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The creation of a land title system in America

Jul.05.2017 | admin

From our friend Michael Holden of North American Title – the rambling title man….

 

The creation of a land titling system in America was and is a unique and special confluence of circumstances that has helped make the United States one of the most wealthy and powerful countries on the earth.   Many other countries have attempted to replicate our system of land titles, but most have never achieved the level of success of the American experiment.

Before the Revolutionary War, the Americas were 13 British colonies. The colonies followed the land laws of Great Britain. Lands were only alienable with the permission of the Crown or overlord. (The term “overlord” is a used to describe the grantor of tenancies in the English feudal system.) The English feudal system was being adopted in the Americas in the 17th and 18th centuries, with the King of England granting multiple land holdings to a series of royalty, lords, knights and military generals for many reasons. The idea that property was held by the underlying lord or monarch was part of this system. Virginia, the largest colony in the Americas, was divided between seven Englishmen by decree of the king in 1649. These land holdings eventually became owned in the 18th century by Thomas Fairfax, 6th Lord of Fairfax of Cameron. Lord Fairfax granted many tenancies to settlers in the Americas, once hiring 16-year-old George Washington as a land surveyor to map his vast holdings of over 5 million acres.

But all that changed in 1779 with the Virginia Act and the defeat of British forces at Yorktown in 1781. All unsettled lands of Lord Fairfax and other landholders in the Americas were confiscated by the newly formed government. In 1785, the Land Ordinance of 1785 (sometimes called the Land Act of 1785) set the system of survey of these confiscated lands, and most importantly,, titled them in the federal government for sale to those who wished to settle upon them. At the time, the federal government did not have the power to directly tax citizens of the newly formed United States, therefore land sales were a vital and most important source of revenue for the new government. The Land Ordinance of 1785 is historic for many reasons, but first and foremost it held the premise that all lands were freely alienable. No longer was the land just leased to those who settled it, but it could be owned by those who purchased the land and toiled to make it productive. This theory that as a property right, lands could be legally transferred was an important precedent. Prior to this act, land was always owned by the monarch, subject to grants to feudal lords, and then subject to leases or tenancies granted to those who lived on the land. But with the confiscation of lands in the Americas from the lords that had land grants from the king, and the decision that all lands were freely alienable, for the first time in history, anyone could own land, regardless if they were from noble birth or not.

The free and easy access to ownership of land created a wealth boom the likes of which the world had never seen before. Landowners in the Americas had access to the wealth creation benefits that came with land ownership. Hernando de Soto, the Peruvian Economist, discussed this wealth creation benefit in his book, “The Mystery of Capital.”

In his book, de Soto compares land systems in other countries to that of the United States. Notably, many countries have spent significant resources mapping and describing their land assets. However, describing those assets does not specifically define ownership, nor does it define the method or rules surrounding the transfer of that ownership.

De Soto describes the nature of real property this way: “Property is not really part of the physical world: its natural habitat is legal and economic…”1. The legal framework that ensures that ownership of land is a tangible thing must exist first for land to have economic value. The United States created that legal framework two and a half centuries ago when it determined that all lands in the Americas would be freely alienable. Once that framework existed, the economic value of land took hold. Land could now be used as a source of capital. The ability to mortgage land, transfer land and derive income from land now meant that the average citizen could have access to the economic engine that is land ownership. In addition to the free and easy access to land ownership, the United States had an abundance of land after the Revolutionary War. No other country on earth enjoyed those two coinciding factors – lots of land and no restrictions on ownership. In 1803, another opportunity came to increase the United States land mass, when the country completed the Louisiana Purchase and acquired 15 million acres from France. Fully three-fourths of the land of the continental United States is subject to the survey system that was crafted by the Land Ordinance of 1785.

When we think of economic wealth, we naturally think of land and real estate as a major part of that wealth. That is because of the way the United States uniquely created a land ownership system that the world had never seen before.

 

“As a man is said to have right to his property, he may be equally said to have a property in his rights.”

James Madison, 4th president of the United States, 1751-1836

1 – Hernando de Soto, “The Mystery of Capital” page 215, Black Swan Publishing 2001

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