The History of the Land Trust
Land trusts have been established and used to acquire, hold, develop and dispose of real property for centuries. Land trusts date back to at least Roman times, but their clearest history is from the time of King Henry VIII in England. Their popularity as we know it today began with the advent of the Illinois Land Trust. The popularity of land trusts, now often referred to as Illinois Land Trusts or Title Holding Trusts, has since spread into other states, including Florida, Massachusetts, and California.
Privacy and Confidentiality of Ownership
Real estate investors and property owners used land trusts at that time to maintain privacy and confidentiality of land ownership so they would not have to serve in the military or suffer the other burdens of land ownership. For example, an elder uncle would hold his nephew’s land so the nephew would not have to join the King’s army.
However, King Henry passed the Statute of Uses in 1536 to put an end to this use (or abuse) of the land trust. The Statute of Uses declares that if a party holds land "to the use of" or in trust for another (the "beneficiary") then the legal title would be vested in the beneficiary and not the owner on record. Obviously, if this statute had been given literal effect, there would be no trust law today. Shortly after the statute was enacted, however, English courts declared that the statute only applied if the trust was passive, that is the trustee didn’t do anything but hold the land.
The Advent of the Illinois Land Trust
Real property owners in Chicago, Illinois, figured out in the late 19th century that land trusts would be a great vehicle for buying, holding and developing real estate. Real estate investors discovered they could privately and confidentially acquire real estate in a land trust. City aldermen realized the land trust would be a good way to hide their land ownership since they were forbidden to vote on city building projects when they owned land nearby.
The question arose whether a land trust would be valid since the law of England, including the Statute of Uses, was the law of America. The question at hand went to the Illinois Supreme Court, which ruled that if a land trust was set-up with some minor duty on the trustee (such as to deed the property to the beneficiaries 20 years later), then the trust would not be considered passive and would be valid. The Illinois Land Trust was born.
California Title Holding Trusts
The Illinois Land Trust was later adapted for use in the State of California and rolled out as the California Title Holding Trust or just Title Holding Trust. Land trusts in the State of California are not as widely accepted as they are in the State of Illinois because the State of California has not adopted any legislation governing the use of the land trust in California.
