UNDERSTANDING CONSERVATION EASEMENTS:   PART I

There never will be enough public or private funding to buy all the land a municipality or its citizens might want to protect. But if the goal is preservation of scenic vistas, farms, and woodlands, there is no real need for municipalities to own the underlying land.

Conservation easements are a land-saving tool that stretches the open space dollar. Easements keep land on the municipal tax rolls, can be tailored to the specific needs of the municipality and landowner, and are completely voluntary on the part of the landowner. They can be used to protect scenic vistas from being blocked, save farmland, and preserve and buffer streams.

Read more and learn how.

• An overview
• Frequently asked questions
• Easements: pros and cons
• How can I learn more?

Excerpted and adapted with permission from Using Conservation Easements to Preserve Open Space: A Guide for Pennsylvania's Municipalities. Copyright © 2002, PA DCNR.






  • What Is a Conservation Easement?
  • Rights Retained by Landowners
  • Restrictions Placed on Properties
  • Calculating the Value of an Easement
  • Public Access Issues
  • Landowner Liability Issues
  • Monitoring and Enforcing Easements
  • Costs to Establish and Manage Easements

    What Is a Conservation Easement?
    A conservation easement is a written legal agreement between a landowner and a government entity or land trust (a private, non-profit conservation organization) that permanently restricts a property's uses to protect its conservation values.

    When a landowner donates or sells an easement to a land trust or municipality, the easement holder continues to own the eased property and pay taxes on it but he or she agrees to permanently give up certain rights.

    Future owners will be bound by the terms of the easement, which is recorded at the county court house. The holder of the easement takes on the legal responsibility and right to enforce the easement. If a future owner or other person violates the easement — perhaps by building a structure the easement does not permit — the easement holder will work to have the violation corrected, in court if necessary.

    Rights Retained by Landowners
    The landowner continues to own the land conserved by an easement and retains many rights of use. An easement document might specify, for example, that the owner reserves the right to:
  • engage in agricultural production;
  • build barns, sheds, and other farm structures;
  • use, maintain, and expand an existing residence;
  • manage woodlands for timber production or conduct a Christmas tree operation; and/or
  • subdivide the land and construct one or more additional residences in agreed-upon areas or "building envelopes" ( See figure #1 ).

    Restrictions Placed on Properties
    A landowner's use of property conserved by an easement might forbid or limit:
  • excessive signage;
  • commercial, industrial, and mining activities;
  • new buildings, except for those specifically negotiated in advance;
  • subdivision; and/or
  • commercial recreational use (this prohibition is required to obtain federal estate tax benefits).

    Each of the restrictions and reserved rights is negotiated and agreed upon before it is included in the easement document.

    Calculating the Value of an Easement
    Because eased property cannot be fully used or developed as zoning would otherwise allow, its market value is lessened. The easement holder may fully or partially compensate the landowner for this reduction in value ( by paying for the easement ); or the landowner may choose to "donate" the reduction in value to the grantee. As long as certain IRS requirements are met, the reduction in market value attributable to a donated easement may be considered a charitable donation that makes the landowner eligible for a federal income tax deduction and estate tax benefits.

    ( To learn more, see " Beyond Basics: Easements Part II " . )

    Public Access Issues

    Easements do not open property for public use. Public access is granted only if the landowner and easement holder agree to this and state it in the easement document.

    Under IRS regulations, easements designed to protect farmland, scenic vistas, or wildlife and plant habitats do not require public access to be tax-deductible. On the other hand, IRS regulations require that easements donated for recreational or educational purposes allow public access.

    ( Click here to view the text of IRS regulations on easements.)

    Easements purchased with grants from the Pennsylvania Department of Conservation and Natural Resources or county programs may also require some degree of public access, such as environmental education visits or limited public hunting and fishing.

    Landowner Liability Issues
    If the easement provides for even limited public access, landowners may be concerned about their potential liability to people who are injured while on the property. Landowners should be aware that the Pennsylvania Recreation Use of Land and Water Act (68 Pa. Stat. Ann. §477-1 et seq.) protects them in many situations, reducing the standard of care they would otherwise owe to easement users so long as they make their land available free of charge to the public for recreational purposes. Where the Act is applicable (courts have interpreted the Act to cover only "undeveloped" land), landowners owe no duty to keep their premises safe and are immune from lawsuits claiming that they were negligent. Landowners will be liable only for their "willful or malicious" failure to guard or warn of dangerous conditions.


    ( Click here to view the LandSavers show Update on Liability).


    Monitoring and Enforcing Easements
    After the parties agree upon the terms and restrictions of the easement, and after the easement has been legally executed and recorded in the county courthouse, the easement holder will visit the property on a periodic basis — usually annually — to ensure that the landowner is complying with the terms of the easement. Many easements are written to require advance notice to the landowner of the date and time of monitoring visits. If a violation is discovered during the visit or otherwise, the easement holder will contact the landowner in an effort to correct the problem. If the violation cannot be corrected through mediation, the easement holder may initiate legal action to enforce the easement.

    Costs to Establish and Manage Easements
    Acquiring, managing, and even donating a conservation easement involves short and long-term costs on the part of the landowner and the easement holder, as follows:

    1) costs to create and acquire easements (e.g., purchase price, legal fees, staff time, baseline documentation, appraisal, survey, title report, title insurance, environmental assessment, recording fees, and stewardship fund);

    2) costs to manage easements (e.g., staff time to monitor eased property on a regular basis, prepare reports, and communicate with landowners); and

    3) costs to enforce easements (e.g., staff time working with landowners to correct easement violations, and hiring legal counsel, if necessary).

    Some easement holders cover a portion of these costs by requiring landowners to contribute to a stewardship fund that will generate income sufficient to cover anticipated yearly expenses.

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  • Why would landowners voluntarily restrict their property rights?
  • Why not ask the landowner to deed restrict the property instead?
  • How does the public benefit if public access is not allowed?
  • Can easements ever be changed?
  • Can easements ever be terminated?
  • What is an agricultural conservation easement?
  • Can municipalities acquire and fund easements themselves?

    Why would landowners voluntarily restrict their property rights?
    The primary reason is that they love their land. Although they might be responsible stewards of their property, they generally have no control over what subsequent owners will do with the site. Easements permit these conservation-minded landowners to control how the property will be used in perpetuity, no matter who the future owners are.

    Another important reason that landowners turn to conservation easements is that donations, bargain sales, or bequests of easements can have beneficial tax consequences. In some cases, sale of a conservation easement nets the landowner close to the same amount as selling to a developer AND helps keep the land in the family.

    Why not ask the landowner to deed restrict the property instead?
    Landowners can insert restrictions into their property deeds that purport to limit future uses. However, placing a deed restriction on a parcel only is effective if there will be someone present in the future who is legally authorized — and willing — to monitor and enforce the restrictions. If the current owner wants to go to the trouble of designating (and funding) a future monitor to enforce the deed restrictions, the landowner might as well place a conservation easement on the property and obtain an easement's tax benefits and legal protections.

    How does the public benefit if public access is not allowed?
    The benefit to the public of privately-owned, protected property is indisputable. In the most recent statewide Recreation Participation Survey, Pennsylvanians listed their top recreation activity as sightseeing/driving for pleasure. Easements can provide this visual relief. Easements also can protect wildlife corridors, maintain a sense of community, combat sprawl, assist in farmland preservation, and maintain high quality water sources. Easements can be placed on private land surrounding public parks to create visual and habitat buffer areas.

    By keeping the land free from development, particularly residential development, the community also avoids increasing taxes to pay for new schools and added municipal services. ( Click here to learn more about this topic. )

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    Can easements ever be changed?
    Amendments that result in net conservation gain (e.g., increasing restrictions on the property) or are conservation-neutral (e.g., clarification of terms, boundary adjustments) are the only ones that should be considered. In addition to being unethical, IRS penalties await those who amend a donated easement in a way that increases the property value (say by restoring an originally prohibited right).

    Parties also may choose to write a provision into the easement document clarifying when future amendment is permissible.

    Can easements ever be terminated?
    Although most conservation easements are granted to run "in perpetuity," easements can be terminated under certain circumstances, many of which are not under the control of the landowner or easement holder.

    Easement restrictions may be terminated by condemnation of the underlying land by a government agency. IRS regulations require the easement document to address the distribution of proceeds that result from the condemnation.

    Foreclosure of a pre-existing lien (e.g., mortgage, tax lien) on the property will extinguish the easement restrictions. For this reason, easement holders should always do a title search before accepting an easement. If the property is mortgaged, a subordination agreement needs to be obtained from the mortgage holder so that a later foreclosure will not terminate the easement.

    The "doctrine of changed circumstance or conditions" also can affect the long-term viability of a conservation easement unless easement drafters are careful. This doctrine allows (future) landowners to argue that the restrictions on their land can no longer fulfill their original purpose because neighboring areas have changed so much from the time the easement was drafted. For instance, assume that the sole stated purpose of a particular easement were to provide a buffer area for a neighboring wildlife preserve, and that the preserve is closed forty years from now because the species it was designed to protect is gone. The doctrine of changed circumstances might be invoked to challenge the easement even though the property still possessed great scenic and open space value. Careful research and drafting of a property's multiple conservation values can avoid this outcome. The easement document should also contain a provision specifically noting that as surrounding areas change or other uses become more economically beneficial, the purpose of the easement is not decreased.

    A number of other possible ways an easement might inadvertently be terminated were remedied by the state's Conservation and Preservation Easements Act.

    What is an agricultural conservation easement?

    Conservation easements can have different names depending on which resource they protect. An easement designed to protect farmland might be called an agricultural conservation easement; an easement designed to protect the façade of an historic structure might be called an historic preservation or façade easement; and an easement acquired to preserve a scenic viewshed might be referred to as a scenic easement. All have similar components.

    ( Click here to learn more about agricultural conservation easements. )

    Can municipalities acquire and fund easements themselves?
    Municipalities have long been authorized to acquire land for active or passive recreational purposes. In addition, open space purchases are authorized under Act 153 to permit protection of:

    • water resources and watersheds;
    • forests and farmland;
    • natural resources such as floodplains and steep slopes;
    • scenic areas visible from public rights-of-way;
    • historic, geologic, and botanic sites of interest; and
    • open space between communities.

    ( Click here to learn more about Act 153. )

    Some municipalities rely instead/(or in addition) on the authority of the real property provisions of the municipal codes in making their open space and easement acquisitions.





  • PROS
    		•
    For the Municipality :
    • Easements are flexible tools. They can be written to achieve specific township goals such as preserving scenic viewsheds along a country road.
    • Easements are perpetual. The restrictions will remain in force even when the property changes hands.
    • Easements can conserve scenic beauty and environmentally sensitive areas at a lower cost to the municipality than fee simple acquisition.
    • Eased property remains on the tax rolls. Responsibility for maintaining the eased property typically remains with the landowner, yielding an additional savings to the municipality over fee simple acquisition.
    • Easements may increase property values on surrounding tracts.
    For the Landowner :
    • Landowners can be assured that the eased portions of their property will be conserved forever.
    • Easements remain in force even when political leadership and zoning ordinances change in the municipality.
    • Placing a conservation easement on the property may significantly lower estate taxes. The tax savings could spell the difference between being able to keep the land in the family and needing to sell it to pay estate taxes.
    • The easement may provide significant federal income tax benefits if the landowner donates the easement to the municipality or land trust (rather than selling it at fair market value).
    • An easement may lower property taxes due to a reduction in the property's assessed value.
    • The reduction in an eased property's market value may be partially made up for through money gained from sale of the easement and/or through tax savings. A combination of conservation easements and limited development on the property may well provide a net gain to the landowner equivalent to an outright sale to a developer who fully develops the property.
    • Landowners can continue to live on their properties and may sell it or pass it on to heirs.
    • An easement can be tailored to a landowner's particular needs (such as reserving three acres for a future residence for the landowner's heir).


  • CONS
    		•
    For the Municipality :
    • Although the public and potential sellers of real estate generally understand the fee simple acquisition process, taxpayers and landowners may have to be educated about how easements work.
    • Establishing the easement involves up-front costs for an attorney or land trust staff to draft and review the easement; for a biologist to prepare the property's baseline documentation; for an appraisal and title search; and for a survey, title insurance, and an environmental assessment, if necessary.
    • There are long-term costs to manage the easement (i.e., annual inspections and record-keeping).
    • The easement holder is responsible for ensuring that easement restrictions are followed. If a violation is discovered, the holder is responsible for enforcing the easement terms, through legal action if necessary.
    For the Landowner :
    • There are short-term costs even to donate an easement, including appraisal and attorney fees. A stewardship donation may be requested if a land trust will be the easement holder.
    • The landowner is choosing to give up certain development rights, which will lower the property's market value.
    • Easement restrictions are permanent and bind all future owners.


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    If you are a landowner and are interested in speaking with a local land trust about the benefits of placing an easement on your property, go to Pennsylvania Land Trust Association to locate land trusts active in your area. The Land Trust Alliance site also has general information about land trusts. If you are a municipal official or citizen activist who wants to explore setting up a land protection program in your municipality, please refer to these sites and also come back and view our next webcast, which will have details on the mechanics of putting easements in place.

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