When buying a ranch, buyers are often concerned about the impact a conservation easement (CE) will have on the land. What should a buyer consider in evaluating an easement? Beyond the conservation easement tax deduction, how will a conservation easement affect the future uses of a property?
We sat down with conservation experts and Mirr Ranch Group ranch brokers, Ken Mirr, a former public lands and conservation attorney, and Woody Beardsley, a former senior project manager for Trust for Public Land, to discuss these implications and the considerations a buyer should make when looking at a property encumbered by a CE.
1. How will an easement affect the future use of the land?
As Woody put it, “It will depend entirely on the language and terms of the proposed CE and what the landowners and land trust wish to achieve from the property.” Note that no two CEs are the same and these instruments are essentially deed restrictions that are perpetual in nature and negotiated openly between landowners and land trusts to preserve certain conservation values, including open space, wildlife habitat, agricultural lands, scenic vistas, and historic properties. This agreement will usually detail land usage, such as:
- Agricultural Use: Review permitted agricultural uses and issues dealing with water rights within the easement. For instance, many new agricultural conservation easements limit the transferability and severance of water rights on a ranch, often requiring these rights continue to irrigate the land. This, along with restrictions on development, does improve the agricultural use of a property, but will impact value.
- Ecological Use: There may be language within a conservation easement that protects wildlife habitat, threatened and endangered species, or migratory corridors. These issues will create restrictions on development and use.
- Recreational Use: Often recreational uses are not too restricted by CEs but look for language that prohibits motorized vehicles and sometimes hunting.
2. How will an easement affect a ranch’s value?
The perspective will differ depending on if you’re the buyer or the seller of the property.
- Buyer: From a buyer’s perspective, you may argue that the price should reflect a diminution in value due to the restrictions imposed by the easement.
- Seller: As a seller you may argue that in the future, the supply of protected landscapes will decrease and as a result the value has been maintained.
- Impacts will be measured on the restrictions imposed and also based upon the location of the land.
- Heavily Developed Areas: In heavily subdivided areas, a conservation easement will likely have a greater impact on value.
- Remote Areas: In remote areas with no subdivision pressures, a conservation easement will have less of an impact on the value of your land.
3. While we know that the original donation may reduce your federal, estate and state taxes, what are the the long-term conservation easement tax benefits?
In Colorado, an agricultural conservation easement will lock in the property tax valuation at its agricultural value. This can be beneficial in higher profile mountain communities where property taxes are high or where assessor’s are pressured to take lands off of agricultural status and classifying them as vacant land to increase revenues.
If a property can be further protected by reducing the number of building sites permitted by the original CE, a new buyer can further restrict the property by amending the CE and potentially receive federal tax deductions and state income tax credits.
4. Who is the holder of the easement?
When considering buying a ranch encumbered by a conservation easement, you should know what land trust holds the easement. No two easements are written alike and a lot of this has to do with the quality of the land trust. Ken recommends examining the following:
- Mission: What type of easements does this land trust typically hold? Are they preserving working landscapes like Colorado Cattlemen’s Agricultural Land Trust (CCALT) or is their mission to protect endangered species or scenic viewsheds?
- Capacity: What is the overall capacity of the land trust? Is the holder a state, regional, or national land trust? How is it managed? How do they monitor their easements?
- Accredited Land Trusts: Is the land trust holding the easement accredited by the Land Trust Alliance (LTA)? The LTA has created practices, policies and procedures that provide a level of certainty and professionalism for operating land trusts.
5. What are the prohibited and permitted uses in the easement?
A conservation easement is a type of deed restriction on your property. When you are analyzing the language of a conservation easement, you need to consider the “Prohibited Uses” (or Inconsistent Uses) and “Permitted Uses” (or Consistent Uses) of the easement. Here is a list of some of the many uses addressed in a conservation easement:
- Homesites/Building Envelopes, new construction, reconstruction, location
- Subdivisions, can property be subdivided into separate parcels
- Livestock grazing and rangeland management
- Fences, maintenance and location, type, wildlife friendly
- Roads, new road construction, location, maintenance, paving, etc.
- Water Rights, water rights may be restricted to the land
- Recreation, habitat enhancements, hunting, ATV and snowmobile use, trails
- Utilities, new installation, location, above ground or buried
- Commercial Uses, what level if any is permitted/prohibited
- Ponds/Rivers/Streams/Wetlands, fishery enhancements
- Motorized Vehicles
- Timber Harvesting, to what extent is this permitted
- Storage on the land
- Signs and Billboards
- Public Access, some CE’s with State and Federal agencies may allow public access
6. Can you ever amend or terminate an easement?
A conservation easement is an easement placed on a ranch in perpetuity. Each easement is negotiated upon by the Grantor (Landowner) and Grantee (Land Trust), so no two are alike. While no conservation easement will ever be terminated, there are times where it can be amended.
Ken says although an amendment can be made to an easement, these are rare and the only way they can happen is if the landowner is willing to donate other retained rights they own.
7. What are non-financial benefits of conservation easements?
The purpose of an easement is to conserve landscapes in perpetuity or forever. They are placed on ranches to protect certain values including:
- Biodiversity: One of the purposes of a conservation easement is to protect the biodiversity and habitats of a property. These easements will likely prohibit things like development, toxic waste, or timber harvesting, and permit uses like recreation or stream management.
- Insider tip: Ken suggests browsing over the Baseline Inventory Report that documents the natural resources and human activity on the property and details the current conditions on the land at the time of the CE, including, habitat and ecological traits of the ranch. After reading this, you will be familiar with what you are buying and the existing ecology on the ranch.
- Working Landscapes: Some easements will look to protect working landscapes like those with Colorado Cattlemen’s Agricultural Land Trust. The language in these easements will include permitted uses regarding livestock, farming, rangeland management, irrigation, fences, etc.
- Community: It is generally held that conservation easements have a positive impact on local and regional communities. The proliferation of land trusts across the country over the past 30 years affirms a growing movement to protect these private landscapes. The efforts of these private landowners not only preserve wildlife habitat, open spaces, and viewsheds, but improve the overall sense of place and community and add value to lands nearby.
- Heritage: Beyond financial gain, there is a landowner ethic that is an inherent component of the makeup of the agricultural families that produce the food and fiber that feed the world. These include: the preservation of agricultural heritage, preservation of the land in its open, productive and undeveloped state, and preservation of water resources for agricultural purposes. CEs can also eliminate future family disputes over what to do with property and provide opportunities for young farmers and ranchers to get a start by allowing them to purchase land at more affordable prices.
Here’s a video recap of these considerations: