Conservation easements explained

The last few years have seen a significant growth in the popularity of conservation easements here in the Upper Arkansas Valley. Exactly what a conservation easement is, and what it does, still seems to be a matter of some confusion and misinformation to many. How long does it last for? Who qualifies for consideration? How does a conservation easement affect private property rights? What are the disadvantages? What are the advantages? What role does a land trust play in the process?

The first thing to realize is that a conservation easement starts with a willing land owner. The landowner gives up the development rights to the subject property, and in return receives state tax credits and federal income tax deductions based on the appraised value of the development rights they have donated. A rancher, for example, can sell these tax credits for cash, enabling them to make capital improvements or pay off a mortgage, thereby being able to stay on the land. The associated reduction in the value of the land with the development rights removed also lessens the burden of estate taxes, making it easier to pass the ranch on to the next generation. Others land owners consider an easement as a way to protect wildlife habitat, open space or view corridors, thereby leaving a legacy for the enjoyment of future generations.

The economic and social benefits for communities that place a high value on protecting these natural resources are well documented. In a tourist driven economy such as ours, this value cannot be underestimated. People come here to recreate, enjoy the view sheds and the rural character, not to see how many houses we can build on two acre plots. A recent study commissioned by the Ranchlands Group found that an overwhelming number of residents and visitors alike placed significant value on protecting these resources. Visitors stated they would visit less, and stay for shorter periods of time were they to diminish.

So how does the process play out? Usually it begins with a land owner contacting an organization such as a land trust, to explore their options and the suitability of their land for consideration. Organizations that can negotiate and hold conservation easements range from large national bodies like The Nature Conservancy and Trust For Public Lands, to smaller locally based non-profit organizations like this valley’s Land Trust of the Upper Arkansas. In order to qualify for the tax credits associated with an easement, the subject property must meet at least one on the nine criteria laid down by the IRS.

Once an initial study of the land has been conducted to verify its suitability, an appraisal is completed to ascertain the value of the development rights being donated. A baseline survey is also made, which gives an in-depth study of the property in its current natural  state, including a  full catalog of flora and fauna, soil conditions etc. Within the basic conservation easement document, there is room for the land owner to customize the agreement to suit their vision. For example, they can specify a building envelope or two, depending on the size of the acreage, for a family member to build a home in the future. They are free to live on and continue to use the land as they have done in the past, provided their activities do not negatively impact the conservation values laid out in the deed of easement. Once agreement has been reached, a closing takes place where the owner signs over the development rights of the subject property to the land trust. This takes the form of a deed restriction that stays with the property in perpetuity. It is the duty of the land trust to monitor the future use and condition of the property to ensure the donor’s wishes and intent are met now and in the future. Given that an easement is in perpetuity, it requires careful consideration on behalf of the donor. Once the deed is signed, there is no going back. One popular misconception about conservation easements is that the land owner must now allow public access on the subject property. This is incorrect. While they can allow public access if they wish, it is by no means mandatory, and most land owners choose not to do so.

So the advantages to the land owner come in the form of the tax credits, a lowering of the value of their land, and thereby the tax burden, continued use and enjoyment of the land, and the feeling of having given up something for the benefit of the greater good. The disadvantages are that once the development rights have been signed over, they are severed from the land forever, so there is no going back. Also, for some, the lowering of the value of their land once the  development rights are removed lessens their ability to raise money using their land as collateral. This all means that landowners must think carefully before they proceed, taking advice from family members, attorneys and accountants before committing.

Hayden is the vice president of the Land Trust of the Upper Arkansas.