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"Treat the Earth well.

It was not given to you by your parents.

It was loaned to you by

your children."  

 - Kenyan Proverb

 

 

Conserving land and water resources in the Saginaw Bay Watershed

Frequently Asked Questions about Preservation Agreements (Conservation Easements)

  1. What is a land conservancy or land trust?
  2. What is a preservation agreement (conservation easement)? How is it different from a drain easement or a utility easement?
  3. What kinds of properties are eligible for a preservation agreement?
  4. Why would a landowner want to place a preservation agreement on his or her land?
  5. Who decides what restrictions govern a preservation agreement?
  6. Are there any uses of my property that are absolutely restricted by a preservation agreement?
  7. What uses are generally permitted after a preservation agreement is placed on the property?
  8. In addition to restrictions, does a landowner have any affirmative obligations associated with land under a preservation agreement?
  9. Will all of my land have to be included in the preservation agreement?
  10. Does a preservation agreement require public access to the land?
  11. What effect does a preservation agreement have on a landowner’s ability to sell or pass the land to his or her heirs?
  12. Does the Saginaw Basin Land Conservancy accept all preservation agreements that it is offered?
  13. How is a preservation agreement different from other types of deed restrictions?
  14. Why not depend on “smart growth” zoning, environmental laws, or other government regulations to assure that land with significant conservation values is protected?
  15. How will future landowners know about the preservation agreement?
  16. What are the responsibilities of the Saginaw Basin Land Conservancy with respect to the preservation agreements that it holds?
  17. What costs are incurred by the landowner in creating a preservation agreement?
  18. What are the potential income tax benefits of donating a preservation agreement?
  19. How is the value of the preservation agreement calculated?
  20. How does the donation of a preservation agreement affect estate taxes?
  21. How might property taxes be affected by the donation of a preservation agreement?
  22. What is the process for creating a preservation agreement?

1. What is a land conservancy or land trust?


Land conservancies or land trusts are local, regional or statewide non-profit organizations directly involved in protecting important natural resources for the public benefit. As community organizations, land conservancies understand and are responsive to the special needs of the land and people in their regions. As non-governmental organizations, land trusts offer quick response, flexibility and confidentiality. Land conservancies use a variety of creative land protection tools that achieve conservation goals while meeting the specific needs of landowners and the community. 


2. What is a preservation agreement? How is it different from a drain easement or a utility easement?


Drain easements and utility easements are examples of “affirmative” easements. An affirmative easement is the right of one person to enter the property of another and “do something thereon”. Affirmative easements are what most of us are familiar with.. For example, right-of-way easements to permit passage to a landlocked property or utility easements, that permit the power or water company to enter the property to construct and maintain electric or water lines, are common affirmative easements. 

A preservation agreement is a type of “negative” easement. A preservation agreement is a voluntary legal agreement -- essentially a contract -- between a landowner and a land conservancy or public agency. The contract requires the landowner to give up, or severely limit, certain uses of the property. Nevertheless, the landowner continues to own the land and may use it in any way as long as the easement is not violated. Like other easements, a preservation agreement “runs with the land” and binds the landowner who grants the CE as well as all subsequent landowners. Except for the purpose of monitoring the easement, the holder of the CE has no right to enter the property.


3. What kinds of properties are eligible for a preservation agreement?


State and federal laws require that the purpose of a preservation agreement be for maintaining land in a natural, scenic, or open-space condition, for wildlife habitat, for agricultural, recreational, or open-space use, or for conserving buildings or other aspects of historic, archaeological, or cultural value. Thus, any property that possesses one or more of these values is potentially eligible for a preservation agreement. 


4. Why would a landowner want to place a preservation agreement on his or her land?


Most landowners are interested in preservation agreements because they wish to protect their family's land from future development or fragmentation. In addition to the permanent protection that a preservation agreement provides, there are potential financial and tax benefits for the landowner. Because the conservation values protected by a preservation agreement are considered a benefit to the public, the Internal Revenue Code recognizes the donation of a preservation agreement as a charitable contribution that may qualify for income and estate tax deductions. 


5. Who decides what restrictions govern a preservation agreement?


The landowner and the land trust or conservancy decide together what’s needed to protect the land’s conservation value, while at the same time meeting the financial and personal needs of the landowner and his or her family. The set of restrictions for any property is quite flexible provided that the easement is sufficiently restrictive so that the conservation values of the property are substantially protected. For example, an easement on property with rare wildlife habitat might limit or prohibit further development of any kind, while a farmland easement may allow continued farming and building of limited agricultural structures. Land-use restrictions may affect only certain portions of a property (significant woodland, wetland or stream banks for example) but allow development on the remainder.


6. Are there any uses of my property that are absolutely restricted by a preservation agreement?


IRS regulations and the goals of most eligible easement holders require that certain uses will always be prohibited, such as extensive subdivision or mining (if you do not own mineral rights, you can still grant an easement so long as the rights were severed before 1972 and future mining is considered unlikely). Other activities including commercial or industrial development, filling of wetlands, erection of signs or billboards and refuse dumping are normally prohibited by a CE.


7. What uses are generally permitted after a preservation agreement is placed on the property?


Traditional uses of the property are almost always allowed to continue, even under the most restrictive easements. This means that landowners may continue to live on the property. In addition, the easement agreement will normally allow the re-construction of any existing structures and may allow some modification or expansion. In general, landowners are free to use the property any way consistent with the terms of the easement agreement. For most landowners in the Saginaw Basin, this means that their ability to use the land for recreational purposes (hunting, fishing, hiking) is not limited. 

8. In addition to restrictions, does a landowner have any affirmative obligations associated with
land under a preservation agreement?


A landowner may have some, minor obligations required by the preservation agreement. For example, in cases where a CE protects a natural area or sensitive habitat, a landowner may be required to control noxious or invasive weeds in accordance with a plan approved by the Conservancy. 


9. Will all of my land have to be included in the preservation agreement?


No. A preservation agreement can be applied to the landowner's entire property or to only a portion of it, such as the land along the bank of a stream. Each preservation agreement is designed specifically to address a property's unique characteristics, its conservation values, and the interests and needs of the landowner.


10. Does a preservation agreement require public access to the land?


No. However, public access to protected land can be a stipulation of a preservation agreement agreement if mutually acceptable to the landowner and the land trust. Granting public access in the preservation agreement document at the time of donation is one way to qualify for a federal income tax deduction, but is usually not necessary for the landowner to obtain tax benefits.


11. What effect does a preservation agreement have on a landowner’s ability to sell or pass the land to his or her heirs?


While restrictions defined in a preservation agreement document remain with the property forever, land protected in this way can be sold, passed to heirs or otherwise transferred at any time.. Transfer of ownership does not affect the integrity or enforceability of the preservation agreement. The landowner who establishes a preservation agreement ensures that his or her careful stewardship of the land is a legacy that lasts.


12. Does the Saginaw Basin Land Conservancy accept all preservation agreements that it is offered?


The Saginaw Basin Land Conservancy assesses each preservation agreement offered for donation. We visit the site, research the conservation values, talk with the landowner about his or her goals and expectations and then decide whether to accept an easement offer. 


13. How is a preservation agreement different from other types of deed restrictions?


Protecting significant land through a preservation agreement provides a guarantee of accountability. Unlike simply attaching deed restrictions to a property title, donating a preservation agreement provides the certainty that a landowner’s desire to preserve the land’s conservation values is honored far into the future by an organization dedicated to the principles of saving precious resources. 


14. Why not depend on “smart growth” zoning, environmental laws, or other government regulations to assure that land with significant conservation values is protected?


Unlike easements, public policy is not implemented in perpetuity. Political moods can and do change and one legislative body can alter the plan and intent of another. preservation agreements are voluntary, private land use restrictions that do not change over time.

15. How will future landowners know about the preservation agreement?


The easement document is a formal legal agreement that is recorded at the County’s Register of Deeds office. A title search by anyone interested in acquiring the property will give notice of the easement.


16. What are the responsibilities of the Saginaw Basin Land Conservancy with respect to the preservation agreements that it holds?


Accepting the donation of a preservation agreement is a tremendous responsibility for a land conservancy. It means accepting the obligation to monitor and enforce the easement terms forever. Once an easement is established, SBLC documents the site’s conservation values, performs periodic inspections to ensure all the easement’s terms and conditions are being honored, and keeps all future owners of the site informed of the agreement.
If a violation is found, the landowner is notified according to the provisions of the preservation agreement and steps are taken to repair the impacts of the violation. Most easement documents contain language that defines the process for resolving disputes between the landowner and the Conservancy. The Conservancy has the right and responsibility to take legal action, if necessary, to enforce easement restrictions.
An endowment is established along with the preservation agreement agreement and is used to cover the costs of monitoring, enforcing compliance and legal defense of the easement.

17. What costs are incurred by the landowner in creating a preservation agreement?


The landowner should expect to pay for legal and, financial advice, ($500-$2500) and an appraisal of the property ($1500-$5000). An appraisal is only required if the landowner wants to take advantage of the tax deduction for granting the easement, and is a deductible expense. The Saginaw Basin Land Conservancy maintains a list of appraisers qualified to appraise preservation agreements for tax purposes.


18. What are the potential income tax benefits of donating a preservation agreement?


Under the Internal Revenue Code, qualified preservation agreement donations may be treated as charitable gifts for federal income tax purposes. The value of the gift can then be deducted at an amount up to 30% of the donor's adjusted gross income (AGI) in the year of the gift. If the easement value exceeds 30% of the donor's income, the excess can be carried forward and deducted (subject to the 30% limit) in each of the five succeeding tax years. 
Example: Joe and Mary Smith donate a preservation agreement on a 150 acre undeveloped woodlot to the Saginaw Basin Land Conservancy. The value of the easement is determined to be $135,000. If their AGI in the year of the donation is $100,000, they would be able to deduct $30,000 (30% of $100,000) in the first year. Since the value of the easement is greater than their allowable deduction, the Smiths would also be able to deduct $30,000 in each of the next three years -- assuming their income stays the same – and $15,000 the fourth year in order to claim the full amount of the easement donation.

For more information about the tax benefits of preservation agreements, see this article by Timothy Lindstrom, Esq. from the Michigan Bar Journal.

19. How is the value of the preservation agreement calculated?


The value of the easement is the difference between the value of the land without the easement restrictions and the value of the land after the restrictions have been applied and the development rights have been removed. The change in property value associated with a preservation agreement must be determined by a qualified real estate appraiser.
Example: The Smith family conveys a preservation agreement on its 150 acre woodlot to the Saginaw Basin Land Conservancy. If the property's current value is $3,000 an acre, its total fair market value-before the easement is in place-would be: 150 acres x $3,000/acre = $450,000. If removing the development rights lowers the value to $2100 an acre, then the total market value of the restricted property would be: 150 acres x $2100/acre = $315,000. The difference between the before and after values is the value of the Easement: $450,000 - $315,000 = $135,000 tax deduction.

20. How does the donation of a preservation agreement affect estate taxes?


The donation of a preservation agreement--whether made during a landowner's life or by bequest--can reduce the value of the estate upon which taxes are calculated. In some cases, the value of an estate after an easement donation may fall below the lifetime exemption so that estate taxes are avoided. Good planning is necessary to ensure that heirs of estates that include property receive maximum tax advantages. If you want to know more about the advantages of a CE for estate planning purposes, talk to your attorney or financial advisor.

For more information about the tax benefits of preservation agreements, see this article by Timothy Lindstrom, Esq. from the Michigan Bar Journal.

21. How might property taxes be affected by the donation of a preservation agreement?


The property's current assessment for tax purposes determines if tax benefits may be realized by protecting it with a preservation agreement. If the assessment reflects the property's development potential and those rights have been permanently relinquished, the landowner can make a case to the local assessor for a reduction in property assessment. See Indian Garden Group v. Resort Township MTT Docket No. 157543, 205036 (Feb, 17, 1995) for the most up-to-date view of preservation agreements and property valuation for tax purposes by the Michigan Tax Tribunal.


22. What is the process for creating a preservation agreement?


Step 1: Contact with the Saginaw Basin Land Conservancy. The landowner or his or her representative contacts SBLC.  SBLC sends basic information including brochure, fact sheet, landowner questionnaire and a sample easement agreement to the landowner. The landowner and SBLC discuss what an easement is and whether it might be appropriate for the property and the landowner.

Step 2: Site Visit. The landowner or representative reviews the material, consults with family and/or advisors. If the landowner is interested in further exploration of an easement, SBLC arranges an initial site visit to meet landowner and view the property. On site, SBLC photographs the property, assesses the property’s conservation values, and discusses with the owner his or her long-term objectives. SBLC and the landowner talk about easement terms that will meet the landowner’s goals, protect the resources, and meet the standards of SBLC. SBLC suggests that the landowner consult an attorney and provides a disclosure statement for the landowner’s signature. 

Step 3: Preliminary Agreement. The landowner and SBLC reach a preliminary agreement consisting of an identification of the parcel and the proposed terms of the easement. 

Step 4: SBLC Easement Research. SBLC staff completes and documents background research on the property including land use history, property zoning, local planning documents, preliminary title search and legal description of the property.

Step 5: Negotiation and Board Approval. The SBLC staff presents the proposed easement to the Board of Directors for consideration and approval. The Board may reject the proposed easement, agree to accept it, or agree to accept it subject to changes. If there are any changes to the proposed terms of the easement, the landowner must consider and agree to the new terms. Drafts of the easement are produced and refined pursuant to discussions among the parties

Step 6: Donation. When the final terms of the easement have been drafted and approved by SBLC and the landowner, the landowner signs the easement agreement and delivers it to SBLC. The president of the SBLC Board of Directors indicates acceptance of the donation by signing the easement agreement.

Step 7: Recordation. SBLC sees that the easement is properly recorded in the County Register of Deeds office.

Step 8: Appraisal. If the landowner intends to take a qualified tax deduction for the non-cash charitable gift, he or she engages an appraiser to determine the value of the gift. Selection of the appraiser is the landowner’s decision, and SBLC is not involved in this process. 

Step 9: Completion of SBLC baseline and file on the Easement. SBLC completes the file for the easement by obtaining the standard documentation for the property. The file includes a copy of the final easement, maps and surveys of the property, natural features inventory, photographs of the property, correspondence, memos and preliminary drafts of the easement document. 

Step 10: Annual Status Report. SBLC monitors easements and reports annually to the Board of Directors on the status of all easements that the Conservancy holds. 

Note: The landowner can change his or her mind about the easement at any time until the easement deed is signed and delivered to SBLC. While these steps show the typical procedure, there are situations where the order of these steps is changed. The process may take anywhere from a few weeks to several years to complete.

For more information about the tax benefits of preservation agreements, see this article by Timothy Lindstrom, Esq. from the Michigan Bar Journal.