What are conservation easements? The person who creates an easement is called the “grantor,” and the person who has the right to enforce an easement is called the “grantee.” Unlike affirmative easements that give the grantee the right to make certain use of the grantor’s property, conservation easements are typically negative easements that disallow certain uses of land by the grantor, such as the right to develop the land. This results in the land being protected for conservation purposes stated in the easement document.
Colorado and all other states have enacted legislation to expressly recognize the validity and enforceability of conservation easements. In Colorado, conservation easements can be granted for the purposes of maintaining land, airspace, water rights or improvements “predominantly in a natural, scenic or open condition, or for wildlife habitat, or for agricultural, horticultural, wetlands, recreational, forest or other use or condition consistent with the protection of open land, environmental quality or life-sustaining ecological diversity, or appropriate to the conservation and preservation of buildings, sites or structures having historical, architectural or cultural interest or value.”
The grantee of a conservation easement is usually either local government or a private organization known as a “land trust.” Most conservation easements are intended to perpetually encumber the affected land and therefore burden all of the grantor’s successors in ownership. The grantor will give the conservation easement by a deed that is recorded in the public records thereby providing notice to anyone interested in the land in the future.
Because of the perpetual nature of conservation easements, it is no small undertaking for a grantee to accept the responsibility of a conservation easement. This is typically done through the parties entering into a detailed agreement before the easement is conveyed describing the circumstances under which the grantee will accept the conveyance. The grantee often requires the grantor to give an endowment in addition to the easement to help defray the cost of perpetually enforcing the easement. Colorado has recently increased its oversight of land trusts through new regulations designed to improve land stewardship.
A conservation easement can be donated, sold or given as a condition of a land-use approval. Some local governments will allow increased density on a developable parcel of land in exchange for a conservation easement on another parcel of land that they want to protect.
In cases where a conservation easement is donated, the grantor may be able to claim a deduction for both state and federal income tax purposes. A deduction against income tax may not greatly benefit someone who is land rich and income poor. For those who do have the income to benefit from additional deductions, it can often be advantageous for tax purposes to divide land into parcels and give conservation easements in series rather than all at once.
While obtaining tax relief from a donated conservation easement is legitimate, the details of many transactions have come under scrutiny by the state and federal tax authorities due to perceived abuses. Most of the problems involve illusory donations and inflated appraisals of the value of the donation. Anyone thinking about granting a conservation easement for tax purposes should do so carefully and with competent tax advice.
When handled properly, conservation easements create a win-win whereby the land owner receives a tax deduction or other benefit and the public also benefits from conservation of the land. There are millions of acres of land in the United States currently encumbered by conservation easements and, despite recent crackdowns by tax authorities, probably many more to come.
Noah Klug is owner of The Klug Law Firm LLC in Summit County. He may be reached at (970) 468-4953 or Noah@TheKlugLawFirm.com.