Conservation Tools

A conservation referendum is a highly successful mechanism for raising money that is dedicated to a specific conservation purpose. Open space of agricultural, recreational, natural, scenic, historic and/or cultural importance to a community can be protected using funds approved by voters in a primary or general election. If a local government hasn’t exceeded its taxation or debt limits, voter approval of funding for conservation projects isn’t necessary. Nevertheless, a referendum can be highly desirable because the referendum will serve to permanently dedicate the proposed tax or bond revenue to the conservation purpose described in the referendum. Cities, boroughs and townships in Pennsylvania are permitted to levy dedicated property, earned income and real estate transfer taxes for land conservation with the approval of a simple majority of voters through a ballot measure. State law does not provide this authority to counties. Both county and local government units in Pennsylvania may issue bonds with the proceeds dedicated to conservation projects with the approval of a simple majority of voters.

Prospective donors sometimes hesitate to make a substantial donation of cash, land or other property because of their concern that they may deplete assets that may be needed later in their lives. A gift by will avoids this concern.

A gift of cash or other personal property by will, sometimes called a bequest, can be made in a specific dollar amount or calculated as a formula based upon other requirements of the estate.  The gift can be to a specific conservation organization or the person(s) administering the estate (the "personal representatives") can be given the power in the will to identify the beneficiary of the gift. The gift can be unrestricted or can be given for a specific purpose.

A gift of land or other real estate interests by will, sometimes called a devise, can be made of the entire ownership interest, a percentage interest in common with others, or a remainder interest after the lifetime of some individual or individuals identified in the will. The will may authorize or direct the personal representative to donate a conservation easement on a property to a conservation organization before it is conveyed out of the estate in accordance with the terms of the will.  Unrestricted gifts of cash or items of personal property that can be converted into cash may come as delightful, and much appreciated, surprises to the beneficiary.  That's not always true with gifts of real estate.  The prospective beneficiary should be consulted before including a devise of real property in a will -- particularly if it is the donor's intent to restrict its use or transferability.

If the conservation organization needs time to obtain acquisition funding, and if the seller is willing to defer payment in full for that time, there are two ways to achieve the desired result:

• Seller Take Back Financing.  At closing, seller deeds the property to the conservation organization.  At the same time, the conservation organization delivers a promissory note to the seller for the unpaid purchase price and records a mortgage on the property in favor of the seller to secure that debt.
• Installment Payment Financing (i.e., Installment Agreement).  At closing, the seller and conservation organization sign and record an agreement that sets out the terms for payment of the unpaid purchase price.  The seller retains title to the property until the purchase price is paid. 

Either financing alternative allows the conservation organization the right to use the property while paying off the purchase price.  In either case, the seller can defer recognition of gain on the sale for federal tax purposes until payments are received.

The Pennsylvania Land Trust Association maintains a suite of model legal documents and accompanying commentaries to assist land trusts, government units, landowners and donors, as well as their respective legal counsels, in implementing conservation transactions and other conservation-related activities. The models and commentaries are the products of countless hours of research, regular feedback from users, scrutiny by legal professionals, and discussion and drafting by the development team. They are characterized by plain language, consistent form, easy-to-read formatting and incorporation of best practices.

The models are regularly used in conservation projects and reviewed for potential improvement. They are updated as needed to reflect advances in knowledge and to maintain them as state-of-the-art legal documents.

The model easement documents are written to achieve meaningful resource protection while being fair to both landowner and holder. The other models are likewise written to be fair to all parties in advancing the purpose of the particular document. The models are written to conform to Pennsylvania law but are easily adapted for use in other states.

Conservation organizations often rely on promises by donors to donate at a future time money, land, conservation easements, services and other valuables. Before investing time and money in a prospective project, a conservation organization may want the prospective donor’s promise to support the project to be a legally binding obligation of the donor. Donors may fear that a legally binding obligation will nullify the wholly voluntary nature of their gift, thereby eliminating the possibility of receiving a federal income tax deduction for making a charitable contribution.

This guide offers suggestions on ways to create a legally enforceable promise to make a gift. The guide also offers suggestions on ways to preserve the voluntary nature of donor’s investment in the project and, hence, allow for the possibility of the donor claiming a deduction for federal tax purposes.

A carefully crafted document evidencing the proposed terms of donation (the “donation document”) can insure that there is a meeting of the minds between a donor and donee about the investments each will be expected to make to bring a project to fruition while addressing the concerns outlined above.

If a conservation organization needs time to obtain acquisition funding, and if seller is willing to defer payment in full for that time, there are two ways to achieve the desired result:

• Seller Take Back Financing.   At closing, seller deeds the property to the conservation organization.  At the same time, the conservation organization delivers a promissory note to seller for the unpaid purchase price and records a mortgage on the property to secure that debt.
• Installment Payment Financing (i.e., Installment Agreement).  At closing, seller and conservation organization sign and record an agreement that sets out the terms for payment of the unpaid purchase price.  Seller retains title to the property until the purchase price is paid.

Either financing alternative allows the conservation organization the right to use the property while paying off the purchase price.  In either case, seller can defer recognition of gain on the sale for federal tax purpose over a period of two or more years.

If a conservation easement, rather than land, is being purchased, then the only alternative is installment payment financing.  A conservation easement is not the kind of property interest that can be the subject of a mortgage to secure payment of the purchase price.

A stewardship fee is a means for a conservation organization to secure the financial commitment necessary to undertake long-term stewardship of a conservation easement. The landowner who cannot or will not make a cash contribution or pledge up front to cover the easement holder’s long term stewardship liability may be willing to establish a fee that will be borne by future owners of the land or that will only be paid upon certain triggering events.

Ensuring that the conservation organization can collect a fee from future landowners who did not, themselves, promise to make payment, requires careful planning. A funding commitment (e.g., a stewardship fee) that is enforceable against the donor who made the promise is relatively easy to create (see discussion in Pledges and Donation Agreements). To enforce the funding commitment as the personal obligation of a future owner is far more challenging: Either the commitment must meet the requirements of a covenant running with the land (including that the payment be directly connected to the future owner’s use and enjoyment of the land) or the future owner must adopt the commitment as his own. The commitment may also be collected from the value of the conserved land by having it secured by a mortgage recorded after the recorded conservation easement.