the establishment and operation of land trusts, necessitating careful compliance.

Reasons To Own Property In A Land Trust 

Hide your name on public record and in turn discouraging litigation.  Attorneys tend to sue those who they think have money since most work on contingency.  They are only likely to take cases which they can not only win but collect since their fee is based on the collection. If your properties are hard to find, you will appear broke and less worth suing. Even if a potential plaintiff thinks you have assets, the difficult prospect of finding and attaching these assets will discourage litigation against you.

Protection from title claims. If you sign a warranty deed in your own name, you are subject to potential title claims against you if there is a problem with the title to the property. For example, a lien filed without your knowledge could result in liability against you, even if you purchased title insurance. A land trust in your place as a seller will protect you personally against many types of title claims because the claim will be limited to the trust. If the trust already sold the property, it has no assets and thus limits your exposure to title claims.

Protection from liens. Real estate titled in a land trust name is not subject to liens against the beneficiary of the trust. For example, if you are dealing with a seller in foreclosure, a judgment holder or the IRS can file a claim against the property in the name of the seller. If the property is titled into trust, the personal judgments or liens of the seller will not attach to the property.

Facilitates the assignability of contracts. The ownership of a land trust also called the beneficial interest is assignable, like the way stock in a corporation is assignable. In addition, once a property is titled in trust, the beneficiary of the trust can be changed without changing the title to the property. This can be very advantageous in the case of a real estate contract that is non-assignable, such as in the case of a bank-owned or HUD property. Instead of making your offer in your own name, make the offer in the name of a land trust, then assign your interest in the land trust to a third party.

Protection from HOA Claims. When you take title to a property in a homeowner’s association (HOA), you become personally liable for all dues and assessments. This means if you buy a condo in your own name and the association assesses an amount due, they can place a lien on the property and/or sue you for the obligation. Don’t take the title in your name but instead take the title in a land trust so that the trust itself and thus the property will be the sole recourse for the homeowner’s association’s dues.

Avoidance of Probate. Property held in a land trust can avoid probate, streamlining the transfer to beneficiaries upon the owner’s death.

Environmental Protection. Conservation land trusts help preserve natural resources and landscapes, providing ecological, recreational, and aesthetic benefits.

Affordable Housing. Community land trusts promote affordable housing by separating land ownership from housing ownership, ensuring long-term affordability and community control.

Conclusion

Land trusts have evolved from medieval legal constructs to sophisticated tools for managing and preserving real estate. They offer significant benefits in terms of privacy, flexibility, and conservation, playing a crucial role in modern real estate development and environmental protection. However, they also come with challenges that require careful legal and financial management.

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