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Conservation Easements – Fundamentals for Buyers

November 20, 2014
  • Facts & Insights
  • Tips For Buying

If you are considering purchasing land that is protected under a conservation easement, understanding the fundamentals of these agreements is a valuable asset to determining if the land is right for you.  It is always best to start by discussing your questions and concerns with a qualified real estate broker or an attorney that has experience in conservation easements. They can help you find answers about what it is intended for, what rights and restrictions are in place and its specific terms and provisions.

What is a Conservation Easement?

A conservation easement, as they are utilized today, is a relatively recent and popular tool implemented by a land owner that puts permanent protection on land for preservation purposes.  In the late 1800s through the 1940s, they were utilized by the federal government to maintain scenic beauty to be enjoyed by the public through parks and parkways. Today, conservation easements are utilized by private land owners, typically designed to restrict development.

Once a proposal is initiated by the land owner, the property is evaluated by a land conservancy to consider if it meets specific guidelines for an easement.  This evaluation information is compiled in a Baseline Report consisting of due diligence gathered about the land including information such as a title review, range assessment – the quality of native grasses, geological review, a mineral rights analysis and wildlife evaluation. If an easement is agreed to, the land conservancy holding the easement will monitor the land typically on an annual basis to insure agreements are being upheld.  Land conservancies are funded through federal, state and local programs as well as private donations to ensure adequate financial backing to implement monitoring and enforce future protection.  A conservation easement is a legally-binding agreement that “runs with the land”, meaning it is perpetual and will be passed on to future land owners and cannot be revoked. 

What type of land qualifies for a Conservation Easement?

Conservation easements are tailored specifically for each land donor. In order for land to qualify for a conservation easement it must meet specific requirements of a land conservancy.  This perpetual agreement, held by a governmental or non-profit organization, permanently limits uses of the land in order to protect its conservation value.  This may include reasons such as to preserve or improve important water resources, preserve geographic formations or improve wildlife corridors and habitats. Large open-land spaces may also qualify for an easement especially if it has an historic significance, has natural resources, is going to be preserved for a park and recreation or if it may help future community development projects.  

What are benefits of a Conservation Easement?

Tax relief may come in forms such as federal income tax deductions or federal estate tax deductions.  Some states offer state income tax credits and property tax relief.  The easement is required to be held in perpetuity in order for the grantor to qualify for the federal tax benefits.  As determined by an appraiser, the value of the easement donation equals the variance between the fair market value of the property before and after the easement takes effect.

Besides the financial benefits, landowners may go the route of a conservation easement due to their sheer love of the land; this should be the primary reason for creating a conservation easement.   The land owner can rest with the knowledge that agricultural tradition will be maintained, land will remain intact, natural beauty will endure and that long term visions of land protection will be up held.  Surrounding-land values can be preserved which can make it a rare entity as the rural integrity and beauty of an area is protected.

Possible drawbacks to Conservations Easements

Since the agreement is perpetual, the market value of land under a conservation easement is often valued at less than land that does not hold an easement because the potential development value is reduced.  This can be a drawback if a property owner wants to sell the land one day or break it up into smaller parcels.  These properties come with restrictions that are placed on the land when the easement is originated. The number and size of building envelopes are often predetermined. 

Is Land Held Under a Conservation Easement Right for You?

When considering purchasing a property with a conservation easement, be sure to consult your legal counsel, CPA and a qualified real estate professional.  It is important to review the easement contract which will outline the specifics and restrictions.  This document is recorded with the deed and encumbers the property.

Current real estate listings through Swan Land Company that are held under conservation easement include Forked Lightning Ranch near Santa Fe, New Mexico, Wise River Ranch in Wise River, Montana and Sun River Ranch in Augusta, Montana.  Please feel free to contact our office to discuss specifics of these properties or to gain additional information regarding conservation easements.