1. What is a land conservancy or land trust?
Land conservancies or land trusts are local, regional or statewide non-profit organizations directly involved in protecting important natural resources for the public benefit. As community organizations, land conservancies understand and are responsive to the special needs of the land and people in their regions. As non-governmental organizations, land trusts offer quick response, flexibility and confidentiality. Land conservancies use a variety of creative land protection tools that achieve conservation goals while meeting the specific needs of landowners and the community.
2. What is a conservation easement? How is it different from a drain easement or a utility easement?
Drain easements and utility easements are examples of “affirmative” easements. An affirmative easement is the right of one person to enter the property of another and “do something thereon”. Affirmative easements are what most of us are familiar with.. For example, right-of-way easements to permit passage to a landlocked property or utility easements, that permit the power or water company to enter the property to construct and maintain electric or water lines, are common affirmative easements.
A conservation easement is a type of “negative” easement. A conservation easement is a voluntary legal agreement -- essentially a contract -- between a landowner and a land conservancy or public agency. The contract requires the landowner to give up, or severely limit, certain uses of the property. Nevertheless, the landowner continues to own the land and may use it in any way as long as the easement is not violated. Like other easements, a conservation easement “runs with the land” and binds the landowner who grants the CE as well as all subsequent landowners. Except for the purpose of monitoring the easement, the holder of the CE has no right to enter the property.
3. What kinds of properties are eligible for a conservation easement?
State and federal laws require that the purpose of a conservation easement be for maintaining land in a natural, scenic, or open-space condition, for wildlife habitat, for agricultural, recreational, or open-space use, or for conserving buildings or other aspects of historic, archaeological, or cultural value. Thus, any property that possesses one or more of these values is potentially eligible for a preservation agreement.
4. Why would a landowner want to place a conservation easement on his or her land?
Most landowners are interested in conservation easement because they wish to protect their family's land from future development or fragmentation. In addition to the permanent protection that a conservation easement provides, there are potential financial and tax benefits for the landowner. Because the conservation values protected by a conservation easement are considered a benefit to the public, the Internal Revenue Code recognizes the donation of a conservation easement as a charitable contribution that may qualify for income and estate tax deductions.
5. Who decides what restrictions govern a conservation easement?
The landowner and the land trust or conservancy decide together what’s needed to protect the land’s conservation value, while at the same time meeting the financial and personal needs of the landowner and his or her family. The set of restrictions for any property is quite flexible provided that the easement is sufficiently restrictive so that the conservation values of the property are substantially protected. For example, an easement on property with rare wildlife habitat might limit or prohibit further development of any kind, while a farmland easement may allow continued farming and building of limited agricultural structures. Land-use restrictions may affect only certain portions of a property (significant woodland, wetland or stream banks for example) but allow development on the remainder.
6. Are there any uses of my property that are absolutely restricted by a conservation easement?
IRS regulations and the goals of most eligible easement holders require that certain uses will always be prohibited, such as extensive subdivision or mining (if you do not own mineral rights, you can still grant an easement so long as the rights were severed before 1972 and future mining is considered unlikely). Other activities including commercial or industrial development, filling of wetlands, erection of signs or billboards and refuse dumping are normally prohibited by a conservation easement.
7. What uses are generally permitted after a conservation easement is placed on the property?
Traditional uses of the property are almost always allowed to continue, even under the most restrictive easements. This means that landowners may continue to live on the property. In addition, the conservation easement will normally allow the re-construction of any existing structures and may allow some modification or expansion. In general, landowners are free to use the property any way consistent with the terms of the conservation easement For most landowners in the Saginaw Basin, this means that their ability to use the land for recreational purposes (hunting, fishing, hiking) is not limited.
8. In addition to restrictions, does a landowner have any affirmative obligations associated with land under a conservation easement?
A landowner may have some, minor obligations required by the conservation easement For example, in cases where a conservation easement protects a natural area or sensitive habitat, a landowner may be required to control noxious or invasive weeds in accordance with a plan approved by the Conservancy.
9. Will all of my land have to be included in the conservation easement?
No. A conservation easement can be applied to the landowner's entire property or to only a portion of it, such as the land along the bank of a stream. Each conservation easement is designed specifically to address a property's unique characteristics, its conservation values, and the interests and needs of the landowner.
10. Does a conservation easement require public access to the land?
No. However, public access to protected land can be a stipulation of a conservation easement if mutually acceptable to the landowner and the land trust. Granting public access in the conservation easement document at the time of donation is one way to qualify for a federal income tax deduction, but is usually not necessary for the landowner to obtain tax benefits.
11. What effect does a conservation easement have on a landowner’s ability to sell or pass the land to his or her heirs?
While restrictions defined in a conservation easement remain with the property forever, land protected in this way can be sold, passed to heirs or otherwise transferred at any time. Transfer of ownership does not affect the integrity or enforceability of the conservation easement. The landowner who establishes a conservation easement ensures that his or her careful stewardship of the land is a legacy that lasts.
12. Does the Saginaw Basin Land Conservancy accept all conservation easement that it is offered?
The Saginaw Basin Land Conservancy assesses each conservation easement prospect offered for donation. We visit the site, research the conservation values, talk with the landowner about his or her goals and expectations and then decide whether to accept an easement offer.
13. How is a conservation easement different from other types of deed restrictions?
Protecting significant land through a conservation easement provides a guarantee of accountability. Unlike simply attaching deed restrictions to a property title, donating a conservation easement provides the certainty that a landowner’s desire to preserve the land’s conservation values is honored far into the future by an organization dedicated to the principles of saving precious resources.
14. Why not depend on “smart growth” zoning, environmental laws, or other government regulations to assure that land with significant conservation values is protected?
Unlike easements, public policy is not implemented in perpetuity. Political moods can and do change and one legislative body can alter the plan and intent of another. Conservation easement are voluntary, private land use restrictions that do not change over time.
15. How will future landowners know about the conservation easement?
The conservation easement is a formal legal agreement that is recorded at the County’s Register of Deeds office. A title search by anyone interested in acquiring the property will give notice of the easement.
16. What are the responsibilities of the Saginaw Basin Land Conservancy with respect to the conservation easements that it holds?
Accepting the donation of a conservation easement is a tremendous responsibility for a land conservancy. It means accepting the obligation to monitor and enforce the easement terms forever. Once an easement is established, SBLC documents the site’s conservation values, performs periodic inspections to ensure all the easement’s terms and conditions are being honored, and keeps all future owners of the site informed of the agreement.
If a violation is found, the landowner is notified according to the provisions of the conservation easement and steps are taken to repair the impacts of the violation. Most conservation easement contain language that defines the process for resolving disputes between the landowner and the Conservancy. The Conservancy has the right and responsibility to take legal action, if necessary, to enforce easement restrictions.
An endowment is established along with the conservation easement and is used to cover the costs of monitoring, enforcing compliance and legal defense of the easement.
17. What costs are incurred by the landowner in creating a conservation easement?
The landowner should expect to pay for legal and financial advice, ($500-$2500) and an appraisal of the property ($1500-$5000). An appraisal is only required if the landowner wants to take advantage of the tax deduction for granting the easement, and is a deductible expense. The Saginaw Basin Land Conservancy maintains a list of appraisers qualified to appraise preservation agreements for tax purposes.
18. What are the potential income tax benefits of donating a conservation easement?
Under the Internal Revenue Code, qualified conservation easement donations may be treated as charitable gifts for federal income tax purposes. The value of the gift can then be deducted at an amount up to 30% of the donor's adjusted gross income (AGI) in the year of the gift. If the easement value exceeds 30% of the donor's income, the excess can be carried forward and deducted (subject to the 30% limit) in each of the five succeeding tax years.
Example: Joe and Mary Smith donate a conservation easement on a 150 acre undeveloped woodlot to the Saginaw Basin Land Conservancy. The value of the easement is determined to be $135,000. If their AGI in the year of the donation is $100,000, they would be able to deduct $30,000 (30% of $100,000) in the first year. Since the value of the easement is greater than their allowable deduction, the Smiths would also be able to deduct $30,000 in each of the next three years -- assuming their income stays the same – and $15,000 the fourth year in order to claim the full amount of the easement donation.
For more information about the tax benefits of conservation easements, see this article by Timothy Lindstrom, Esq. from the Michigan Bar Journal.
19. How is the value of the conservation easement calculated?
The value of the easement is the difference between the value of the land without the easement restrictions and the value of the land after the restrictions have been applied and the development rights have been removed. The change in property value associated with a conservation easement must be determined by a qualified real estate appraiser.
Example: The Smith family conveys a conservation easement on its 150 acre woodlot to the Saginaw Basin Land Conservancy. If the property's current value is $3,000 an acre, its total fair market value-before the easement is in place-would be: 150 acres x $3,000/acre = $450,000. If removing the development rights lowers the value to $2100 an acre, then the total market value of the restricted property would be: 150 acres x $2100/acre = $315,000. The difference between the before and after values is the value of the Easement: $450,000 - $315,000 = $135,000 tax deduction.
20. How does the donation of a conservation easement affect estate taxes?
The donation of a conservation easement -whether made during a landowner's life or by bequest--can reduce the value of the estate upon which taxes are calculated. In some cases, the value of an estate after an easement donation may fall below the lifetime exemption so that estate taxes are avoided. Good planning is necessary to ensure that heirs of estates that include property receive maximum tax advantages. If you want to know more about the advantages of a CE for estate planning purposes, talk to your attorney or financial advisor.
For more information about the tax benefits of conservation easements, see this article by Timothy Lindstrom, Esq. from the Michigan Bar Journal.
21. How might property taxes be affected by the donation of a conservation easement?
The property's current assessment for tax purposes determines if tax benefits may be realized by protecting it with a conservation easement. If the assessment reflects the property's development potential and those rights have been permanently relinquished, the landowner can make a case to the local assessor for a reduction in property assessment. See Indian Garden Group v. Resort Township MTT Docket No. 157543, 205036 (Feb, 17, 1995) for the most up-to-date view of conservation easement and property valuation for tax purposes by the Michigan Tax Tribunal.
Land conservancies or land trusts are local, regional or statewide non-profit organizations directly involved in protecting important natural resources for the public benefit. As community organizations, land conservancies understand and are responsive to the special needs of the land and people in their regions. As non-governmental organizations, land trusts offer quick response, flexibility and confidentiality. Land conservancies use a variety of creative land protection tools that achieve conservation goals while meeting the specific needs of landowners and the community.
2. What is a conservation easement? How is it different from a drain easement or a utility easement?
Drain easements and utility easements are examples of “affirmative” easements. An affirmative easement is the right of one person to enter the property of another and “do something thereon”. Affirmative easements are what most of us are familiar with.. For example, right-of-way easements to permit passage to a landlocked property or utility easements, that permit the power or water company to enter the property to construct and maintain electric or water lines, are common affirmative easements.
A conservation easement is a type of “negative” easement. A conservation easement is a voluntary legal agreement -- essentially a contract -- between a landowner and a land conservancy or public agency. The contract requires the landowner to give up, or severely limit, certain uses of the property. Nevertheless, the landowner continues to own the land and may use it in any way as long as the easement is not violated. Like other easements, a conservation easement “runs with the land” and binds the landowner who grants the CE as well as all subsequent landowners. Except for the purpose of monitoring the easement, the holder of the CE has no right to enter the property.
3. What kinds of properties are eligible for a conservation easement?
State and federal laws require that the purpose of a conservation easement be for maintaining land in a natural, scenic, or open-space condition, for wildlife habitat, for agricultural, recreational, or open-space use, or for conserving buildings or other aspects of historic, archaeological, or cultural value. Thus, any property that possesses one or more of these values is potentially eligible for a preservation agreement.
4. Why would a landowner want to place a conservation easement on his or her land?
Most landowners are interested in conservation easement because they wish to protect their family's land from future development or fragmentation. In addition to the permanent protection that a conservation easement provides, there are potential financial and tax benefits for the landowner. Because the conservation values protected by a conservation easement are considered a benefit to the public, the Internal Revenue Code recognizes the donation of a conservation easement as a charitable contribution that may qualify for income and estate tax deductions.
5. Who decides what restrictions govern a conservation easement?
The landowner and the land trust or conservancy decide together what’s needed to protect the land’s conservation value, while at the same time meeting the financial and personal needs of the landowner and his or her family. The set of restrictions for any property is quite flexible provided that the easement is sufficiently restrictive so that the conservation values of the property are substantially protected. For example, an easement on property with rare wildlife habitat might limit or prohibit further development of any kind, while a farmland easement may allow continued farming and building of limited agricultural structures. Land-use restrictions may affect only certain portions of a property (significant woodland, wetland or stream banks for example) but allow development on the remainder.
6. Are there any uses of my property that are absolutely restricted by a conservation easement?
IRS regulations and the goals of most eligible easement holders require that certain uses will always be prohibited, such as extensive subdivision or mining (if you do not own mineral rights, you can still grant an easement so long as the rights were severed before 1972 and future mining is considered unlikely). Other activities including commercial or industrial development, filling of wetlands, erection of signs or billboards and refuse dumping are normally prohibited by a conservation easement.
7. What uses are generally permitted after a conservation easement is placed on the property?
Traditional uses of the property are almost always allowed to continue, even under the most restrictive easements. This means that landowners may continue to live on the property. In addition, the conservation easement will normally allow the re-construction of any existing structures and may allow some modification or expansion. In general, landowners are free to use the property any way consistent with the terms of the conservation easement For most landowners in the Saginaw Basin, this means that their ability to use the land for recreational purposes (hunting, fishing, hiking) is not limited.
8. In addition to restrictions, does a landowner have any affirmative obligations associated with land under a conservation easement?
A landowner may have some, minor obligations required by the conservation easement For example, in cases where a conservation easement protects a natural area or sensitive habitat, a landowner may be required to control noxious or invasive weeds in accordance with a plan approved by the Conservancy.
9. Will all of my land have to be included in the conservation easement?
No. A conservation easement can be applied to the landowner's entire property or to only a portion of it, such as the land along the bank of a stream. Each conservation easement is designed specifically to address a property's unique characteristics, its conservation values, and the interests and needs of the landowner.
10. Does a conservation easement require public access to the land?
No. However, public access to protected land can be a stipulation of a conservation easement if mutually acceptable to the landowner and the land trust. Granting public access in the conservation easement document at the time of donation is one way to qualify for a federal income tax deduction, but is usually not necessary for the landowner to obtain tax benefits.
11. What effect does a conservation easement have on a landowner’s ability to sell or pass the land to his or her heirs?
While restrictions defined in a conservation easement remain with the property forever, land protected in this way can be sold, passed to heirs or otherwise transferred at any time. Transfer of ownership does not affect the integrity or enforceability of the conservation easement. The landowner who establishes a conservation easement ensures that his or her careful stewardship of the land is a legacy that lasts.
12. Does the Saginaw Basin Land Conservancy accept all conservation easement that it is offered?
The Saginaw Basin Land Conservancy assesses each conservation easement prospect offered for donation. We visit the site, research the conservation values, talk with the landowner about his or her goals and expectations and then decide whether to accept an easement offer.
13. How is a conservation easement different from other types of deed restrictions?
Protecting significant land through a conservation easement provides a guarantee of accountability. Unlike simply attaching deed restrictions to a property title, donating a conservation easement provides the certainty that a landowner’s desire to preserve the land’s conservation values is honored far into the future by an organization dedicated to the principles of saving precious resources.
14. Why not depend on “smart growth” zoning, environmental laws, or other government regulations to assure that land with significant conservation values is protected?
Unlike easements, public policy is not implemented in perpetuity. Political moods can and do change and one legislative body can alter the plan and intent of another. Conservation easement are voluntary, private land use restrictions that do not change over time.
15. How will future landowners know about the conservation easement?
The conservation easement is a formal legal agreement that is recorded at the County’s Register of Deeds office. A title search by anyone interested in acquiring the property will give notice of the easement.
16. What are the responsibilities of the Saginaw Basin Land Conservancy with respect to the conservation easements that it holds?
Accepting the donation of a conservation easement is a tremendous responsibility for a land conservancy. It means accepting the obligation to monitor and enforce the easement terms forever. Once an easement is established, SBLC documents the site’s conservation values, performs periodic inspections to ensure all the easement’s terms and conditions are being honored, and keeps all future owners of the site informed of the agreement.
If a violation is found, the landowner is notified according to the provisions of the conservation easement and steps are taken to repair the impacts of the violation. Most conservation easement contain language that defines the process for resolving disputes between the landowner and the Conservancy. The Conservancy has the right and responsibility to take legal action, if necessary, to enforce easement restrictions.
An endowment is established along with the conservation easement and is used to cover the costs of monitoring, enforcing compliance and legal defense of the easement.
17. What costs are incurred by the landowner in creating a conservation easement?
The landowner should expect to pay for legal and financial advice, ($500-$2500) and an appraisal of the property ($1500-$5000). An appraisal is only required if the landowner wants to take advantage of the tax deduction for granting the easement, and is a deductible expense. The Saginaw Basin Land Conservancy maintains a list of appraisers qualified to appraise preservation agreements for tax purposes.
18. What are the potential income tax benefits of donating a conservation easement?
Under the Internal Revenue Code, qualified conservation easement donations may be treated as charitable gifts for federal income tax purposes. The value of the gift can then be deducted at an amount up to 30% of the donor's adjusted gross income (AGI) in the year of the gift. If the easement value exceeds 30% of the donor's income, the excess can be carried forward and deducted (subject to the 30% limit) in each of the five succeeding tax years.
Example: Joe and Mary Smith donate a conservation easement on a 150 acre undeveloped woodlot to the Saginaw Basin Land Conservancy. The value of the easement is determined to be $135,000. If their AGI in the year of the donation is $100,000, they would be able to deduct $30,000 (30% of $100,000) in the first year. Since the value of the easement is greater than their allowable deduction, the Smiths would also be able to deduct $30,000 in each of the next three years -- assuming their income stays the same – and $15,000 the fourth year in order to claim the full amount of the easement donation.
For more information about the tax benefits of conservation easements, see this article by Timothy Lindstrom, Esq. from the Michigan Bar Journal.
19. How is the value of the conservation easement calculated?
The value of the easement is the difference between the value of the land without the easement restrictions and the value of the land after the restrictions have been applied and the development rights have been removed. The change in property value associated with a conservation easement must be determined by a qualified real estate appraiser.
Example: The Smith family conveys a conservation easement on its 150 acre woodlot to the Saginaw Basin Land Conservancy. If the property's current value is $3,000 an acre, its total fair market value-before the easement is in place-would be: 150 acres x $3,000/acre = $450,000. If removing the development rights lowers the value to $2100 an acre, then the total market value of the restricted property would be: 150 acres x $2100/acre = $315,000. The difference between the before and after values is the value of the Easement: $450,000 - $315,000 = $135,000 tax deduction.
20. How does the donation of a conservation easement affect estate taxes?
The donation of a conservation easement -whether made during a landowner's life or by bequest--can reduce the value of the estate upon which taxes are calculated. In some cases, the value of an estate after an easement donation may fall below the lifetime exemption so that estate taxes are avoided. Good planning is necessary to ensure that heirs of estates that include property receive maximum tax advantages. If you want to know more about the advantages of a CE for estate planning purposes, talk to your attorney or financial advisor.
For more information about the tax benefits of conservation easements, see this article by Timothy Lindstrom, Esq. from the Michigan Bar Journal.
21. How might property taxes be affected by the donation of a conservation easement?
The property's current assessment for tax purposes determines if tax benefits may be realized by protecting it with a conservation easement. If the assessment reflects the property's development potential and those rights have been permanently relinquished, the landowner can make a case to the local assessor for a reduction in property assessment. See Indian Garden Group v. Resort Township MTT Docket No. 157543, 205036 (Feb, 17, 1995) for the most up-to-date view of conservation easement and property valuation for tax purposes by the Michigan Tax Tribunal.
