A Conservation Easement Guide to Protecting Our Treasured Land Tuesday, September 10, 2019

Conservation EasementThe importance of a fully modern open space preservation vehicle, the conservation easement, cannot be better summarized than by than our 26th President. Theodore Roosevelt, one of the nation’s original land protectionists, embodied the power – and beauty – of a conservation easement in the following quote:

“Here is your country. Cherish these natural wonders, cherish the natural resources, cherish the history and romance as a sacred heritage, for your children and your children’s children. Do not let selfish men or greedy interests skin your country of its beauty, its riches or its romance.”

Conservation easements as a land protection tool cannot be understated. Already since its creation, according to the National Conservation Easement Database, an estimated 40 million acres have been saved.

In the era of human-enhanced climate change and renewed interest in public vs. private lands, how does a conservation easement help save the treasured wilds we hold so dear? Answering this question requires its step-by-step unpackaging, starting with definitional awareness, and continuing with tax advantages, regulations, and appraisal value.

 

What Is a Conservation Easement?

A simple conservation easement definition is a legal contract to protect private land, permanently. When an Ohio landowner or investor decides to preserve their property, they likely turn to a conservation organization such as a state government agency or land trust.

When you transfer the ownership of the land to another entity, you do so under contractually agreed-upon terms. For instance, you may agree that there are limits or conditions for certain types of land use. All conditions agreed upon by the landowner and the other party are under the purpose of conservation.

While the conservation easement definition establishes the protection of land for future generations to enjoy, there may be specifications for:

  • land subdivisions;
  • property development;
  • property conservation values; and
  • agriculture, forestry, or water quality protection.

If you’re unsure whether a conservation easement is right for you, check out our conservation easements pros and cons guide. Otherwise, know that a landowner will retain their rights, including the ability to use the land, sell it, or pass it on to their family members. Conservation easements provide a significant benefit to landowners and the community surrounding the property. It is a sustainable solution to ensuring that the land is protected and remains under responsible stewardship.

A contract between the landowner and the buyer is legally binding. For instance, in Ohio, “A Deed of Conservation Easement” is recorded in the county where the land is located. The land can also be taxed because the buyer privately owns the property.

 

A Conservation Easement Example in Ohio: Big Darby Watershed

A modern-day conservation easement example is the Big Darby Watershed, located in Franklin County. The Big Darby Watershed is a biologically diverse aquatic ecosystem that stretches 557 square miles through Central Ohio. It is a co-op project that involves over ten jurisdictions.

Launched in 2004, the Big Darby Accord intended to preserve the land, plant life, and 38 rare species of fish and mussels that inhabit the area. Further, the vision is to integrate both the preservation of the land with growth strategies through planned monitoring and oversight.

The mission statement of the Big Darby Accord outlines its key initiatives:

  • Provide public services and facilities while encouraging responsible growth.
  • Preserve, protect and improve the Big Darby Watershed’s unique ecosystem by utilizing the best available technology and practices.
  • Partner with local jurisdictions to enhance their conservation plans while collaborating on planning and zoning efforts for future development projects.

Concessions have also been made for controlled residential and commercial development around the undeveloped area. Currently, the Big Darby Watershed represents the largest undeveloped area in Franklin County.

 

How Do Conservation Easements Work?

A conservation easement is a strategic approach to incentivizing the private sector to become involved in land conservation. It works by bringing together landowners, companies, communities, and co-ops to protect the land. There are several ways these entities can achieve this objective:

1. Land Trusts

A land trust is a legal entity that assumes ownership of purchased property. The entity controls the land according to the terms of the contract. The trust typically protects the anonymity of the individual or organization. Also, if the entity uses the property for a conservation easement, they are eligible for a tax deduction.

2. Private Reserves

A private reserve is a piece of land that the owner will designate as a reserve for plant or animal life. The land and the species will remain untouched and under the care of the owner. The owner of the land can be an individual, a company, or a government agency.

3. Incentives and Conservation Easement Tax Benefits

There are several incentives for purchasing land for a conservation easement, including tax credits or charitable tax deductions. When a conservation easement meets the criteria outlined by the Internal Revenue Service, the owner of the property may qualify. These benefits are based on the property’s reduction in value. If the owner wants to claim the property, then they must use it for the following purposes:

  • Natural habitat for fish, wildlife, or plants
  • Public recreational or educational use
  • “Open space” or undeveloped land
  • Environmental preservation or certified historic structures

The property owner may seek a deduction if they donate a portion or all of the land to a qualified entity. An example would be a historic building or natural monument given to a preservation society or governmental agency. In this scenario, the purpose of the transaction is for preservation, not proposed changes.

Also, the owner may deduct the conservation easement if the purpose is to protect the property “in perpetuity.” Meaning, all future property owners will adhere to the condition of the easement. A conservation easement that qualifies for a tax deduction is categorized as a charitable contribution.

Something to consider: Make sure the retained tax attorney or accountant has a comprehensive understanding of tax laws and deductions regarding conservation easement. All documents filed with the IRS must be precise and meet the relevant tax criteria. Failure to submit your deduction correctly can get you in hot water with the Internal Revenue Service.

Another incentive is for the owner to become involved in an environmental issue. Incentives are effective motivators for uniting multiple entities into a single project.

All conservation easements “run with the land,” meaning, they apply to both present and future owners of the property in question. The purpose of the land use is variable, depending on the nature of the property and the intent of the purchase.

 

Conservation Easement Regulations

There are several regulations that must be adhered to if undertaking a conservation easement. Failure to comply with these regulations can result in legal consequences. Some of the highlights of conservation easement regulations include:

1. Valid

The owner must be satisfied that the new owners will use the property for land, animal, or plant preservation. Remember that “preservation” means whatever the IRS, local, or state government specifies that it means.

2. Voluntary

No one can force a landowner to go into a conservation easement. A conservation easement is either donated or sold by the existing owner to the future owner. Both go into the agreement in an exclusively voluntary manner.

3. Permanent and Irrevocable

The easement must be permanent. If the transaction is temporary – say, within 10 years – then the owner may qualify for local or state tax deductions, but not federal. However, most experts recommend that you do not sell or purchase a conservation easement for temporary use. It more or less defeats the purpose.

4. Legally Binding

A conservation easement is registered and recorded as a Deed of Conservation Easement in a Franklin County Courthouse. The agreement is binding “forever” for both the present and future owners of the land. The agreement also recognizes that the property holder is responsible for maintaining and protecting the land and/or its inhabitants.

5. Restricted

Last, the easement must restrict or prevent any development as outlined in the contract. Of course, this condition does not prevent certain rights such as the right to subdivide, build on, sell, cut timber, or farm the land. Granted, when someone enters into a contract, they generally give up one or more of these rights voluntarily. The restriction ultimately fulfills the overarching purpose of a conservation easement.

 

Conservation Easement and Eminent Domain

The government can, under certain circumstances, confiscate land without your permission. This process of taking property is called eminent domain. The government can take private land and designate it for public use. A classic example of this is when the government builds a highway through privately held farmland.

Thus, the key difference between a conservation easement and eminent domain is that an easement is voluntary; eminent domain is not. From a legal standpoint, even if you have an agreement with another party to conserve or protect a piece of land, the government can override the agreement for its agenda.

With that in mind, note that local, state, and federal governments increasingly rely on conservation easements to help them accomplish land, animal, and plant preservation goals. Therefore, demonstrating that an easement accomplishes a goal such as protecting a species or maintaining water supply, can avoid an eminent domain proceeding.

There is no governing rule of thumb, as each case of eminent domain is subject to the property in question and the government’s justification for confiscating it.

 

Conservation Easement Appraisals

Conservation easement appraisals in Ohio are typically conducted for five reasons:

  1. Tax purposes
  2. Buying or selling property
  3. Verifying the value of the property
  4. Outlining the components of the property that establish value
  5. Determining how certain restrictions affect the value of the property

A conservation easement can complicate what would otherwise be a straightforward transaction between a land buyer and a land seller. Moreover, preserving wildlife can work against your behalf as it may lower the value of the property from an investment point of view. Also, the more restrictions you place on the land, the more difficult it will become to appraise.

If you are requesting a conservation easement appraisal for tax purposes, then there are several factors the IRS will consider:

  • The assessment contains supporting documentation
  • Comparable properties in the area
  • An accurate and comprehensive market analysis
  • Compliance with the Internal Revenue Code and Treasury regulation
  • All failed attempts to sell the property in the past
  • The official appraisal is current – 0 to 60 days

For a valuation company in Ohio to complete an accurate conservation easement appraisal, you must submit all necessary information such as location, dates, and the method of valuation to be conducted. In addition, you need to provide current landowner rights, restriction, and the short and long-term effects of the best use of the property.

 

Conservation Easement FAQ

The takeaway is this: entering into a conservation easement is an important decision that should not be taken lightly. Before signing any agreement, consider these questions:

Why Should I Consider a Conservation Easement?

To conserve land. You may also want to keep property in the family or desire compensation for development rights through tax deductions. An easement can help you pay down debt or reinvest elsewhere.

Do Conservation Easements Have to be Perpetual?

No. However, the purpose of a conservation easement is to preserve, not just make a profit. The first question to ask yourself when selling your property for an easement is, “Why am I doing this?” What is your underlying motivation?

Do I Still Own My Land?

Yes. You can still use your land for its original purpose as long as it falls under the rights and restrictions outlined in the contract. The main issue at hand is development rights. You may still choose to develop a portion of the land. Any land development will be negotiated between you and the entity that assumes responsibility for the property.

Do I Still Pay Property Taxes?

Yes. The IRS will typically categorize a conservation easement as something other than developed land. How much you pay will depend on what development rights you give up.

Do I Have to Allow Public Access?

This depends on the details of the agreement or any specific rights that you give up in the transaction.

 

Conservation Easement Advisors for “Your Children’s Children”

Founded at a time when another Roosevelt was the U.S. President, The Robert Weiler Company is a full-service commercial real estate firm, committed to understanding your unique needs. Our 81 years in the business gives us a competitive advantage in the market. And, we guarantee a value that you won’t find from any other firm specializing in commercial real estate in Columbus, Ohio or beyond. Our expertly-trained real estate professionals are on hand to walk you through the particulars of a conservation easement, appraise the property, or review tax implications and benefits. Sit down with one of our experts at The Robert Weiler Company by calling 614-221-4286.

More than a century ago, one of the country’s first naturalists inspired Americans across generations to preserve our cherished natural lands. Today that spirit lives on through one of the most unique and versatile tools in the land preservationist’s tool kit. Together, The Robert Weiler Company will ensure the next century’s land use – and its preservation and profitability – will endure one conservation easement at a time.