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Do Land Grants Keep Your Home Safe?

written by: •edited by: Doreen Martel•updated: 5/28/2011

Does your property deed say something like, Dee Doth Down from the Queen of Spain, etc., or do you see the words “land trust” anywhere on home documents? These trusts are a way to secure land and taxes and keep land in family, but if you own property with a land trust, you could be in for trouble.

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    Family Owned Trusts

    Family Trusts Basically, there are two types of land trusts and depending on the kind you are dealing with will help you find out how to use a land trust to protect your property.

    My property in New Mexico is part of a land trust. In fact, the deed to my home is about four inches thick and does mention the Queen of Spain. What is also in there is the following: Cristobal de la Serna Land Grant.

    What this means in New Mexico is after the Treaty of Hidalgo was signed in 1848 (meaning New Mexico became part of the United States) to protect native lands (Mexican and Spanish), families (or a group of families) were allowed to develop and hold land trusts on many parcels of land—in the case of where I live, over 22,000 acres, which now contains 7,000 single-family properties.

    Land trusts such as these are not that uncommon and I wasn’t aware of the extent of trouble I’d be in—until I wanted to move and sell my house.

    Most of these old land grants sit uselessly in some county records hall, but my Serna Land Grant came to light when heirs of the original land trust decided to invoke their right to my property! Can I sell my property? Sure—if someone pays cash and doesn’t need a title insurance policy which “insures” that the property is free and clear of any encumbrances. According to the lawsuit filed by the trustee heirs if someone wants to purchase my home and obtain a mortgage, they will be unable to obtain title insurance saying the land and property is free and clear. Most lenders will not enter into a mortgage without property insurance—in fact, I don’t know of one lender that will.

    Land Deed New Mexico isn’t the only state where this is happening of late, so once you’ve read through this article, run for your mortgage papers and look at your warranty deed and title insurance to see if any stipulations about land grants or land trusts appear. If so, you may have trouble selling your property. Of course, most of these heirs leave the trusts as they are and many homes are perfectly safe to sell even if the title insurance company is required to mention the trust in the title policy.

    Not in my case, however. The worst part problem with the Serna Land Grant in New Mexico is the lawsuit says the property must be divided between “all heirs.” Can you image how many heirs there are after hundreds of years? Impossible to track.

    In New Mexico, the current homeowners are fighting with the land grant associations and are turning to local courts to make a decision on who owns what. This isn’t working however, and judges are agreeing the trust is indeed valid. Courts and attorneys are advising those affected by these types of land grants to file a claim with the original title insurance company, which many have done, however, the list is long and the response is slow. These family land grants trusts are just one way those of long ago protected land from ever being sold or owned by anyone other than those named in the grant. If this has happened to you, file a claim with the title insurance company—after all it was they who insured the property was free and clear.

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    Creating a Trust

    House for Sale Beyond old family land grants, you can also create a land trust on your own. Most real estate attorneys can help you with this or you can find companies online that charge a one-time fee. What these trusts do is protect your land and allow it to be passed down from one generation to another and can sometimes grandfather the property tax owed each year—but not always. The tax rules of land trusts are based on the county where they are established so your property taxes could indeed rise. A land trust may, however, if passed down to heirs may relieve capital gains income taxes.

    Be careful with some online land grant creators as they often state on their websites no liens can be placed on your home. This is not true in all counties and court systems so a blanket statement that your land will be forever free of someone filing a lien is not likely—especially if you have a mortgage on the property when the trust is created. It’s best to find an attorney to advise you on how to use a land trust to protect property. A land trust can, however, help a property speed through the probate process for resale—even with any attached liens. The type of trust is also important. A revocable trust can be change where an irrevocable trust cannot.

    Other families use a land trust so upon their death, the land can be donated or preserved. These trusts generally mean you want your land to go to a dedicate charity or used for nature or preservation purposes—a dedicated park/museum for example. Again, these are not hard to set up, however, I recommend using a real estate or tax attorney to help you do this correctly.

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    The Good and the Bad

    Monopoly Game It is possible to utilize a land grant so your land (and the property that sits on it) can’t be sold, however, there are state and county rules that come with all types of land grants. The family owned land grants, such as the one I am dealing with have not been fully resolved as to rights and claims.

    According to the New Mexico Public Regulatory Commission, many of the original 282 land grants acknowledged in 1891 across the United States are difficult to determine, as surveyor records have lost, misplaced or destroyed. If a land grant trust does have the appropriate documents, they can file a lien, preventing you from selling the home; or you can sell the home with a clouded lien title which must be disclosed.

    Families who wish land and property to stay within the family or donated, can create land trusts, however, keep in mind state and county rules before you determine if this is right for your property.

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    Resources

    Sources

    1. Land Grants – New Mexico Public Regulatory Commission - http://www.nmcpr.state.nm.us/archives/land_grants.htm
    2. Full Count Investments – Land Trusts - http://fullcountservices.com/living-land-trust.htm
    3. New Mexico History - Cristobal de la Serna Land Grant - http://www.newmexicohistory.org/filedetails.php?fileID=23111

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