Conservation Easements Defined
A conservation easement is a legal agreement between a property owner and a land conservation organization, like the Central Coast Land Conservancy. Conservation easements protect important natural resources on a property by restricting the type and amount of development that can take place on a particular property. Easements last in perpetuity and do not change even as a property title is sold to a new owner.
Conservation easements are now being used by landowners, land trusts, government agencies and not-for-profit organizations to preserve land in perpetuity. Properties across the United States and abroad benefit from the protection of conservation easements, written to protect natural resources, agricultural land, scenic vistas and historic structures. Easements are tailored to each property and clearly identify the rights of the property owner and the stewardship responsibilities of the third party that will hold the easement.
Terms of the Easement
One of the advantages of a conservation easement is that it allows a property owner to permanently protect property while retaining private ownership. Typically, an easement does not change the way the owner uses the property but rather identifies a particular resource for protection. For example, a landowner interested in protecting a property from development will sell or donate the right to do so to a not-for-profit conservation organization or public agency. A detailed conservation easement deed clearly identifies what resources are to be protected and which rights will be transferred from the landowner to a third party. The easement also defines the rights and stewardship responsibilities of the third party.
Financial Benefits of Conservation Easements
Landowners can sell conservation easements to a third party for the appraised value of the development rights for a particular property. The value of the easement is determined by appraising the market value of the property without the easement restrictions and the market value of the property with the easement restrictions. The difference between these two values is the easement value.
A landowner can also donate an easement and take advantage of significant state and federal income tax benefits and estate tax relief in the amount equal to the market value of the development rights.
An example of how a landowner's income tax can be reduced:
A property has an appraised fair market value of $100,000. The landowner donates a conservation easement to the Central Coast Land Conservancy. The easement restrictions reduce the property's market value to $64,000. The value of the landowner's easement donation is $36,000. According to Internal Revenue Code the landowner is eligible to deduct an amount equal to 30 percent of his or her adjusted gross income each year for a total of six years, or until the value of the gift has been realized. If the landowner has an annual adjusted gross income of $60,000, she can deduct $18,000 a year (30% x $60,000) until she has used up the $36,000 value. In this case the landowner will use up the gift in two years (2 x $18,000 = $36,000), assuming income does not change. (The Conservation Easement Handbook)