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. The easement is signed by the landowner, who is the easement donor, and The Champlain Valley Conservation Partnership (CVCP- the Land Trust component of CATS), who is the party receiving the easement. CVCP accepts the easement with understanding that it must enforce the terms of the easement in perpetuity. After the 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 sticks. Each one of these sticks represents the landowner’s right to do something with their property. The right to build a house, to extract minerals, to lease the property, pass it on to heirs, allow hunting are all rights that the landowner has. A landowner may give up certain development rights, or sticks from the bundle, associated with their property through a document called a conservation easement.
(Following is a series of emails written by CATS Executive Director Chris Maron in February and March of 2016 on Conservation Easements.)
A Conservation Easement is a legal agreement between a landowner and a land trust like CATS, or government agency that permanently limits uses of the land in order to protect its conservation values. The landowner continues to own and use the land and can sell it or pass it on to his heirs.
When you donate or sell a Conservation Easement, you give up some of the rights associated with the land. For example, you might give up the right to build additional structures or to subdivide the property into multiple parcels. You do retain rights like using the land for agriculture or harvesting timber but agree to do those activities in ways that protect clean water, maintain soil health, and ensure sustainable use. Future owners will be bound by the easement’s terms. The land trust is responsible for making sure landowners follow the easement’s terms.
Conservation Easements can be flexible within established limits. For example, an easement on property with rare plants might prohibit development in sensitive areas but allow it in other places. An agricultural easement would allow farming and new barns, but only with a wide vegetated buffer along streams. An easement may apply to just a portion of the property.
In Clinton County, CATS and the owners of a 75-acre property with farmland, forests, wetlands, a stream, and one house created a conservation easement that designated 5 acres around their house as the “homestead” where additional non-residential structures could be built. No other houses are allowed on the property nor can it be subdivided. These actions mean the farmland will always be available for farming and the forest will always be wooded. A power-line now goes through the woods and no timber harvesting can take place in the forest east of the power-line. This part of the forest borders the creek so the no-logging restriction will help keep the water clean. Timber harvesting can occur in the woods west of the power-line but it must follow “best management practices.” Likewise, the farming practices must follow “sound agricultural practices” to maintain soil health and protect clean water.
In Willsboro, CATS holds a CE on 318 acres that have about 140 acres of farmland, 140 acres of forest, and 38 acres of wetlands. The CE allows only two houses—one is the existing house and its associated structures which are clustered in “Homestead One.” Another house can be built in an area designated as “Homestead Two” where it and accessory structures can be built. That’s all the houses the CE allows. The property can be subdivided in a number of specified ways and shortly after the closing, there was a subdivision when 116 acres of mostly farmland were sold to the adjoining property farm. The CE provides exceptionally strong protection to the forest. Whereas many easements allow logging that follows best management practices, this property’s owners wanted to let the forest become “old growth,” which is a condition few forests can attain. To provide for healthy wildlife populations, there is no trapping and no hunting of predators and carnivores (bears, bobcats, fishers, minks, cougars, wolves, foxes, and coyotes). For grassland breeding birds, it’s recommended that cutting hay occur after July 15 so they can have time to raise their young.
An Agricultural Conservation Easement protects the agricultural use of a farm, thus itprohibits conversion of productive farmland to residential and commercial uses. It stays as farmland—that’s how simple it is. Well, maybe not that simple because it will require best management practices to protect clean water, healthy soils, and wildlife habitat. It could even require “farming with the wild” that promotes greater protections of wildlife, fence-rows, and bird habitat. Many farmers already follow those practices. Agricultural easements promote farming on the land. That means jobs, especially in a place like the Champlain Valley where there is a resurgence of small, local-food based farms. (Photo credit Sara Kurak, Full & By Farm)
A Working Forest Conservation Easement protects productive timberland. It can’t be converted to residential and commercial uses. It stays as woods and has a forest management plan to promote sustainable use of the forest to keep water clean, maintain soils, encourage a diverse and healthy forest, and protect wildlife. The easement is especially helpful because it helps landowners better understand forest ecology and productivity. This way they recognize the danger to the forest of accepting what may seem like a generous offer of money for some trees, but can lead to “high-grading” when all the best trees are taken, skidders ripping up the soil and tearing bark off trees they run up against, and timber theft. A working forest conservation easement means jobs—sustainable jobs because the forest is treated properly.
A Forever Wild Conservation Easement protects biological diversity–plants, animals, natural communities, and habitat connectivity so animals and plants can move between habitats or across their ranges. A Forever Wild CE allows woodlands to become “old growth forests,” which are unusual but so necessary for our native species to thrive. To state the obvious, the land cannot be converted to residential or commercial uses and in addition, there is no timber harvesting, farming, trapping, hunting of predators and carnivores, or other consumptive uses. People can enjoy nature, drink the clean water, watch the birds, and find peace. Jobs? Not resource extraction jobs, but jobs in outdoor education, guide services, ecological research, and the result of enjoying the outdoors that makes us all more productive in what we do.
As we go farther down the trail describing Conservation Easements, let’s look at what they look like. For review, a conservation easement (CE) is a voluntary legal agreement to protect a property’s conservation values—its forest, farmland, wetlands, scenic vistas, clean water, etc—by permanently restricting specified land uses that would damage those features.
It starts with the “Whereas” clauses that establish the justification for the CE. For example, separate clauses might say, “Whereas the Property has—a high quality forest; productive farmland; is part of a wildlife corridor; has rare plants and animals; is identified in a land protection plan; will provide benefits to the public; etc.” Then it concludes with “therefore the parties enter into this conservation easement.”
The “Purpose” clause comes next and it’s the most important part of the CE because it articulates the purpose of the CE—namely to protect the “conservation values” which include plants, animals, natural communities, farmland, rivers, wetlands, etc and/or the agricultural use, forest management, or wildland features of the Property. It’s important because questions about the CE are referred back to its purpose.
Then the easement says what the landowner can’t do like build houses everywhere, dump trash, plow too close to steams, remove the top soil, etc. That’s followed by what the landowner can do—build a specified number of houses in designated locations, manage timber using best forest management practices, farm using sound agricultural practices, sell or lease the property, install solar panels, etc. Next is what the land trust, which holds the easement, can do. This includes entering the property with proper notice to monitor compliance with the CE, enforcing the easement, and for some properties, building a trail.
Finally, the last part of the CE describes administrative procedures like how the parties contact each other, make requests for specified actions, and amend the easement. Also, what to do if the easement is extinguished, property sold to another person, or a third party damages the property. Then there’s the signature page followed by the legal description and maps. That’s about it—a simplified explanation of a 15+ page document.
We’ve talked about what a conservation easement (CE) is, provided some examples, discussed working forest/farm easements and forever wild easements, and what is in an easement. For those wondering what is still to come, we’ll get into monitoring easements, the cost of easements, funding that helps land trusts acquire easements, tax benefits of donated easements, and how cooperation between land trusts facilitate protecting land with easements.
Now let’s look at a condensed summary of the process to protect land with a CE. First, the landowner, the land trust, or someone has the idea to save a piece of land. Next, the landowner and land trust meet to tour the property and discuss its features, their respective goals, the CE process, the costs, the need to have separate legal representation, and if the owner will sell or donate the CE.
Then they talk about and reach agreement on present and future land uses including the number and locations of future houses. The Land Trust fits all this into the appropriate CE template which is then shown to the lawyers. Meanwhile, the Land Trust gets its board’s approval, has the property appraised, and if needed, contracts for a survey, especially if there is a need to define areas where buildings may be built. After what can be lengthy discussions to finalize the wording of the easement, the two parties agree on the CE.
Because the Land Trust’s long-term role is to ensure compliance with the CE, it documents the condition of the Property as it enters into the CE. So, it develops a “Baseline Documentation Report” (BDR), which describes the Property’s “present condition” in relation to the terms of the CE. So, if the CE says “one house can be built in the now empty northeast corner of the Property,” the BDR would say “no building is now located there.” If the CE says agricultural activity must be 50 feet from a creek, the BDR would say “farming is taking place and the 50-foot buffer is in place.”
When the parties have agreed on the CE and the Baseline Report, they conclude the transaction and, hooray!, another wonderful Champlain Valley property and its natural, agricultural, and scenic values are protected.
Part 6 – Determining the value of a CE
Conservation easements have value. Landowners can donate the CE and obtain tax benefits of a non-cash charitable contribution. Landowners can sell the CE and be paid for its value. A middle ground is something called a “bargain sale” where the landowner sells the CE (or a property) below its appraised value and the difference between the appraised value and selling price is counted as a non-cash charitable contribution that can qualify for tax benefits.
So, how much is the easement worth? We turn to a qualified appraiser to get that answer. He or she will evaluate the value of the Property with all of its rights intact. That means if there are twenty building rights, a forest with substantial timber value, and 100 acres being farmed, the appraisal will reflect those conditions. That is called the “Before” value.
Then, assuming the CE limits development to two houses, allows a very limited annual timber harvest, identifies a route for a permanent hiking trail, and creates a buffer along a stream that protects clean water but takes twenty acres out of production, the appraiser establishes a value of the Property with those conditions. That is called the “After” value.
Then it is a simple subtraction problem where “before value” minus “after value” equals “conservation easement value.”
Part 7 – What Happens after the Conservation Easement is Signed?
Hooray! The Conservation Easement is signed and more land is saved. Now what? The landowner carries on but is mindful of how the CE protects the Property’s conservation values and clean water. If he donated the CE, he will contact an appraiser to value of CE and justify the tax benefits he’ll receive.
The Land Trust files the documents in a secure location, informs its donors and the public about its conservation success, and deposits funds into the stewardship and easement defense accounts. If it was a donated CE, the Land Trust will study the appraisal and sign the IRS form for the landowner’s tax benefits.
Then a year goes by and it is time to monitor the easement. The Land Trust reviews the CE, reads the Baseline Documentation Report which describes the Property when it was covered by the CE, and contacts the owner for a site visit. They meet, discuss the Property, and walk it as the Land Trust take pictures and verifies compliance with the CE. Then the Land Trust fills out a form, attaches new photos, and mails it to the landowner.
In rare situations, the landowner or Land Trust may want to alter the CE. This is done through a legal process to amend the CE. A caution is that if the CE was donated, the amendment cannot reduce the restrictions and thus give value back to the landowner for which tax benefits have already been claimed.
When the land is sold to another owner, then additional work takes place. The Land Trust must explain the CE to the new landowner emphasizing that this is a permanent document that restricts potentially harmful activities and encourages beneficial uses. Some new owners may not understand the process or resist the CE which could cause problems. In the vast majority of cases, the new landowner supports the CE because he too, wants to protect the conservation values and clean water. Because the CE is permanent, this easement monitoring process will continue far into the future. And that is what conservation is—its saving what we have now for those who will follow—an inspiring and auspicious reality.
Part 8 – Conservation Easement Costs
A conservation easement (CE) is an excellent way to preserve natural habitat, conserve farmland, and protect clean water. It can also be costly. Here’s what goes into those costs:
The Appraisal establishes the CE’s value. If the landowner is donating the CE, the IRS requires him to pay for the appraisal. If the landowners sells the CE, the Land Trust may pay for the appraisal. Estimated cost – $3,500
Lawyers review the CE and arrange the transaction. Estimated cost – $2,000.
A Survey may be needed for the whole Property or just to identify areas where structures can be built. Estimated cost of a full survey – $10,000.
Transaction Costs include updating the title to the Property, getting title insurance, paying real estate transfer taxes, and closing costs. Estimated cost – $2,000.
Land Trust Staff Costs include inspecting the Property, negotiating the CE, creating a Property Description Report, contracting for appraisal/survey/title work, and completing the transaction. Estimated cost – $3,500.
Stewardship Endowment is intended to provide earnings that pay for 1-2 days of staff time to annually meet the landowner and review the status of the Property. Estimated cost – $7,500
Easement Defense Fund is a predetermined amount aside for each CE that will be combined with insurance coverage to pay legal costs in the rare case that the Land Trust needs to legally enforce the CE. Cost – $3,000.
So, that all adds up to $31,500. That’s a lot of money. Before you start writing checks or say, “No way,” just “hold your horses” as my father used to say and look forward to the next piece on CE’s where I’ll discuss programs to cover those costs and how the benefits of donating a CE can offset the conservation easement expenses.
Part 9 – Paying the Conservation Easement Costs
Conservation easements are a great way to conserve land and as we discussed in Part 8, they do come with costs—the price of purchasing the CE and paying the associated transaction costs. Thankfully, there can be funding to cover some costs and for donated easements, tax benefits that make up for expenditures.
Paying for the CE:
- Donation – Some landowners are in a position where they can donate the conservation easement or sell it below its appraised value (called a “bargain sale”). The federal and state governments offer tax benefits to the landowner because that donation is counted as a non-cash charitable contribution. New York is unique in providing an income tax credit of 25% of the property tax up to $5,000. That credit applies to the present owner and all subsequent owners of the property. It does not lower the property taxes paid on the property but allows the landowner to deduct that amount from NY State income taxes.
State & Federal Tax Information for Donated Conservation Easements
FAQ About New York’s CE Tax Credit: A Guide for Landowners & Land Trusts
- Purchase with privately-raised funds – The land trust can buy the CE using its “land protection fund” that people have donated to for that purpose. Alternatively, the land trust might fundraise to buy a CE on a certain property. Or a donor could set up a specific fund the land trust uses to protect land. An inspiring local example is the Klipper Family Fund that the Open Space Institute (OSI) has used to protect several local properties.
- Grants – The land trust can apply to private foundations for grants to pay for conservation easements. It can also apply for state and federal grants. New York has a Farmland Protection Program that pays 75% of the cost to purchase conservation easements on farmland. The remaining 25% can come from other grants, private funds, or doing a bargain sale. Here in the Champlain Valley, a number of farms have been conserved through this program.
Transaction costs of a CE: These expenses can be a big deterrent to getting a CE because it can easily add more than $30,000 of costs—this includes survey, appraisal, lawyers, and stewardship endowment. For a donated CE, the landowner may be asked to contribute this and some can do that. But in many cases, it is simply too much. Fortunately, there are a few ways to address these costs.
- New York State’s Conservation Partnership Program, funded by the Environmental Protection Fund and administered by the Land Trust Alliance,offers “transaction grants” that pay for the survey, appraisal, staff time, closing costs, and even costs of enhancing public access, meaning trails. It’s a matching grant program so the land trust matches some of the grant reward with funds and/or staff and volunteer time. This wonderful state program can cover a substantial amount of the CE costs.
- Privately funded programs are another opportunity to address CE costs. Donors can give to a land trust’s land protection fund which can pay those costs. If they’ve set up a special land protection program like OSI’s Klipper Family Fund, the funds can be used to pay transaction costs, especially for donated conservation easements and those acquired through bargain sales.
- New York’s Farmland Protection Program grants can pay transaction costs in addition to purchasing the CE on properties approved for grant funding but the Champlain Valley hasn’t received any grants to protect farmland for a number of years.
- Stewardship Endowment – Few programs pay for this cost, so the land trust can raise funds specifically for that purpose or ask the landowner to donate for that purpose, which can be structured over time.
In sum, CE’s are costly. Thankfully there are generous landowners, donors, foundations, and government programs that address those costs. Nevertheless, the expenses can be a barrier to protecting a property with a CE. And that is a challenge all land trusts address as they work to conserve natural areas, farmland, scenic vistas, and clean water.
Part 10 – Success Stories!
CE Success Story #1 – DeNeale CE: Dick and Leanna DeNeale wanted to conserve their 318-acre property just north of Essex on Route 22 but the potential costs were a deterrent. Then the federal government renewed a tax incentive to encourage people to donate conservation easements—but for just two years. That gave us a brief window to work with the DeNeales so they could deduct 50% from their gross adjusted income instead of just 30% and have sixteen years to make those deductions instead of six. So, if they earned $50,000/year and the easement was worth $300,000, they could deduct $25,000 from their gross adjusted income and do that for twelve years to gain the full benefit of their donated CE (using the old formula, they could deduct $15,000 for six years which would allow them to deduct only $90,000 of the $300,000 donated value). Another benefit is the donated CE allows them to get a New York State income tax credit of 25% of their property taxes every year. That credit applies to them and all subsequent owners of the property. It does not lower the property taxes paid on the property but allows them to deduct that amount from their New York State income taxes.
Then we received a “transaction grant” from NYS Conservation Partnership Program administered by the Land Trust Alliance that covered our legal and staff costs plus the DeNeale’s survey cost. So, these great programs enabled the DeNeales to protect their beautiful property and allowed us to build the Ancient Oaks Trail. Final good news—the temporary federal tax incentives that benefited the DeNeales were just made permanent.
Success Story #2 – Full & By Farm: When the Eddy Foundation bought a large property in Essex featuring Boquet Mountain about fifteen years ago, the primary purpose was to conserve the forest because it is part of the Split Rock Wildway wildlife corridor connecting Lake Champlain and the Adirondack Mountains. The property came with a run-down farm with untended fields along Leaning Road.
Several years later, James Graves and Sara Kurak, who had come here to work at Essex Farm and were looking for their own farm, made an arrangement with Eddy and began renovating the farm. It’s best for farmers to own their farm so Sara and James made an arrangement with Eddy Foundation so they could buy the farm at a price they could afford. That was done through their donation of a conservation easement that keeps the land open for farming, provides wide vegetated buffer along the Boquet River to protect clean water, and encourages farming practices that preserves wildlife habitat. The donated conservation easement provided income tax benefits and a credit on their state income tax worth 25% of their property taxes. Their “Full and By Farm” became one of our area’s first “community supported agriculture (CSA)” farms providing outstanding local farm products to its happy members. It has also spawned several other new, young farmers who are making the Champlain Valley known for productive local farms growing food we all enjoy.
Success Story #3 – Rowe Conservation Easement: Bob and Patty Rowe wanted to conserve their 121 acres on Jersey Street in Essex before selling it. Their property featured 100 acres of forest in the Split Rock Wildway where maintaining the forest is extremely important for wildlife moving between Lake Champlain and the Adirondack Mountains. Conservation groups wanted to conserve the forest yet its value with all the building rights made it prohibitively expensive. It also had 20 acres of farmland. The problem was that this was mid-November and the Rowe’s needed to donate the CE by year’s end. So, we quickly worked out a deal where the Rowe’s donated the CE to Eddy Foundation and it closed on December 31, 2008. Shortly thereafter, Northeast Wilderness Trust bought 90 acres of the woods to become forever-wild forest, and the 31-acre farm tract was sold to a couple who planned to build one house on it. They never built the house and recently sold the conserved farmland property to Reber Rock Farm which grows food enjoyed by many in our local communities. Result – A conserved forest and farm that will stay as farmland producing tasty food for us all.
Success Story #4 – Laewitz CE: When driving south on Rt 22/9N from Westport toward Port Henry, just past the RR underpass, you make a big right turn and look past a two-story brick house to a spectacular view over Lake Champlain. That view is conserved by conservation easement. Here’s the story—Karen Laewitz invited me for a visit when I worked for the Adirondack Nature Conservancy/Adirondack Land Trust. She served a fabulous apple pie and talked about living in the house for many years, loving the land, and about her husband who had died several years before. “You know, I feel he like he’s just taking a long walk and someday I’ll join him.” But the primary thing on her mind was conserving the land and view she loved and how she could do that financially. We came up with a creative solution—she sold about fifteen acres of forest and made a generous bargain sale of the conservation easement on the open land at a value that just paid her transaction costs. This “bargain sale donation” reduced the capital gains tax and enabled the proceeds from the land sale to provide her with the financial security she needed for the latter stages of her life. Thank you Karen—you’ve saved a view thousands of people appreciate every year.