What is a Conservation Easement?
A conservation easement is a voluntary agreement that allows a landowner to limit the type or amount of development on their property while retaining private ownership of the land. It is a legal document restricting future uses of the land. The conservation easement agreement is signed by the landowner, who is the conservation easement donor, and the Conservancy, who is the party receiving the agreement. The Conservancy accepts the conservation easement with the understanding that it must enforce the terms of the conservation easement in perpetuity. After the conservation easement is signed, it is recorded with the County Register of Deeds and applies to all future owners of the land.
Another way to visualize a conservation easement is to think of owning land as holding a bundle of rights. Each one of these rights represents the landowner’s ability to do something with their property. The right to build a house, to extract minerals, to lease the property, pass it on to heirs, and allow hunting are all rights that the landowner has. A landowner may give up certain rights associated with their property through a document called a conservation easement.
Why do people grant Conservation Easements?
People grant conservation easements not only because they want to protect their property from unwanted development, but they also wish to retain ownership of their land. By granting a conservation easement, a landowner can be assured that the property will be protected and cared for forever, regardless of who owns the land in the future. An additional benefit of granting a conservation easement is that the donation of an easement may provide financial advantages to the donor.
What kind of financial advantages can result from granting a Conservation Easement?
Many landowners receive a federal income tax deduction for the gift of a Conservation Easement. The Internal Revenue Service allows a deduction if the agreement is perpetual and donated “exclusively for conservation purposes.” The amount of the tax deduction is determined by the value of the conservation easement, which is obtained through a specific appraisal process for conservation easements. In addition to the tax deduction, the donor may have estate and property tax relief.
What activities are allowed on land protected by a Conservation Easement?
The activities allowed by a conservation easement depend on the landowner’s wishes and the characteristics of the property. In some instances, no further development is allowed on the land. In other circumstances some additional development is allowed, but the amount and type of development is less than would otherwise be allowed. Conservation easements may be designed to cover all or only a portion of a property. Every conservation easement is unique, tailored to a particular landowner’s goals and their land.
Can the landowner still sell or give the property away?
The landowner continues to own the property after executing a conservation easement. Therefore, the owner can sell, give or lease the property, as before. However, all future owners must abide by the easement.
What if I want to protect my property but I have a mortgage?
If a conservation easement property is encumbered by a mortgage, the mortgage would need to be subordinated to the terms of the conservation easement. We had have had some success working with various banks to subordinate a mortgage to the terms of the conservation easement, but it depends on the appraisal (what the property is worth after it is protected) and how much is owed on the mortgage.
Does the public have the right to access a conservation easement-protected property?
The public does not have access to property protected by a conservation easement unless the original landowner who grants the conservation easement specifically allows it. Most conservation easement donors do not wish for, and therefore do not allow, public access to their property.
How long does an conservation easement last, and who upholds it in the future?
To be eligible for a federal income tax deduction, the conservation easement must be “perpetual,” that is, it must last forever. The Conservancy monitors the property, once a year, to assure that the conservation values are being protected and the conservation easement is not being violated. If the conservation easement has been breached the Conservancy will take whatever steps are necessary to uphold the terms of the conservation easement, including legal action. Because of this obligation, the Conservancy typically asks conservation easement donors to make a financial contribution to the Conservancy’s Stewardship Endowment Fund. This fund ensures long-term monitoring and enforcement of every conservation easement the Conservancy receives.
Who holds the Conservation Easement?
The Leelanau Conservancy holds the conservation easement. To qualify for a tax deduction, the conservation easement must be donated to a unit of government or a qualifying conservation or historic preservation organization. The Leelanau Conservancy qualifies as a federally recognized public charity under Internal Revenue Code Section 501( c )( 3 ). In addition, the Conservancy is qualified to receive conservation easements under Michigan’s Conservation and Historic Preservation Easement Act, PA 197 of 1980.
Who owns and manages conservation easement-protected land?
The landowner retains full rights to control and manage their property within the limits of the conservation easement. The landowner continues to bear all costs and liabilities related to ownership and maintenance of the property. The Conservancy monitors the property annually to ensure compliance with the conservation easement’s terms, but it has no other management responsibilities and exercises no direct control over other activities on the land.
Does the conservation easement have to cover all the landowner’s property?
No, some conservation easements only cover a portion of the landowner’s property. Again, it depends on the landowner’s wishes. For example, if someone owns 80 acres, of which 35 acres are wetlands, and 25 acre are hardwoods, the landowner may decide to restrict development on only 40 or 50 acres and leave the rest unrestricted by a conservation easement..
What kind of land can be protected by a Conservation Easement?
IRS regulations require that the property have “significant” conservation values. This includes forests, wetland, endangered species habitat, beaches, scenic areas and more. The Conservancy also has its own criteria for accepting conservation easements. At the invitation of the landowner, Conservancy staff will evaluate the property to determine whether it meets these criteria.
What is “Purchase of Development Rights?”
The Conservancy works with willing farmers and landowners who wish to permanently preserve their lands. For farm families, the program can be a great tool to help the older generation prepare for retirement and enable the next generation to take over the farm. One of the key barriers to young farmers is the cost of land. Too often, farmable acreage in our region is far too expensive for beginning farmers because it is so highly-desired for second-home development. As a result, it is virtually impossible to service the debt from the purchase of this highly valued acreage from the cash-flow from crops grown on the land. The FRPP program helps overcome this barrier by paying the current owner to remove the “development premium” on the land, making the acreage much more affordable for beginning farmers.
Although the right to future residential development is extinguished, the family continues to own the land and to have the right to farm it. The property also remains on the tax rolls. At the community-level, it helps keep the agricultural economy and the business environment for farming strong by protecting larger blocks of intact farms.