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Conservation easements are complicated legally binding restrictive agreements that can affect values for generations indefinitely. A careful analysis of the benefits should be considered before entering into a conservation easement.

In a basic way we can define a conservation easement as an agreement to restrict some form of use of the land for a tax benefit in return. Conservation easements by design have but one goal and that is to restrict the development potential of the land in the future. A conservation easement can come about in many ways. A majority land owner may want to dedicate a portion of the land for the public use in creating a park, or a farmer may want to protect the farm from development and keep the farming tradition alive in the community. Likewise, a property owner may agree to discontinue the practice of logging and leave the property to a community trust. Whatever the motivation, the effect of the conservation easement is to restrict the use or development of the property for an indefinite period. Certain tax benefits are derived from these types of gifts, grants or restrictions in the form of tax deductions equal to the dollar loss experienced by the land owner due to the restrictive nature of the easement.

The Federal taxing authorities are very much interested in anyone who gifts or deed restricts their property for a tax benefit. With this in mind, a property owner will want to gather as much information as possible about the tax effects, legal implications and long term affects of placing a deed restriction on the property. An appraiser who is qualified must be employed to evaluate the eventual diminished value and certify it to be accurate. If the gift or restriction is sizable then a second opinion as to value will be required.

Conservation easements have been used to prevent Urban sprawl for many decades. The method that has been used is to purchase the development rights (a sending area) from a rancher, farmer or majority land owner with a covenant (Conservation easement) not to develop the land. The development rights are then transferred to a (receiving area) as designated by the Land planning authorities of a city or county. The sending area land owner can reap a cash benefit in the form of either cash from the developer or tax savings from the government. Another form where conservation easements are used would be to restrict a portion of the land for the public use and then develop the neighboring parcel which may experience a greater value due to the neighboring open space.

Whatever the motivation, a land owner should be careful to stay away from abuses of the Federal tax code. Some charitable trusts have been found to participate in illegitimate schemes to accept a gift leaving the land owner with something less than a favorable tax outcome. Conservation easements are permanent and run with the land forever. Caution should be employed whenever considering a conservation easement. If the goal is to restrict a certain use, then a negative or restrictive easement may be a candidate.

If you are considering a conservation easement for your property consult a qualified CPA, Land use Attorney, and Appraiser before entering into any agreements.

Douglas Ferguson has been a successful land broker for over 19 years in California and Idaho and at present is the Principal Broker for Ferguson, Beal & Associates in Middleton, Idaho. Mr. Ferguson is an Accredited Land Consultant and a Certified Land Consultant. Currently, Mr. Ferguson serves as President of the American Land Institute, Member of the World Organization Land Federation and teaches continuing education in matters of land brokerage. If you have questions or simply need a referral to a knowledgeable land broker in your area visit me at http://www.douglasferguson.net or send an email requesting help.

Originally posted here:
Conservation Easements – The Good, the Bad and the Ugly