Real Estate Newsletter

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Conservation Easements as a Means to Regulating Private Land

The Fifth Amendment to the U.S. Constitution states, in part, that private property shall not be “taken for public use, without just compensation.” In order to take property, the government must first condemn it through “eminent domain” power and then pay the owner the property’s “fair market value.”

Generally, regulation regarding land use decisions and zoning (including takings by eminent domain) are made at the state level, while the administration of such regulation is frequently assigned to county or local governments. The federal government can provide incentives for state and local governments to implement development plans that meet certain criteria, such as maintaining land for endangered species. One type of incentive relates to “conservation easements.”

Conservation Easements

In general, an easement involves the transfer of some right attached to a piece of land to a person or entity that does not own the land. A “conservation” easement is usually a permanent restriction placed on private land to protect natural or man-made resources. As such, it prohibits certain types of development from taking place on the land. The holder of the conservation easement can control specified uses, while the original owner may still retain ownership and limited use.

Often, state law controls the creation and maintaining of easements. As common law did not allow the creation of an easement for conservation purposes, such easements are only permitted where a relevant state statute is in place. In 1981, a “Uniform Conservation Act” was drafted and recommended by the American Bar Association for adoption by the states, and many have done so.

Although landowners are encouraged to grant conservation easements voluntarily, they can be created by force through eminent domain. A landowner in upstate New York recently challenged a township-created conservation easement, but the courts concluded it was an not a “taking.” This decision was based, in part, on the judge’s opinion that there was a clear relationship “between the conservation easement and the legitimate town interest of protecting sensitive environmental areas within its borders.”

Conservation Easement Benefits

Federal tax laws allow deductions for the fair market value of conservation easements donated to land trusts and other public interest organizations. Currently, the grant of the easement must be in perpetuity to receive the tax benefits. This means that the easement, essentially, must have been granted for an indefinite period of time. The benefits of such an arrangement include:

  • Protecting and conserving resources important to the landowner and the public
  • Tax benefits, such as reducing property and/or estate taxes, as the fair market value of the land is reduced by the value of the granted conservation easement
  • Maintaining private ownership of the land, at least in part

To qualify for benefits, the easement must meet one or more of the following purposes:

  • Preservation of land for outdoor recreation or education
  • Protection of natural habitats of fish, wildlife, or plants
  • Preservation of historically significant land or buildings
  • Scenic enjoyment of the public

Critics and Enforcement

Conservation easements have their critics. Some states have taken action to limit the term of such easements from in perpetuity to a fixed term, such as fifty years, and put other restrictions on such easements. Some states have legislation pending that would prohibit easements that prevent use of natural resources.

Each conservation easement is distinctive and unique to the private property owner and easement holder. The most common right that the landowner relinquishes is the right to subdivide or develop the land. The easement holder has the responsibility to:

  • Establish the easement by clear and enforceable language and documentation
  • Monitor use of the land regularly
  • Provide information and background about the easement to prospective buyers
  • Establish a review and approval process for covered land uses
  • Enforce the easement through the courts, if necessary
  • Maintain property and easement-related records
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