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Home -> Orville Marcellus Powers -> Commerce and Finance -> Chapter XXXVII

Commerce and Finance - Chapter XXXVII

1. Chapter I

2. Chapter II

3. Chapter III

4. Chapter IV

5. Chapter V

6. Chapter VI

7. Chapter VII

8. Chapter VIII

9. Chapter IX

10. Chapter X

11. Chapter XI

12. Chapter XII

13. Chapter XIII

14. Chapter XIV

15. Chapter XV

16. Chapter XVI

17. Chapter XVII

18. Chapter XVIII

19. Chapter XIX

20. Chapter XX

21. Chapter XXI

22. Chapter XXII

23. Chapter XXIII

24. Chapter XXIV

25. Chapter XXV

26. Chapter XXVI

27. Chapter XXVII

28. Chapter XXVIII

29. Chapter XXIX

30. Chapter XXX

31. Chapter XXXI

32. Chapter XXXII

33. Chapter XXXIII

34. Chapter XXXIV

35. Chapter XXXV

36. Chapter XXXVI

37. Chapter XXXVII

38. Chapter XXXVIII

39. Chapter XXXIX

40. Chapter XL

41. Chapter XLI

42. Chapter XLII

43. Chapter XLIII

44. Chapter XLIV

45. Chapter XLV

46. Chapter XLVI

47. Chapter XLVII

48. Chapter XLVIII

49. Chapter XLVIX

50. Chapter L

51. Chapter LI

52. Chapter LII



Private ownership in land is a recognized right among all
civilized governments and people. Titles are derived originally
from the government,* which continues to be the paramount
owner of the land under the doctrine of eminent domain, and
which holds title to all unclaimed and undeveloped lands. The
title to the lands in the United States was acquired from Great
Britain by the treaty of peace, from France, Spain and other
countries by either purchase or conquest. The title of the
European nations to this immense territorial domain, which
passed to the United States was founded upon their discovery
and conquest. By the customary European law of nations
discovery gave title to the soil subject to the right of occupancy

by the natives. The United States, therefore, de-
Tities rived its title to all the lands within our borders,

subject to the right of occupancy or use by the
Indians. The millions of square miles of our vast undeveloped
plains and forests were called government lands and this land
the Government has parceled out and sold at the minimum price
of $1.25 per acre, or donated to individuals or corporations for
various considerations. t The "chain of title" then begins with

*In a monarchical government they are derived from the king.

fUnder the homestead law of 1862 a settler was permitted to acquire
title to 160 acres of Government land gratis under certain restrictions by
cultivating it five years.



the Government and runs down through the various holders
who have taken it either through purchase or descent, to the
present holder in fee simple,, or claimant of the land.

The ownership of real property "in fee simple" excludes all
qualifications and restrictions as to the persons who may inherit
it as heirs, thus distinguishing it from a "fee tail." It is the
largest possible estate a man can have, being absolute in per-
petuity. It is where lands are given to a man and to his heirs
absolutely without any restrictions or limitations put upon the
estate. The word "simple" in the compound word "fee-simple"
adds no meaning to the word "fee" standing by itself. The
"fee tail" is an inheritable estate which can descend to certain
classes of heirs only. It is necessary that they should be "heirs
of the body" or "blood heirs." The theory of a "fee tail" estate
was derived from the old Eoman system restricting estates.

Having extinguished the Indian title by treaty or otherwise,
the next step was to survey the land into ranges, townships and
sections by means of lines running north and south, and east and
west, but not including navigable streams or any land especially
reserved, such as Indian Reservations and National Parks.
Townships are six miles square and contain thirty-
Surveys six sections of six hundred and forty acres, each
section being one mile square. These sections
are divided into halves, quarters and eighths. The ranges,
townships and sections are numbered in regular order, and hence
by knowing the number of each we have a brief and accurate
description of the tract. Salt springs and lead mines were
specifically reserved to the United States, in all government
land, our fathers probably supposing these constituted the only
mineral wealth worth reserving. One section in every town-
ship, numbered sixteen, was reserved for the purposes of edu-

When a town or village is laid out, all the land included
within its limits is platted, upon a map, accurately drawn, which


is kept in the offices of the town or city. Anyone who owns
land within the limits of the town or city may sub-divide it into
lots by having it surveyed by a competent surveyor, which survey
must be acknowledged by himself and the surveyor before a
notary, and a true plat with such acknowledgment filed with the
County Recorder. One who subdivides land usually names the

subdivision after himself and thereafter in describ-
subdivisions ing any lot or parcel of the land the description

must include, in addition to the number of the
township, section, and part of section, the name of the subdi-
vision, number of block and lot. A subdivision may be subdi-
vided again and this is a re-subdivision, or a lot may be divided
into two or more lots and these are called sub-lots. A legal
description of a sub-lot may then read somewhat as follows: Sub-
lot three of lot thirty in Brown's resubdivision of the south
twenty acres of the East one-half of the West one-half of the
Southwest quarter, section eight, township thirty-nine, range
fourteen East of the Third Principal Meridian, Cook County,

Land values depend upon innumerable conditions, and as the
conditions change the values are liable to change also. Farming
land is chiefly valuable on account of its fertility and other favor-
able conditions for raising produce, its nearness to market, trans-
portation facilities, etc. City lots are dependent for their value

chiefly upon location, those in the center of trade
values being the most valuable. As cities grow older and

increase in business and population, the pressure
for desirable lots in good locations grows heavier and prices ad-
vance. Improvements upon land, however, are constantly dete-
riorating from age and use and this acts as an offset in a degree
against the advance in the land values. In large cities, for
instance New York and Chicago, substantial improvements are
frequently destroyed and modern ones of greater height erected.
The invention of the modern "skyscraper" has made possible the


carrying up of buildings to practically an unlimited height, sur-
passing the renting space afforded in buildings of the old type
and construction several fold, but not necessitating an increase in
the size of the land. The cost of maintenance and the expense
in the operation of these new buildings are proportionately less
than in the old. All this, of course, has a tendency to greatly
increase the land values of this character of property.

Values of property are largely determined by the rents or
income, if it is improved, and, if unimproved, what income it
may be made to produce. The stability of property also affects its
value, the question whether the conditions of location, etc.,
will warrant a continuation of income. This is determined by its
accessibility to transportation, etc., the properties in centers of
great population being of the highest value and receding in value
from those centers as their accessibility becomes less. The law
of supply and demand regulates to a large extent the value of
real' property the same as personal property. Property obtains
an abnormal value frequently from overconfidence due from
various causes, that are sometimes not warranted by the stability
of the community or its industries. In growing towns and cities,
all classes of real property are more or less in a transient state,
changing as the character of localities change. Thus residence
property deteriorates materially in the event of the removal of
residents to new and popular locations. As a result properties
sometimes a distance of eight or ten miles from centers of activity
are more valuable than intermediate property. Business prop-
erty then being the most staple and producing the greatest in-
come, has, of course, the highest value, and being in demand is
purchased to earn on the lowest percentage of income. Some-
times these properties are purchased to net the investor as low
as four per cent, per annum.

The most desirable form of investment in property, and by
far the safest, is to purchase land and then lease it for a long
period, usually ninety-nine years, the lessee or lessees agreeing


to pay general taxes and all other obligations incurred by the

ownership of the land, and in addition, as security for the pay-

ment of the rent and all additions thereto, erect an improvement

on the property which he maintains during the life

Ninety-nine- O f ^he i ease? $%{& improvements reverting to the
owner of the land at the termination of the lease by
purchase, or otherwise, according to agreement. It is usually a
beneficial arrangement also to the lessee, as it affords him all the
rights of ownership of the land, providing, of course, that the
ground rents and all the covenants of his lease are promptly met,
without investing a large sum of money in the title. Long term
leases of ground as previously stated, are usually made for the
term of ninety-nine years. This is only a custom, following the
old theory that a conveyance or letting of land for a period of
more than three average life times, that is three life times of
thirty-three years each, was an absolute conveyance and not a
lease. Leases may just as properly and legally be made for one
hundred years, or nine hundred years, or nine hundred and
ninety-nine years as for ninety-nine years.

Having investigated the present condition and future pros-

pects of a property and decided upon its purchase, the buyer

enters into a written contract* with the seller, or his agent, in

which the seller agrees to sell the property at an

Real Estate agreed price, to deliver a "merchantable" abstract


showing a perfect title in him, and to convey the
same by deed properly executed. On his part, the buyer agrees
to buy or receive the property within a specified time, usually
thirty days, after a complete abstract of title has been furnished
him by the seller, showing perfect title in him, and to pay for the
property the price agreed either in cash or installments as agreed.
The buyer usually makes a cash deposit of about 5 per cent, of
the purchase price when the contract is executed, which is to be

*A11 contracts with a reference to the purchase of real estate must be
in writing in order to be valid.


refunded in case the transaction is not consummated through the
fault of the seller, or is forfeited to the seller in case the buyer
fails to carry out the agreement. If the transaction is consum-
mated the contract money is applied upon the purchase price.

The seller then furnishes an abstract of title, which may be
procured from an abstract company, showing the complete his-
tory of the ownership of the property to the present holder.
This is examined by the buyer or his attorney.* Past convey-
ances, encumbrances, the rights of heirs, and especially minors,
judgment creditors and many other points must be carefully
watched and scrutinized in the past history of the property. So
many questions of law are involved in the examination of titles
to real estate that a good lawyer is a necessity. Defects in titles
may be cured in various ways, many of them by
Examination securing quit claim deeds from possible claim-
ants by purchase or otherwise. Some defects are
cured by time, while others are incurable. Properties sometimes
lie unimproved and unsalable in our cities through some defect
in title until lapse of time cures the fault. It is needless to say
that the buyer should be absolutely safe in the quality of title
which he accepts.

The next step is the execution and "passing of the papers"
which convey title. On the part of the seller or grantor this
consists of a warranty deed signed by him and the signature duly
acknowledged by a notary. If the grantor is mar-
Passingof ried, the wife, (or husband, as the case may be,)

must join in the execution of the deed, and, if the
grantor is a bachelor, or spinster, the fact must be recited in the
deed. The buyer, or grantee, on his part pays the purchase
money, or in case any portion of the purchase price is to be paid
at future dates, he executes notes therefor, and a mortgage or
trust deed on the property as security for their payment. The

*We have Guaranty Companies which issue policies of insurance against
defects in titles, but the examination of the abstract is the most common


wife or husband of the grantee need not join in the execution of
a mortgage or trust deed given to secure purchase money, but in
all other cases where such instruments are executed she or he
must so join.

As explained in a previous chapter, a mortgage is virtually a
conveyance of property to the mortgagee, with a provisional
clause that in case a certain note shall be paid upon a given date
then the conveyance described in the mortgage shall be void and
the title shall vest in the mortgagor. A deed of trust is a con-
veyance of property by the mortgagor to a third person called a
trustee, to be held by him as security for the notes given. After

the notes are paid the trustee "releases" or recon-
Mortgageand ve y g ^he property to the grantor in the trust

deed by the execution of a release deed. This
is the more common method of securing real estate notes.
When there is a default in one note of a series or interest
upon one of the notes, by a provision in the mortgage or trust
deed such default causes all of the notes to fall due at once at
the election of the trustee or legal owner of the notes. This is
necessary in order that action may be taken under the mortgage
or trust deed to enforce full and complete payment and avoid the
necessity for foreclosure proceedings upon each note separately.
Mortgages are still used largely by insurance corporations
in loaning their surplus capital, for the reason that they do not
expect to transfer the paper and the mortgage gives publicity to
the fact that they are the actual lenders of the money, but by
individuals the trust deed form is preferred as it enables the
owner to transfer the trust deed and notes without recourse or
publicity, the actual lender not being known in the trust deed.
In 1879 a law was passed in Illinois making the proceedings to
foreclose a mortgage on real estate and a trust deed practically
the same. Prior to that date it was not necessary for the mort-
gagee to file a bill of complaint, etc., it being only necessary for
him to advertise the property a certain number of days and sell


it to the highest and best bidder. The law was no doubt enacted
largely in the interest of the borrower, giving him a certain pro-
tection in the event of a fraudulent foreclosure,, etc.,, and for the
reason that a trust deed conveys the property absolutely under
certain conditions and enables the paper to be more readily sold
or used as collateral security for loans.

In foreclosing a trust deed or mortgage the complainant files
a bill of complaint in the court having proper jurisdiction, making
the signers of the notes and trust deed, and all parties having
any interest in the property, defendants. The court usually
refers the case to a Master in Chancery for the purpose of taking
evidence and arriving at a conclusion as to the amount due. To
this report either parties have a right to file and argue objections
with the Master. In the event of the Master's report being

favorable to the complainant and sustained by the
Foreclosure court, a decree of sale is entered. The Master

then advertises and sells the property to the high-
est and best bidder for cash. This being approved by the court
the Master executes a certificate of sale to the purchaser, which
certificate will entitle the purchaser or holder thereof to a deed
at the expiration of the redemption period. This latter is one to
two years in different states*, a period of time in which the
mortgagor may have a final opportunity to recover his property
by paying up his debt with interest and costs.

During the continuance of the mortgage the owner of the
property has what is called "an equity of redemption." He
enjoys the same right of ownership over the property (assuming,
of course, that interest and maturing notes are paid when due)
as though the mortgage and trust deed did not exist. He has
the right to transfer by deed, or to again mortgage the property,
subject, of course, to the rights of the holder of the previous lien.
In case the property is sold while it is under mortgage the pur-
chaser either buys it "subject to" the mortgage, or "assumes and

*In Illinois the redemption period is fifteen months.
agrees to pay" the incumbrance. In this latter event, the pur-
chaser of the property, by accepting such a deed, obligates him-
self personally to pay the incumbrance and in case of foreclosure,
if the property does not sell for enough to pay the mortgage
together with interest and costs, he may be held for the balance.
It is to the interest of the purchaser to see that the deed is
properly placed on recor.d in the office of the Recorder of Deeds.
If the buyer fails to record his deed and the seller should fraudu-
lently convey the property over again or mortgage
Recording it to an innocent person who placed his deed or

mortgage upon record first, he, the innocent pur-
chaser, would be protected in his title. The same principle
holds in regard to recording other documents. The mortgagee
must at once file his mortgage for record, lest another mortgage,
sale or judgment takes precedence over it.

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