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A conservation easement limits certain uses on a property in order to advance specified conservation purposes while keeping the land in the owner’s ownership and control.
The conservation easement is a tool to help landowners and conservation organizations or governments work in partnership to achieve conservation objectives. The objectives, and the means for achieving those objectives, will vary depending on the character of the particular property, the goals of the conservation organization and the needs of the landowners. For example, an easement’s objectives might include any one or more of the following:
The means for achieving the easement’s objectives might include any one or more of the following:
The most distinguishing feature of the conservation easement as a conservation tool is that it enables users to achieve specific conservation objectives on the land while keeping the land in the ownership and control of landowners for uses consistent with the conservation objectives. For example: If a community seeks to ensure that no development will occur near a high quality stream known for its recreational and wildlife values and seeks to ensure that forestry is conducted sustainably and without damaging water supplies, conservation easements may achieve these goals with the landowners still able to generate timber and other revenue from the property.
A conservation easement on the land can complement private economic activities rather than preclude or severely hamper them. However, the tool has its limits. For example, if the organization or government wants to dictate to landowners how to manage their land on a continuing basis (going beyond the program set forth in the grant of conservation easement), then the easement may not be the best choice of tools. Likewise, if the conservation organization or government wants control of any portion of the land or continuous access to it.
In some cases, owners may choose to grant the holder the right to remove invasive non-native plant species, plant native species or even to establish a public trail or other public access to the land as part of a conservation easement. However, owners are not obligated to do so, and holders often are not interested in seeking these additional rights.
To conserve the land, the owners and the “holder” (a nonprofit conservation organization or government) sign and record at the county recorder of deeds office a document that vests in the holder a real property interest in the area identified for protection. This property interest is quite narrow. The owners retain their rights to possess, control and responsibly manage the land and to exclude trespassers. The holder is granted only the right to constrain the use of the land to the extent necessary to achieve the conservation purposes specifically agreed to by the owners. These purposes, also referred to as goals or objectives, are set forth in the document; so too are a set of restrictions and limitations identified by the owners and holder as being the agreed upon means to achieve the identified objectives.
The conservation objectives and restrictions established by the owners, as well as the rights that the owners grant to the holder to advance the objectives and enforce the restrictions, run with the land, binding all future owners of the land.
The real property interest granted to a holder in order to advance a conservation purpose is called a conservation easement in Pennsylvania. (The Pennsylvania law providing statutory authority for the creation and handling of these interests is named the “Conservation and Preservation Easements Act”.) A national panel of respected legal scholars and practitioners has convincingly advanced the label conservation servitude. (See the Restatement of the Law (3d) of Property—Servitudes.) This guide generally uses the term “conservation easement” or “easement” to identify this real property interest.
In legal terms, a conservation easement is a type of servitude. Servitudes allow people to create stable long-term arrangements involving land uses for a variety of purposes. The wider class of servitudes includes everything from a shared driveway arrangement between two neighbors to the complex structure of easements, restrictive covenants and affirmative covenants that will govern an entire planned community. A conservation servitude (also known as a conservation easement) is simply a long-term arrangement to regulate land use for conservation purposes. It operates by vesting a power in a holder to constrain activities on the land in order to achieve conservation purposes.
There are two important differences between servitudes and other types of real estate interests. The first is that, as the name suggests, servitudes serve a purpose. The purpose is not only the reason for the arrangement, it sets the limits of the rights or powers vested in the holder of the servitude. In the case of a servitude granted to conserve land important to a waterway, the rights and powers vested in holder are not unlimited -- they must be reasonably related to achieving that purpose. Both landowners and holder should strive not only to make the purposes of the conservation easement clear but also to create a set of restrictions that is demonstrably related to achieving that purpose.
The second difference between servitudes and other types of real estate arrangements is that servitudes are "non-possessory", which means that (unlike leases and other estates in land) all rights of ownership and possession remain with the landowners. Neither the holder nor anyone else has the right to exclude the landowners from using their entire property including the riparian buffer area. Their use must be consistent with the conservation objectives of the conservation easement but they always remain in sole and absolute possession of their land.
Landowners continue to have absolute control over who may enter the property and for what purpose. The conservation easement will ordinarily grant holder the right to enter for purposes of monitoring compliance with, or remedying violations of, the conservation easement and no other purpose. Some landowners may be willing to grant holder a right of entry to study aquatic species or to stabilize banks of the waterway. Others may be willing to grant rights of public access for fishing, boating and other recreational uses. These are affirmative access easements (rights of entry for particular purpose) rather than conservation easements, and are usually granted by a separate document.
A servitude is not an agreement in the nature of a contract. The title of the document may use the word "agreement" (as in, for example, Riparian Buffer Protection Agreement) but, in order to achieve its objective of permanent protection, the content must create a servitude for conservation purposes on the land. The grant of a servitude permanently and unconditionally vests in the holder a right or power to use, or constrain the use of, land for a particular purpose. The process starts with a meeting of the minds between the granting landowners and the holder but, once the granting document is recorded, the conservation easement binds the land whether future owners agree with it or not. That does not mean that anything written in a recorded document is enforceable against future owners. A conservation easement, like other servitudes, is an extraordinary arrangement forever binding on people who never agreed to it. Care must be taken to keep the arrangement both reasonable and purpose-driven if it is to be enforced against future owners.
Land trusts in their marketing materials sometimes take the approach of emphasizing the cooperative aspect of their easement work and referring to the documents used to vest conservation easements as agreements, for example, a “Conservation Easement Agreement”. In Their Own Words: Fifteen Stories of Conservation and Inspiration (2007), introduces the conservation easement as:
[a]n agreement between a landowner and a private land trust or government. The agreement limits certain uses on all or a portion of a property for conservation purposes while keeping the property in the landowner’s ownership and control. The agreement is tailored to the particular property and to the goals of the owner and conservation organization. It applies to present and future owners of the land.
Such descriptions abound in land trust marketing materials. Although use of the term “conservation easement” and references to it binding future owners indicates that this creature is more than a simple contract between two parties, a focus on the agreement aspect of the conservation easement can cause confusion.
The following description clarifies that while the establishment of a conservation easement requires the agreement of a landowner and a prospective holder, the easement itself is an interest in real property serving a particular conservation purpose.
A landowner and a land trust or government may agree on conservation objectives for the landowner’s property and associated restrictions on the use of the property to advance those objectives. They may then make their agreement operational by signing and recording a legal document granting the land trust or government a narrow interest in the property for the purpose of upholding the objectives and enforcing the restrictions.
Government (and a few private) programs, particularly those engaged in farmland preservation, sometimes label themselves as purchase of development rights or PDR programs and explain their business as being the purchase of development rights. This label is misleading. In fact, these programs are not purchasing development rights but, rather, are incentivizing the owners to place development restrictions on their land for conservation purposes and purchasing the right to enforce these owner-imposed restrictions. These programs are not acquiring development rights that the programs could later sell to a developer or exercise themselves!
Property ownership is sometimes characterized as an owner possessing a bundle of sticks or rights. An owner has the right to use their land in a large variety of ways, subject to local zoning and other laws. An owner has the right to plant trees or cut them down, the right to construct buildings or demolish them, the right to grow crops or pile rocks, and so on. These rights can be thought of as a bundle of sticks. The owner may give away, sell, lease and otherwise transfer these various sticks or rights to other persons. When granting a conservation easement, an owner permanently places the uses of some sticks or rights on permanent restriction in order to advance a conservation purpose. The holder is given the right to ensure that these sticks or rights are never used, for example the right to subdivide, bulldoze the land or construct large buildings.
With a conservation easement, the owners generally aren’t giving the holder the right to use the sticks; rather, they are giving the holder the right to enforce the restrictions on the use of certain sticks that the owners have set aside. (Exceptions to this include when landowners choose to give to holders the right to build a trail or to enter the land to improve wildlife habitat.)
When a landowner conveys a conservation easement to a charitable organization or public agency, the transfer may entitle the landowner to federal tax benefits. The landowner may qualify for a federal charitable income tax deduction if he or she donates or bargain sells the easement and meets all the various requirements of Internal Revenue Code section 170(h). These requirements include conveying the easement to a qualified organization exclusively for conservation purposes and in perpetuity.
If the requirements to qualify are met, the value of the charitable contribution for tax deduction purposes is determined by independent appraisal. Federal rules spell out what constitutes a “qualified appraisal” and a “qualified appraiser.” Although the tax rules are complex, a first approximation of the value of the gift can be determined by calculating the difference between the value of the property without taking into account (or before the creation of) the easement and the value of the property subject to (or after establishment of) the easement. This latter value evaluates the extent to which the easement will restrict present and future land use and thus the economic value of the property—the amount that a willing seller would pay a willing buyer for the property in an arm’s length transaction. The more a conservation easement restricts the development potential for a property for conservation purposes, the more likely the possibility of a tax deduction and the larger the valuation of the gift for deduction purposes.
Example (simplified to serve as a reasonably accurate introduction to the topic). Assuming an appraised easement value of $100,000, a landowner in the 30 percent income tax bracket would realize $30,000 in tax savings from the gift, if the landowner has enough income from other sources to be able to use the full amount of the gift value. The law limits the deduction to 30% of Adjusted Gross Income but allows a five-year carryover period beyond the year of the gift for landowners to claim the unused gift value.
(From 2005 to 2014, Congress provided for a more expansive tax benefit, most significantly, for those with moderate incomes, a 16-year period in which to use the deduction. The future of this expanded benefit is perpetually uncertain, with Congress having at times renewed it at the end of the tax year for which it was being renewed.)
Under Internal Revenue Code section 2031(c), the gift of the easement can also qualify a landowner to a federal estate tax exclusion for a portion of the value of the land that is subject to a conservation easement, thus potentially reducing federal estate.
A dozen or so states provide some sort of state income tax incentive for the donation or bargain sale of conservation easements. (Pennsylvania is not among them.) A review of these various incentives is beyond the scope of this guide.
The process of preparing for a conservation easement is much like the process of preparing for the acquisition of land. The prospective holder will want to make the same sorts of investigations that a prospective land purchaser makes. The types of investigations are summarized below and the costs associated with them are described in the guide Costs of Due Diligence in Conservation Acquisitions.
Title to the land must be good and marketable and free of mortgages and other liens. While exceptions can occasionally be made when the conservation easement is wholly donated and no charitable contribution for federal income tax purposes is being claimed, the general rule is that mortgages must be released or subordinated to the conservation easement. For further information, see the guide Mortgage Subordination as well as the Model Mortgage Subordination and Commentary.
Pennsylvania’s Conservation and Preservation Easements Act requires that except when referencing an easement’s boundary using setback descriptions from existing deed boundaries or natural or artificial features, such as streams, rivers or railroad rights-of-way, a metes and bounds description of the portion of property subject to the easement must be provided in the easement document.
The prospective holder will want to obtain information about prior uses of the land. If any existing features or historic information raises a concern, additional investigation may be desired.
If the conservation easement is being purchased, the holder will almost always want an appraisal to justify the amount being paid. Sometimes funding provided by government programs requires more than one appraisal or a review by a second appraiser of the work product of the first. If the owners want a contribution or bargain sale of a conservation easement to qualify as a charitable contribution for federal tax purposes, an appraisal must be prepared to support the tax deduction. The Internal Revenue Code and Regulations have very specific requirements regarding the preparation of the appraisal and the qualifications of the appraiser.
If the owners want a contribution or bargain sale of a conservation easement to qualify as a charitable contribution for federal tax purposes, the Internal Revenue Code and Regulations (see §1.170A-14(g)(5) of the Regulations) require the owners to provide baseline documentation. However, baseline documentation is critical to the soundness of the conservation project, whether or not federal tax benefits are involved.
Practice 11B “Baseline Documentation Report” of Land Trust Standards and Practices states that:
For every easement, the land trust has a baseline documentation report (that includes a baseline map) prepared prior to closing and signed by the landowner at closing. The report documents the important conservation values protected by the easement and the relevant conditions of the property as necessary to monitor and enforce the easement. In the event that seasonal conditions prevent the completion of a full baseline documentation report by closing, a schedule for finalizing the full report and an acknowledgement of interim data [that for donations and bargain sales meets Treasury Regulations §1.170A-14(g)(5)(i)] are signed by the landowner at closing.
Common practice is for the holder to prepare the baseline documentation. The costs are described in the guide Costs of Due Diligence in Conservation Acquisitions.
The Model Grant of Conservation Easement and Commentary, published and maintained by the Pennsylvania Land Trust Association (PALTA), provides users with a state-of-the-art legal document together with expansive guidance covering alternative and optional provisions and the reasoning behind it all. The model, now in its sixth edition (2011), has been adopted by land trusts, local governments and landowner counsels across the country.
The Model Grant of Conservation Easement and Commentary is the culmination of countless hours of research, discussion and drafting by the development team; feedback from users; review by easement professionals; and comments from workshop participants. No easement document in the nation has benefited from more cycles of public review and comment.
The model is written to achieve meaningful resource protection while being fair to both landowner and holder. It is characterized by plain language, consistent form and easy-to-read formatting. It is structured in modular form to minimize cross-referencing and the potential drafting errors resulting from cross-referencing.
The Model Riparian Buffer Protection Agreement, now in its second edition, is a grant of conservation easement specifically designed for riparian buffer protection projects. The model applies a single set of conservation objectives and restrictions to the area to be conserved. The Model Grant of Conservation Easement, in contrast, enables users to set different conservation objectives and restrictions for different areas of a property. The Model Riparian Buffer Protection Agreement shares a development platform with the 6th edition of the Model Grant of Conservation Easement.
Both owners and holder need to focus upon the resources to be protected: not only what is being protected but why. The agreement of owners and holder on these matters forms the basis for the “Conservation Objectives” of the conservation easement (§1.03 of the Model Grant of Conservation Easement). Conservation Objectives are important for a number of reasons discussed in the commentary to the Model Grant of Conservation Easement.
From the perspective of the holder, the Conservation Objectives are the reason the holder is accepting the conservation easement. They should be the foundation of the easement, its raison d’etre; the land use restrictions set forth in the grant of conservation easement simply constitute the agreed-to program for advancing the Conservation Objectives.
After owners and holder come to agreement on the Conservation Objectives and the restrictions on the land that will serve those Conservation Objectives, it is time to prepare a draft of the grant of conservation easement. This task is greatly simplified by the availability of the Model Grant of Conservation Easement. Usually the first draft of the Grant is produced by holder or counsel for the holder.
When accepting a conservation easement, a holder is responsible for ensuring the conservation objectives are upheld in perpetuity. Proper stewardship for conservation easements includes regular site monitoring trips, responding to landowners questions about the easement, maintaining positive relationships with landowners, building relationships with new landowners, ensuring easement violations are resolved, responding to landowners requests to exercise reserved rights, and amending the easement when necessary.
The guide Costs of Conservation Easement Stewardship and the accompanying Stewardship Costs Calculator may help in estimating the costs of the stewardship activities. An Introduction to Stewardship Funding Arrangements and Legal Considerations for Stewardship Funding Arrangements help users understand their options in ensuring adequate funding for easement stewardship. The Model Stewardship Funding Covenant and Commentary provides a model legal document and guidance for implementing one or more of these options.
Nothing contained in this or any other document available at ConservationTools.org is intended to be relied upon as legal advice or to create an attorney-client relationship. The material presented is generally provided in the context of Pennsylvania law and, depending on the subject, may have more or less applicability elsewhere. There is no guarantee that it is up to date or error free.