Conservation easements are often used as a land protection tool. The purpose of using one depends on the character of the property in question. Each parcel of land brings with it several specific needs that may benefit from a lack of development in the future. You can improve water quality, foster healthy forest growth, improve wildlife habitats, and even protect a scenic vista.
The terms of a conservation easement are variable, but most include constrained subdivision development or an outright ban on building. It allows the land to remain in ownership while giving the owner consistent access which works with the overall conservation objectives.
This process is 100% voluntary. No one is forced into a conservation easement as a property owner. That remains the case even if the property is purchased or sold. Even the appraisals of the value held in the easement, and whatever financial arrangements were made, are kept private under most circumstances.
If you’re thinking about a conservation easement for your property, then here are the vital pros and cons to evaluate.
List of the Pros of Conservation Easement
1. You can customize a conservation easement to meet your needs.
Conservation easements are not inflexible rulings which change how you can manage your property in future years. They are completely customizable, depending on what your plans and goals happen to be for the space. You will decide how much development makes you comfortable with this option. If you want your relatives to use the land one day, then you can designate spaces for future building for your kids, grandkids, or other designated parties.
You and the land trust are always working together to ensure that an easement which benefits everyone involved applies to the property.
2. You do not create public access with a conservation easement.
It is not a requirement to allow public access to your property when seeking a conservation easement. That is another element of the customization process involved. It follows your needs as the owner of the property instead of making blanket declarations about what you can or cannot do.
There are times when some landowners do opt for public access as a condition of the easement, but this is rare and the exception more than the rule. What you are doing when conserving a property is to forego future development rights on your private land. You are not creating a public park with this option.
3. You are not giving the conservation easement to the government in most instances.
Most conservation easements are held by a non-profit land trust. These organizations are 501(c)(3) organizations designated by the IRS, similar to other NGOs and tax-exempt companies that provide charitable work. Although there are rare instances where a government entity does hold an easement, and your finances can be scrutinized or audited if something seems “fishy” with this choice, that happens with most transactions when you work with non-profits or make unusual changes to your financial profile.
4. You don’t need to have the land trust visiting you all the time.
You can also make it a condition of your conservation easement that your land trust doesn’t visit you repetitively to review the condition of the property. There is a requirement that a physical inspection must occur at least once per year if you opt for this designation. Most non-profits would consider anything more than that a waste of their resources, so they’re not going to push for multiple visits.
If you are concerned about this issue, then establish your expectations upfront during the negotiation process. Cover the details of what would happen during a monitoring visit. Most trusts will give you plenty of notice, respect your timing wishes, and work with you to make this a winning relationship.
5. You can still farm or ranch on your land with a conservation easement.
This advantage goes right back to the customization which is allowed when looking at the conservation easement process. If your property is agriculturally productive, then it makes sense to keep it that way. Have your ranching or farming activities incorporated into the easement so that it is reflective of your goals. What you are doing is creating a line of defense against the future development of this property in other ways.
You still get to be a farmer. The land you work won’t be turned into a new housing development.
6. You can financially benefit from a conservation easement even with a low income.
Even if you don’t have enough income to justify a conservation easement on the grounds of a tax benefit, there are other ways that you can financially benefit from this decision. Some land trusts will pay property owners if the parcel in question is of high enough importance. Grants and private donations allow them to purchase development rights directly from you, which means cash instead of a deduction or tax credit.
Easement purchases are a possibility too, although they are rarer than a donation, with a process that takes longer. Some states permit your conservation tax credits to be sold for cash, which means your donation can be monetized while high-income third parties can benefit from a credit at a discounted rate.
7. You might be able to change the conditions of the conservation easement.
When Fred and Linda Dowd purchased a Wyoming ranch in 1999, the property came with a conservation easement. It offered permanent restrictions on land use, making it available for agricultural use only. When mineral developers came to their property and started setting up rigs and pipeline, the Dowds went to the county commission to renegotiate the easement. They decided together to cancel the agreement, allowing the new owners to do whatever they wished with the land.
List of the Cons of Conservation Easement
1. You could overstate the value of the conservation easement.
When you claim the tax benefits for a conservation easement, either on the state or federal level, then you must file the appropriate forms which document the transaction. You must provide an appraisal if the deduction is larger than $500,000 when filing IRS Form 8283. Agencies are paying closer attention to this potential credit, ensuring that the values are not intentionally or accidentally overstated.
That means you must have a defensible appraisal of the land in question as part of the conservation easement process. This work creates an added cost that may come out of your pocket before reaching an agreement.
2. Your land may not qualify for a conservation easement.
You can only take advantage of a conservation easement from a financial standpoint if it meets one of the four categories of purpose as defined by the current IRS Code, found in Section 1.170A-14(d).
• You are preserving a relatively natural habitat of wildlife, fish, or plants.
• You wish to preserve forests or agricultural lands that have open spaces.
• You want to allow public access to a portion of your land.
• You are protecting the property in response to a clearly delineated governmental policy that is identified in local open-space plans.
The first two options in the bulleted list above are the ones which are used most often. Some property owners will opt for the public access stipulation if their land does not meet the first two qualifications. Only special circumstances permit the fourth option. That means if there is no public access benefit for your property, a conservation easement may not be possible.
3. You can choose the incorrect land trust.
There are fantastic land trusts out there which will work with you every step of the way to create benefits which are mutually advantageous. They are the ones which are bureaucratic, inflexible, or even confrontational with you about the property. You should always choose a land trust which offers a proven understanding of forestry practices or agricultural issues.
Your first option to avoid this disadvantage is to work with a non-profit certified by the Land Trust Accreditation Commission. Perform your due diligence when vetting the agency, however, because there are some personalities which will still rub you the wrong way. Then make sure that you can have a different land trust steward your property if you find irreconcilable differences with your first choice.
4. Your use of the property in question can change without a structured conservation easement.
Many landowners have found that how they use their property changes after a conservation easement – and not in a good way. You might not be allowed to use ATVs, snowmobiles, or other recreational motorized vehicles on the portion in question. Installing wind turbines or other economically viable technologies may be restricted. You might not have access to the inspection records of your property. There can be confidentiality breaches, including a public petition for structures or other land uses without your consent.
Although issues are rare because you are in control of the negotiating process before the final agreement is made, signing something without realizing what you’re giving up could create more problems than solutions for you.
5. You may find a limited selection of buyers available to you.
Land trusts, investors, and other buyers of properties governed by a conservation easement are discovering the many benefits of this relationship. Many potential suitors may want to use the property for their own purposes, however, and they don’t want to deal with the mess of having another party involved. When it comes time to sell your land, you might find that the pool of interested buyers has narrowed considerably for you.
Before finalizing your decision to create a conservation easement, work with your local land trusts and brokers to see what the current situation happens to be. Some markets see price increases because of this option because a guarantee on conserved land offers more value.
6. You may suffer from lender problems as a buyer.
The banking community does not always understand the pros and cons of conservation easements. They’re often viewed by lenders as a hurdle to the purchasing process instead of something that benefits the property. Some landowners have found that trying to refinance their land with an easement in place becomes virtually impossible. You might encounter an onerous appraisal or bank terms with your lending agreement if one is authorized. These issues can then make it a challenge to buy or sell, increase the cost of these actions, or obtain future financing.
7. You may not stop all forms of development.
When you own property in the U.S. West, there are various rights that you purchase with that agreement. This structure includes oil and gas rights, mineral rights, or even water rights. If you create a conservation easement to use the land for agricultural purposes, that agreement does not automatically cover what lies underneath the ground. Agreements which involve “forever” can place property owners into a sticky situation at times. If the land use needs change, and you’re not permitted to change with it, then the value of your usable land might decrease to nothing.
These conservation easement pros and cons look at the benefits of setting land aside for nature and awareness instead of development. You can take a tax write-off for the benefit when approved while still having access to your property. Although any land-use agreement offers the potential of a nightmare scenario, most property owners find that the benefits far outweigh whatever financial risks come with this opportunity.
Crystal Ayres is a proud veteran, wife and mother. Our goal at Green Garage is to publish the most in depth content on the internet for every topic we write about. If you would like to reach out to contact Crystal, then go here to send her a message.