So what is a conservation easement?
OK, right off the bat, what the heck is an easement, let alone a conservation easement?
Simply, an easement is the legal right to use some part (or, at times, all) of the real property of another. This right to use the property of another might extend on, above or below the surface of the “other’s” land.
While a subsurface right might include such things as a mining claim, an above-surface right might include the right to have your satellite dish protrude out and over your neighbor’s airspace. A surface right might include the driveway across your neighbor’s land over which you are entitled to travel.
Easements may be “positive” or “negative,” that is to say, they may allow one do something or prohibit one from doing something. Conservation easements are “negative” in that they prohibit specific activities on the land they affect, called the “servient tenement” or “servient estate.” The conservation easement is said to “burden” or “encumber” the servient tenement or estate.
In Colorado, the conservation easement statute has existed, relatively unchanged, since 1976.
Conservation easements are more correctly called “non-development easements” or “preservation easements.” Essentially, a landowner who grants a conservation easement prevents future development upon the land by stripping it of development rights. The easement may not, however, necessarily extended into perpetuity. Rather, it may extend for only a specified number of years, after which time the easement may expire.
In effect, the conservation easement represents the sale or donation of development rights to a party pledged not to exercise them for the duration of the easement. Thus, the land is preserved in its natural state for its perceived conservation value and not for its development value.
Under the Colorado statute, the permitted purposes for granting a valid conservation easement are: The retaining or maintaining of … land, water, or airspace … predominantly in a natural, scenic, or open condition, or for wildlife habitat, or for agricultural, horticultural, recreational, forest, or other use or condition consistent with the protection of open land having wholesome environmental quality or life-sustaining ecological diversity…
A close relative of the conservation easement is the historic preservation easement. Like the conservation easement, its purpose is preservation, in this instance, preservation not of the land’s natural beauty or ecological diversity, but of its historic heritage. Historic preservation easements may be placed on historic structures or historic land, although the emphasis is generally upon historic structures.
Although laudatory, donation of a conservation easement is not always an expression purely of philanthropy. The tax codes of both the United States and the state of Colorado recognize donation of easements for “conservation purposes” as deductible for income tax purposes, thus encouraging dedication of scenic and diverse lands to open space.
Further, the donor may realize property tax advantages and certain estate-planning benefits as a direct result of the donation. Balanced against these advantages, however, is the fact that by virtue of the gift of the conservation easement, something of value has been stripped from the land and, accordingly, the value of the land is proportionately diminished.
The owner has given up something of value to get something else of value in return. Still, in the appropriate circumstances, the income tax benefits, estate and gift tax benefits, and property tax benefits may indeed offer a strong, and often compelling, incentive in favor of donation of a conservation easement from a purely “smart business” point-of-view.
Too often, both business persons and their counsel overlook the advantages the conservation easement might offer, lock-stepping to more traditional (and, perhaps, seemingly more conservative) business plans pertaining to “developable” land.
And yet, despite often institutionalized “stodginess” about such things, there is (forgive the pun) a recent groundswell of popularity favoring preservation. Often, support of such arrangement flows from reasons other than tax and estate considerations and reflects a preservationist philosophy.
Lands owned by private foundations and no-profit entities are increasingly subjected to conservation easements for motives having noting whatsoever to do with tax considerations. Municipal, county and state governments have begun to purchase and condemn open space and then dedicate the property with a conservation easement thus preserving and ensuring greenspace buffers.
One more related device is that of the “land trust.” Land trusts are groups organized for the express purpose of “collecting”‘ and dedicating land for conservation purposes and to hold them “in trust” in their natural, undeveloped state.
Particularly in the instance of acquisition or development of large tracts of land, serious consideration should be given from a strictly business point-of-view to the advantages of land preservation and dedication of greenspace buffers.
Not only does this device ensure a better life for us all, and for the critters with whom we share our world, but it might also benefit the pocketbook of the potential developer more than he or she might realize if an enlightened business partner or legal counsel where not to whisper wise words regarding conservation in his or her ear.
Rohn K. Robbins is an attorney, licensed before the Bars of Colorado and California, who practices in the Vail Valley. He lectures for continuing legal education for attorneys in real estate, business law and legal ethics. He may be reached at 926-4461 or e-mail firstname.lastname@example.org