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What Do You Mean, I Can't Develop My Property?

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Posted May 31, 2006

Conservation Easement - a legally enforceable restriction that a landowner(s) voluntarily places on specific uses of the property to protect natural, productive or cultural features.

Are conservation easements a negative to your property? Not if they fulfill your goals. However, you need to think about the very, very long-term impact of placing your property in a conservation easement, because, as one person put it, "Forever it's a mighty long time!" The good news about conservation easements is that someone pays you money for an easement on your land, and not every easement is perpetual. The bad news is not every easement is tax deductible, and the easement can last forever. Personally, I would hire a lawyer who has considerable experience with conservation easements before I would even consider one. Some landowners have hired lawyers without experience in conservation easements. In some of these cases, whether through the fault of the attorney and/or the landowner, the contract was not read completely nor fully comprehended. The failure to read and fully understand the terms of the conservation easement resulted in much grief and lost opportunity for the landowner.

Preserving the environment for future generations is a laudable goal, but is a conservation easement for you? It is hard to answer with a "yes" or a "no." Let's look at a simple example. To conserve your land, gain a little money and obtain a tax break, you enter into a binding agreement (the conservation easement) with an organization. This organization (or government entity) has the right to enter the property and check it in order to ensure you are maintaining it by fulfilling all the provisions in the easement. You still possess ownership and use of the property. Next, the IRS must approve the conservation easement for tax purposes. Now, you have money, a tax break, and you can use the land as you have been (assuming you have been practicing best management recommendations and conserving the land). You think to yourself, "This conservation easement is beginning to look really good! My family will get some money now and a tax break on the land I plan on passing down." As time passes, you get excited about your investment opportunities because now the area where you live has much residential/commercial development. Now, imagine it's 50 years in the future. Your grandchildren own the property that is now in the "middle" of a town and would be extremely valuable for development. Land located around your property is selling for an extremely good price, and your descendants decide to sell the property. They list it with a realtor who finds someone interested in purchasing the property. Wait a minute the conservation easement has come along for the ride! It forbids re-zoning the land from agriculture to commercial or residential development because it would violate the conservation easement. The prospective buyer backs out of the deal. Well, maybe your descendants can sell it as a park. Would that be acceptable to the trustee of the conservation easement? What the conservation easement does not allow does not happen on that land ever. Under existing rules, courts must interpret agreements in the light most favorable to the trustee of the land trust that controls/owns the conservation easement, not the landowner. From a very generous gesture of conservation preservation (we will not mention the tax reduction and money paid), you probably greatly limited both the value and use of the land for all future generations.

Currently, there is legislation being considered in some states to implement a set period for conservation easements. Until then, if you are considering a conservation easement, you really should consult with your family, tax and legal experts and a land trust representative to determine if a conservation easement is right for your operation.

David Annis
Former Ag Consultant