Below are some common questions about Conservation Easements. Much of the information was adapted from information provided by the American Farmland Trust.
What is a Conservation Easement?
Conservation or agricultural easements are legally binding agreements negotiated between a landowner and the holding agent (land trust). The landowner gives up certain rights, usually development rights. In return, the landowners may be able to take an income tax deduction if the easement is permanent and donated. There are, of course, limits to charitable deductions, but they can be spread out over several years. Conservation easements can (but not always) also reduce the amount of the taxable estate, thus reducing property and inheritance taxes. This can help a family pass land to the next generation without subdividing and/or developing it to pay the taxes. This is particularly important in agricultural areas facing the conversion of agricultural lands to urban uses. Despite the tax advantages of open space and agricultural lands protection, most landowners seeking easements do so because they have a great love for the land and the values that their property represents.
How does a conservation easement affect property rights?
Landowners still hold title to their property and enjoy all the rights of ownership, such as the right to sell the property, lease the land, leave it to their heirs, the right to privacy, and so forth. The easement is perpetual and runs with the land and is binding on future owners. Under the terms of the conservation easement, the property cannot be used in a manner that significantly impairs the conservation purposes articulated in the easement, but does not dictate specific uses that must be adopted.
Does a Conservation Easement cover the entire property?
In most cases the Conservation Easement covers the entire property, but a landowner can exclude specific areas. Any exclusion would be negotiated between the landowner and the Land Trust.
Will a conservation easement affect local property tax?
Different states have different rules, but in general the assessed value of easement-encumbered land will be based on its restricted value. If the property is enrolled in an agricultural current use taxation program, the property taxes are likely to stay the same. If the property is not enrolled in such a program, then the property tax could be significantly lowered once the easement is placed on the property. In some cases, however, tax assessor's have not lowered property taxes. Therefore, no guarantee is offered for a property tax reduction.
How is the value of an easement determined for tax purposes?
A qualified appraisal is required to claim a tax deduction for a donated easement. The landowner is ultimately responsible for securing and paying the cost of the appraisal. The value of the conservation easement is the difference between the highest market value of the property before imposition of the easement and the market value of the property after the easement is in place. This is called the "before and after" approach to valuation; the "after" value typically reflects the property's restricted value.
Do landowners need a lawyer to place a conservation easement on their property?
Yes, the Land Conservancy strongly advises that you get qualified legal counsel to assist in the decision making process and to review legal documents. Placing a conservation easement on your property can have significant land use, income tax and estate planning benefits and consequences.
Does a conservation easement affect borrowing power?
Not necessarily. The property may still have significant value even with a conservation easement. The easement itself does not restrict use of the property as collateral for borrowing.
Is a mortgage affected by a conservation easement?
Yes, any mortgage or deed of trust or other monetary lien on the property must be either discharged prior to the easement or subordinated to the easement. In the case of subordination it is advisable to talk to your lender well in advance of placing an easement on the property to determine what, if any, requirements they may have.
What is a stewardship endowment and how is the amount determined?
The Land Conservancy generally requires a stewardship endowment for each conservation easement it acquires. A conservation easement is a perpetual obligation and responsibility, and it is important that funds are available to ensure the Conservancy has the means to ensure the conservation easement is upheld. The endowment is a fund of money that is placed in a restricted purpose account and is used to pay for the cost of monitoring the conservation easement. The amount of the endowment can vary, but as a general rule it is about $5,000. More complex situations may require additional funds or small projects may involve less funding.
What is the monitoring process?
The Land Conservancy generally visits each of its easement-protected properties once each year, in addition to communications with you via phone, mail and through our stewardship newsletter. These visits provide an opportunity to exchange information or to answer questions you may have about the easement. Advance notice for each visit is given and you are strongly encouraged to participate. The visits usually involve driving around or walking around the property, taking photographs and filling out a questionnaire. The meeting usually runs from a couple of hours to a half a day. Sometimes in the case of large sites or clusters of protected properties, low-level aerial monitoring is conducted with advance notice to the landowner.
What land does the Land Conservancy consider for conservation easements?
The Land Conservancy is primarily interested in preserving lands featuring Monterey Pine Forest, Oak Woodlands, Coastal Streams, and Coastal Dunes in San Luis Obispo County. Other resources may be considered in response to local conservation interests.
Land Conservancy project criteria?
The Land Conservancy uses the following criteria to select projects. Within these criteria are additional sub-criteria.
- The Land Conservancy only protects property that will achieve a public benefit.
- The Land Conservancy only protects land that has value for conservation, education, or recreation purposes.
- The Land Conservancy confines its land protection efforts to San Luis Obispo County and the adjacent surrounding region. Involvement outside of the County would only be undertaken when the area is part of a landscape that crosses our county line.
- The Land Conservancy protects land using those techniques that most efficiently commit current and future resources of the organization
- The Land Conservancy protects land only if we can fulfill whatever stewardship responsibilities, i.e. monitoring, management, and enforcement are associated with the property.
Where can one get more information?
