There are many species of plants and animals that need habitat to live in and protection from development |
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What Is a Conservation Easement?
A conservation easement is a voluntary legal agreement that permanently restricts specified activities on a piece of property. This assures protection of wildlife habitat, forest ecosystems, enables natural chemical processes like Carbon sequestration, and is proven to make people feel happier and closer to the environment. In our case, the conservation easement is granted by the property owner to us who will “hold” the easement in perpetuity. The original restrictions specified by the land owner stay with the property and are binding on all future owners. Conservation easements are site-specific documents that help landowners ensure that important natural values are protected forever, while keeping the property in private ownership and use.
Why do this? What are the incentives?
Placing an easement on property allows individuals, families or businesses to retain ownership of their property while protecting its natural landscape and establishing long-term management goals. Easements are perpetual and run with the land, therefore assuring future conservation after the current owner’s death or if the property needs to be sold. By design, easements are effective at protecting the carefully stewarded natural capital of the property from future liquidation. A conservation easement can also yield often substantial tax savings or revenue, as discussed below.
What are the financial values to granting a conservation easement?
Conservation easements can be transmited by charitable gift or sale. The value of the easement is the difference between the fair market value of the property before and after the property restrictions are put in place. Because they usually reduce the market value of the property to reflect only the allowed uses, eliminating development value, the gift of a conservation easement can bring significant income or estate tax deductions.
Tell me more about the tax benefits of easement donation.
The IRS treats donation of a conservation easement like any other charitable donation. The value of the easement can be deducted from the land owner’s income taxes in the year in which it was donated. Any undeducted value can be claimed for up to five years after time of donation. The value of the easement must be independently appraised for tax purposes.
To be eligible for tax-deductible status an easement must meet three criteria: it must be perpetual in duration, it must be donated for “conservation purposes,” and the grantee must be a qualified conservancy.
Internal Revenue Code Section 170(h) defines the necessary "conservation purposes" of an easement to include at least one of the following:
Conservation easements on managed forestlands usually qualify both as protection of relatively natural habitat or ecosystem, and as preservation of open space.
Who owns the land once it is under an easement?
The present landowner owns the property. If it is sold or donated, the condition of the land will not change from the specifications outlined in the original easement. The owners property rights are limited only to the extent outlined in the easement.
To be eligible for tax-deductible status an easement must meet three criteria: it must be perpetual in duration, it must be donated for “conservation purposes,” and the grantee must be a qualified conservancy.
Internal Revenue Code Section 170(h) defines the necessary "conservation purposes" of an easement to include at least one of the following:
- The preservation of land areas for outdoor recreation by, or the education of, the general public; or
- The protection of relatively natural habitats of fish, wildlife, or plants, or similar ecosystems; or
- The preservation of open space -- including forestland and farmland -- for scenic enjoyment or pursuant to an adopted governmental conservation policy; in either case such open space preservation must yield a significant public benefit; or
- The preservation of historically important land areas or buildings.
Conservation easements on managed forestlands usually qualify both as protection of relatively natural habitat or ecosystem, and as preservation of open space.
Who owns the land once it is under an easement?
The present landowner owns the property. If it is sold or donated, the condition of the land will not change from the specifications outlined in the original easement. The owners property rights are limited only to the extent outlined in the easement.
Which land uses are usually restricted by a conservation easement? Which are usually allowed?
Terms of easements vary based on the grantors specifications, but usually any activity that would harm the conservation values are not allowed (e.g. subdivisions or commercial development, industrial uses, waste dumping, extensive road building, water diversion, or other activities that contribute to erosion and sedimentation of waterways).
Forest management, residence, recreation, low-impact commercial uses, and the building and maintenance of roads can all continue on the property, although the easement may limit their intensity or location.
Forest management, residence, recreation, low-impact commercial uses, and the building and maintenance of roads can all continue on the property, although the easement may limit their intensity or location.
How does a conservation easement differ from other types of easements?
Legally it is similar to other easements, in that certain rights associated with a piece of property are held by someone other than the property owner. Conservation easements, however, are different in a major way: the rights conveyed by a conservation easement are effectually negative. For example, with a road easement the landowner gives someone a positive right to cross a property. Whereas with a conservation easement, the landowner may forgo the right to subdivide the property or to clear-cut the forest. The conservancy will not give the right to do the subdivision or clear-cut; rather, it holds those restrictions "in trust" and ensures that no one uses any of the rights that have been restricted by the grantor.
Does placing an easement on my land give the public the right to enter private property?
Not unless the land owner specifies it in the conservation easement – and there is no requirement for the owner to do so.
What process does a landowner follow to establish a conservation easement?
First the grantor should think about what kinds of conservation goals they would like to uphold. If the property is owned by more than one person they should agree on the potential uses. Once an accord is reached, a land conservancy qualified to hold and manage easements should be contacted. Someone from the organization will visit the property and discuss the owner’s goals and preferences to determine it’s eligibility for being placed under a conservation easement. By establishing a conservation easement, the landowner and land trust will become partners in conservation, so taking the time to establish a knowledgeable, trusting relationship is important to success.
After coming up with a mutually agreeable plan, the Deed of Conservation Easement will be drafted (see an example copy at http://sblc-mi.org/sample.html). Another document called the baseline report (i.e. an inventory of the property’s physical condition) will be drafted as well. Maps and surveys may be needed for this step. In consultation with the landowner the land trust also prepares a monitoring plan so it can ensure the easement terms are honored in the future. Finally, whether an easement is charitably given or is sold, an appraisal will sometimes be needed to determine its value. Not in every case.
After coming up with a mutually agreeable plan, the Deed of Conservation Easement will be drafted (see an example copy at http://sblc-mi.org/sample.html). Another document called the baseline report (i.e. an inventory of the property’s physical condition) will be drafted as well. Maps and surveys may be needed for this step. In consultation with the landowner the land trust also prepares a monitoring plan so it can ensure the easement terms are honored in the future. Finally, whether an easement is charitably given or is sold, an appraisal will sometimes be needed to determine its value. Not in every case.