LESS-THAN-PERPETUITY AND AGRICULTURAL CONSERVATION EASEMENTS

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1 LESS-THAN-PERPETUITY AND AGRICULTURAL CONSERVATION EASEMENTS Anita M. Zurbrugg American Farmland Trust Center for Agriculture in the Environment DeKalb, IL April 14, 2003 NOTE: All information provided is of a general nature and it is not my intention to address the circumstances of any particular individual or entity. No one should act upon such information without appropriate professional advice after a thorough examination of the facts of the particular transaction, estate planning or other situation.

2 ABSTRACT The conservation easement has become the fastest growing method for protecting land because of its flexibility, simple application as a land use tool and promise of protecting land for future generations. Land trusts, or other eligible entities, are increasingly using conservation easements as an agricultural preservation tool in the form of voluntary donations or a purchased development right. By doing so, conservation easements have formed the backbone of local and state purchase of development rights (PDR) programs across the country. As these conservation easements grow in popularity, some landowners and program managers have voiced their intrigue or conversely, their concern about employing a variant of this model, the less-than-perpetuity or term conservation easement. However, the use of a less-than-perpetuity easement by a landowner will depend greatly on what the language of state enabling laws provide, how this relatively new and unique concept of perpetuity within conservation easements holds up to future challenges, the valuation assigned to these easements, and their realized resulting tax treatment. All 50 states have a law pertaining to conservation easements but address the specificity of term of conservation easements differently. This language, to some degree, will determine the use of less-than-perpetuity easements in each state. The statutes in most of these states establish a default favoring perpetual easements, but a few others limit the duration of easements unless specifically spelled out as perpetual in the easement document. Only a few states or local programs are developing PDR programs, tax programs or zoning ordinances that specifically apply to term-type easements. Further complicating the discussion of the use of less-than-perpetuity easements is whether perpetual easements are in fact designed to last forever. Given the relatively new and unique nature of the statutory and common law conservation easement, the extent of its vulnerability is likely to be challenged. The result may affect the degree to which a public benefit will continue to be accepted and associated with its existence. In some states, easements created 25 years ago are meeting statutory terms making them eligible for termination or extinguishments if specified conditions are met. Additionally, second and third generation transfers of property are occurring for the first time, testing not only the content of individual easements, but also the future landowners' comfort with the attached conservation restriction. This is especially true as land values increase. The factors, which determine the valuation of farmland placed under a conservation easement in perpetuity often provide a framework for assessing the tax rate for and compensation to holders of less-than-perpetuity or other term agreements. When put into practice, this process of valuation and compensation to the landowner can become complicated as the term specified for an easement becomes something other than perpetual. The future of less-than-perpetuity conservation easements therefore hinges on some of the same factors that have made conservation easements designed for perpetuity so popular and desirable; namely, whether or not there exists a statutory or legal authority for their existence, their ease and flexibility in use, their ability to accomplish what they have been designed to do and the costs and benefits they provide for the landowner and the community or public at large. 2

3 INTRODUCTION Conservation easements have become the fastest growing method for protecting lands in part because of their flexibility, their ease of use as a land use tool and their promise of protecting land for future generations. Land trusts, or other eligible entities, are increasingly using easements as an agricultural land preservation tool in the form of voluntary donations or a purchased conservation easement and they form the backbone of local and state purchase of agriculture conservation easements (PACE) or purchase of development rights (PDR) programs across the country. As their popularity grows, some astute landowners and program managers are intrigued, or conversely concerned, by the potential of developing less-than-perpetual or term variations of this relatively new land use tool. The degree to which alternatives to perpetual agricultural easements have a potential for use by land owners will depend on several factors, including what state enabling laws provide, how the historically new and unique concept of perpetuity within conservation easements holds up to future challenges, the valuation assigned to these easements and resulting tax treatment less-than-perpetuity easements will confer. This paper describes some of the legal issues that affect, and in some cases limit, the use of less-than-perpetuity agricultural conservation easements as a tool that can be used for protecting agricultural lands. AGRICULTURAL CONSERVATION EASEMENTS UNIQUE TOOL IN LAND USE HISTORY Conservation easements are growing in popularity and use. Although the first conservation easement designed to permanently limit the development of land in the United States was written in the late 1880s, 1 the majority of conservation easements have been created since the late 1980s, a trend that has seen a rapid increase in the last decade alone (Gustanski, 2000). To illustrate, the number of acres protected by conservation easements held by private, nonprofit organizations increased from 450,000 in 1990 to 2.6 million in 2000 (Land Trust Alliance April, 2003). Specifically, agricultural lands protected by conservation easements is estimated to be around 1,245,000 acres as of 2001 and almost all of these are created in perpetuity (ERS, 2003). Conservation easements are instruments designed to preserve for perpetuity, or in some cases for a designated term, lands of ecological, scenic or cultural significance. To achieve this end, they enable landowners to divide their property rights and transfer a nonpossessory interest, servitude or easement to a qualified organization (Dukeminier, 1998). These voluntary legal agreements are created between private landowners grantors and qualified land trusts, conservation organizations or government agencies grantees to limit land to specific uses and therefore protect it from development. Grantors may receive cash in exchange for surrendering their easements or they may receive federal tax benefits as a result of donating easements in perpetuity (American Farmland Trust, 1997). They remain in possession of the property, free to use the land in any way not inconsistent with the terms of the easement. 3

4 Conservation easements are a unique tool in that they are created by statute, not the traditional common law. 2 They are comprised of an unusual combination of the legal concepts of equitable servitudes, negative easements in gross and real covenants (Morrisette, 2001). Conservation easements divide up property rights in order to pursue a goal that differs from those traditionally promoted by American property law which limits the ways in which property owners can divide up their sets of property rights (Heller, 1999). Property law traditionally facilitates the maximization of the value of land for landowners to derive the highest possible economic return from their property. This contrasts with conservation easements, which are designed to restrict the range of available land use options into the future (Mahoney, 2002). Agricultural conservation easements are designed specifically to protect farmland into the future. Grantors retain the right to use their land for farming and other purposes that do not interfere with or reduce agricultural viability. Farmers remain eligible for any state or federal farm program for which they qualified before entering into the conservation easement (AFT, 1997). Despite their growing popularity, some agricultural landowners are hesitant to enter into a binding commitment to restrict their land forever and to willingly forego the benefit of selling their land at some time in the future when they might reap a substantial financial gain if they could sell it for development. These same landowners might be interested in entering a restrictive agreement if it were for a shorter duration other than perpetuity, even if the compensation they might receive were less. One of the reasons for the widespread and increasing use of conservation easements is their flexibility, affording contracting parties a wide variety of negotiation and content options. From between selling or donating the entire fee simple or retaining all the rights associated with either property, landowners choosing a conservation easement have a range of intermediate choices that restrict the use of the land to varying degrees depending on how the conservation easement is drafted. The length of term, or duration of the easement, can in some cases, or in some states, be something other than perpetual, perhaps a term of 10 or 30 years. If the term of an easement is for a limited number of years verses for perpetuity, an easement is often called a term easement. Given the relatively young nature of the conservation easement as a land use instrument, landowners and policy makers need to be aware of the uncertain future for the term easement as a flexible tool of conserving land. This temporal flexibility is subject to the various local, state and federal statutory requirements. For example, to be eligible for federal Farm and Ranch Protection Program (FRPP) matching funds, only perpetual easements have been funded to date (Lawrence, 2003). Existing Statutory Authority and Duration Limits State legislation is needed to legitimize conservation easements because common law does not clearly provide for negative easements that run with the land in perpetuity. 3 All 50 states have a law pertaining to conservation easements but address the specificity of term of conservation easements differently. This language, to some degree, will determine the use of less-than-perpetuity easements in each state (Appendix A). The National Conference of Commissioners on Uniform State Laws adopted the Uniform 4

5 Conservation Easement Act (UCEA) in The Act served as a model for state legislation allowing qualified public agencies and private conservation organizations to accept, acquire and hold less than fee simple interests in land for the purposes of conservation and preservation. Twenty-one states have adopted state enabling laws based upon this model, while 23 states have drafted and enacted their own enabling laws (AFT Farmland Information Center, 2001). In designating what the conservation easement is designed to protect, most states allow for the conservation easement to preserve agricultural lands. Hawaii, Illinois, Mississippi, Missouri, New Jersey, New York and Washington are notable exceptions, in that agriculture is not explicitly stated as a recognized purpose (Gustanski, 2000). The statues in most of these states established a default favoring perpetual easements, meaning that if an easement is silent in its language concerning the duration, it is presumed perpetual. A few state statutes limit the duration of easements unless specifically spelled out as perpetual in individual easements (Gustanski, 2000). Others still leave the duration of the conservation easement up to the grantor and grantee of the easement, but indicate it must be spelled out in the easement document. Agricultural conservation easements are often authorized specifically within state legislation that establishes state farmland preservation programs or purchase of agricultural conservation easements (PACE) also known as purchase of development rights (PDR) programs, and as such they tend to specifically favor perpetuity. In fact, many of the agricultural conservation easements currently used are found in state, county or township PACE programs and are designed with perpetuity in mind. Removing an unwanted restriction written into a conservation easement is precluded by express provisions of some applicable state statutes and/or under the programs which administer the negotiation of and the monitoring of the easements. Terms of numerous conservation easements strictly limit permissible transfers of conservation easements (Appendix A). Are Perpetual Easements Really Perpetual? Conservation easements differ from standard land use regulation and outright purchases of land in that conservation easements are explicitly designed to restrict the range of available land use options into the future. Standard regulations and purchases restrict future development through the charitable efforts of landowners, who voluntarily forego the potential gain from development in an attempt to bestow upon present and future generations the public benefits of non-development. But these decisions can be altered, reversed by regulatory or legislative change or land purchase and sale. Conservation easements, by contrast, impose significant potential costs on future generations by deliberately making non-development decisions hard to change (Mahoney, 2002). Complicating the discussion of the use of less-than-perpetuity easements is whether perpetual easements are really forever. Given the relatively new and unique nature of the statutory and common law conservation easement, the extent of their vulnerability is likely to be challenged and the result may affect the degree to which a public benefit will 5

6 continue to be accepted and associated with their existence. In some states, easements created 25 years ago are meeting statutory terms making them eligible for termination or extinguishments if specified conditions are met. Although generally the requirements a landowner must meet in order to terminate an easement under these conditions are very strict and carefully crafted to provide for a buy-out option or release for the landowner in only the most extreme circumstances, these agreements have not been tested to date and the effectiveness of the easement as a perpetual instrument remains to be seen. These same concerns apply to incorporating an option of term conservation easements in a community s farmland preservation program. Although they may have provided adequate landowner compensation and protection for farmland during the contractual term, local policy makers and stakeholders are concerned that term easements contracted for 25 or 30 years may not provide sufficient protection to keep land in agricultural use. If this is the case, the public benefit originally intended and negotiated that supports a community s intent to protect its agricultural lands may not be met and may have to be reevaluated. The cost for continuing to protect the land in the event an easement expires or needs to be renegotiated, may be more than anticipated and planned for in a community s farmland preservation and planning efforts, and the short history of the use of these easements may not provide enough information to anticipate such challenges should they occur. These issues and concerns are coming to the surface in Maryland, the likes of which legislators, policy makers and landowners with similar concerns around the country are observing with interest. During the last 2003 legislative session in Maryland, lawmakers apparently concerned about the potential of easement protected agricultural lands being released from easement protection and coming back into development, considered legislation that would allow counties to negotiate with landowners to remove buy-back or escape clauses contained in the original easements that allow the termination of the easement after at least 25 years (Bowers, 2003). Although current Maryland law provides that conservation easements in existence for at least 25 years that have been purchased in whole or in part with state funds may be terminated through repurchase by the landowner, the requirements for qualifying for this buy-back provision included in the easement are substantial. In order for landowners to be able to terminate an agricultural easement, they must be able to convince their local governing body that their land can no longer be farmed profitably. Additionally, the governing Maryland Agricultural Lands Preservation Foundation (MALPF) board, along with the state secretary and treasurer must sign off on such approval if granted by the local governing body (Md. Code Ann., Agric ). Since easements negotiated at the start of the program in 1977 and approaching the end of the statutory 25-year termination clause are becoming eligible this year for this buy-back provision, and exist in high growth areas in Maryland, the MALPF board is likely to be faced with addressing and administering buy-back requests with high costs and potentially precedent setting results. Even though the prohibitive cost involved may be a disincentive, the resulting decision to grant the termination may make this land eligible for development or non-agricultural use, and if so, would likely affect the agricultural preservation efforts in relevant localities. 6

7 Under the Maryland statute, the qualifying landowner may repurchase the easement by paying MALPF the difference between the fair market value and the agricultural value of the subject land as determined by a current appraisal paid for by the landowner (Md. Code Ann., Agric (f)(2)). In areas of high growth, this appreciated value may be substantial, and reflective of development pressure and opportunity. If a qualifying landowner who could be released from the easement were willing to renegotiate a subsequent easement, the cost involved to do so may easily go beyond a program budget for MALPF to reasonably absorb. Even if legislative efforts resume and prevail to authorize counties to negotiate existing buy-back or escape provisions within an easement with the landowner, the same pressures would apply at a presumably high cost to the local government body or program entity. Although other states provide for easement term buy-back provisions within their state farmland preservation programs, the easements created under these programs are a number of years away from the triggering contractual termination mechanism and therefore the degree to which they will affect farmland preservation efforts are even more uncertain than they are in Maryland. In Pennsylvania, for example, where 25 year easement termination clauses also exist, the state program, created in 1989, is much younger. As of yet the program has not established specific regulations or provisions for addressing landowner requests for buying back their easements (Bowers, 2003). Delaware s 1996 program is even younger, and the first easements won t be available for consideration for termination until Additionally, second and third generation transfers of property are occurring for the first time, testing not only the content of individual easements, but also the future landowners comfort with the attached conservation restriction, especially as land values increase. Removing an unwanted easement is difficult if not impossible under present conditions, depending on the authoritative state legislation. However, future owners may create increasing amounts of tension affecting the vulnerability of a permanent conservation easement, especially if their understanding and comfort with the perpetual nature of the deed restriction with which they must abide is contrary to the original landowner s. The degree to which an easement can be extinguished or modified may be directly proportional to the degree to which the easement will extend into another generation or landowner who may not have the same or similar appreciation for the conservation easement limitation that runs with the landowner s property. Owners of land burdened with conservation easements will generally have strong incentives to free their land from development restrictions especially in cases where there exists substantial differences in value between the restricted property and surrounding unrestricted property (Mahoney, 2002). The duration and integrity of the easement is also directly affected by the degree to which the easement is monitored and enforced by the holder of the easement. If the purpose of the easement is to preserve land for agriculture, that value will be lost if the property owner attempts to develop the property in a manner inconsistent with the easement. Without regular monitoring, a land trust or other holder of the easement is unlikely to discover violations of the easement (Morrisette, 2001). Easement holders are becoming 7

8 increasingly aware of the necessity and cost of this monitoring and enforcement responsibility and are starting to more realistically build enforceable restrictions and potential costs within the negotiated terms of the easement contract (Anderson, 1998). However, easements that are not closely monitored over time increase the potential of landowners circumventing the intent and substance of the original easement. States and Programs with Term Agricultural Conservation Easements Only a few states sponsor programs that offer less-than-perpetuity or term easements or agreements in conjunction with compensatory benefits or options to landowners in the form of purchase of development rights (PDR) programs, agricultural district incentive programs, or tax programs. California s Williamson Act (CA GOVT ' 51200) and the subsequent and more comprehensive Farmland Security Zone (FSZ) legislation (CA GOVT ' 51296) are well known as examples of tax programs that use term agreements negotiated with a county government. For example, in the FSZ contract the landowner agrees to restrict the use of the land to the production of commercial food or fiber for a term of at least 20 years in return for being given substantial tax incentives. 4 Only a few states authorize compensation for less-than-perpetuity easements, and the reception of these easements by landowners has not been overwhelming to date. In 2002, the Arizona PDR program incorporated a 25-year term easement option. (A.R.S ). Due to its relatively new status, no conclusive experience and valuation details are available. Montana created temporary legislation in 1999 that authorized perpetual or renewable term easements ( M.C.A ). It is likely that before the sunset clause terminates this legislation in July 2003, there may be no landowners taking advantage of this option. Similarly, in 2001, Florida created a 30-year term easement option for agricultural properties with significant natural areas (F.AS.A ). The program has placed a 10 percent limit on the dedicated funds that can be used for this purpose. The recent age of the program has not as of yet yielded any noteworthy program experience to date. In 1988, Pennsylvania created a 25-year term easement option within its state PDR program at 10 percent of the full, appraised value of the parcel of land. The program was repealed in 1994 due to no participants in the program. North Carolina legislation provides for a variation of perpetual easements in that a county may reconvey an easement to the owner of the land if commercial agriculture is no longer practicable on the land in question (N.C.G.S.A. Secction ). To date, the few PDR programs that offer less-than-perpetuity easements have not demonstrated widespread use. Challenges of Term Easements to Meet Public Benefit Given that recent history has not supported overwhelming participation in these programs, it is notable that landowners and key land use and community planning players continue to exhibit an interest in participating in term easements. Although the majority of agricultural conservation easements are overwhelmingly written with the intent to permanently protect the subject property, especially as part of a compensatory program to pay landowners for this commitment, some landowners remain reluctant to enter into a contract for perpetuity that places limits on what they and their heirs can do with their 8

9 land into the future. Consequently, landowners are often looking for compensation for commitments for something other than perpetuity. On the other hand, a community is more interested in contracting with and compensating a landowner for a permanent commitment to protect land that is in line with a community s land use and planning goals and policies and therefore more apt to align with the requisite public purpose needed to legitimize use of public funds (Quinn, 1994). Farmland preservation programs that compensate landowners through tax deductions for donated agricultural conservation easements or by purchasing the development rights of agricultural land are much more likely to authorize compensation for easements that permanently restrict development (in perpetuity) rather than for a contractually specific term or duration because the potential public benefit is more evident in perpetual easements. Courts are increasingly supporting sensitivity to the claims that agricultural land preservation is a legitimate public good. Federal, as well as state and local legislation, supports farmland preservation as consistent with supporting the public s general welfare. 5 However, that public benefit does not necessarily extend easily to term easements. Direct payments made to landowners, as well as the property assessments that form the basis for the available tax benefits, are all based upon the assumption that the restrictions will prove perpetual. If what landowners are surrendering in exchange for payments and tax breaks are really promises not to engage in specified forms of development for a limited term of years, then surely their level of compensation should reflect this shorter time horizon. To assert that conservation servitudes are not permanent is, in effect, to admit that the programs amount to a government giveaway for owners of eligible lands (Mahoney, 2002). At the end of the day it may be much easier for a public body to justify the payments or compensation it has made to an agricultural landowner for longer (such as perpetual) rather than shorter term agricultural conservation easements. Challenge of Valuing Less-than-Perpetuity Easements The factors and basis for valuation of farmland placed under a conservation easement for perpetuity often provides a form of measurement for compensation for, and taxation or valuation of types of less-than-perpetual conservation easements and other agreements. This process for valuation and compensation to the landowner can become complicated as the term specified for an easement becomes something other than perpetual. Landowners can sell or donate an agricultural conservation easement to a qualified conservation organization or government body. In doing so, one must determine the value of the easement to establish a price or to calculate tax benefits that may be available under federal and state law. Federal estate and income tax benefits are generally available only to easements made in perpetuity. Direct cash compensation or indirect compensation in the form of tax benefits have fueled the popularity of conservation easements. Federal law provides for income tax deduction for charitable contributions (Section 170(h)). A donor of property must convey her entire interest in order to claim a 9

10 deduction for a charitable contribution on income tax. An exception exists for conservation easements that meet the definition of a qualified conservation contribution which means in practice allows many individuals who donate perpetual conservation easements to qualified organizations (such as land trusts) to deduct the value of the donated easement from their incomes for purposes of calculating their state and federal income taxes. Federal estate tax law allows for exclusion of up to 40 percent of the value of land subject to certain perpetual conservation easements from the taxable estate of a decedent (Section 2031(c) of IRC). A term easement holder cannot qualify for these tax benefits. Conservation easements generally reduce the fair market value of land, and therefore their use can reduce state and local property taxes assessed against the property. Property tax benefits in some cases benefit both term and perpetual easement holders, but generally the term easement holder has to forfeit some portion of the tax benefit he has enjoyed during the duration of the easement. The value of an agricultural conservation easement is generally the fair market value of the property minus its restricted value, as determined by a qualified independent appraiser, or in some cases, as determined by a PDR program s agreed upon point evaluation system. In general, more restrictive agreements and intense development pressure result in higher easement values. Perpetual easement values will be greater than a term easement of 25 or 30 years (AFT Farmland Information Center, 2001). Valuing a perpetual easement may be challenging enough in determining a price for the easement, but term easements present their own set of valuing issues when it comes to determining their tax treatment. Is a term easement really an easement? Some may argue that it is in reality a term agreement. A less than permanent agreement to limit development in return for compensation is the functional equivalent of a rental payment for the use of land, or a lease from development, which is generally treated as ordinary income. At what point in time does the length of an easement become a capital asset? There is no debate that the proceeds from a sale of a permanent easement are treated as capital gains (Small, 1987). A permanent easement has a generally agreed upon value for this purpose through the qualified appraisal process, but this is not the case for a five-year term agreement. Should this be treated as if it were a rental payment? Short term easements provide a challenge that is less straight forward than calculating a rental payment, however, because of the public value that is associated with conservation easements, which is designed to be permanent. What is a fair and publicly supportable compensation to the landowner for a less-than-perpetual restriction? As the term of an easement becomes shorter, the public value also becomes less. Although these issues have not been clearly and legally established, at some point it becomes clear that the public may not be getting its money s worth if public funds are used to compensate a landowner for a less-than-perpetual or term easement. 10

11 Standard appraisal methods may not be as effective in taking into consideration all the factors involved in determining the value for a less-than-perpetual easement. Other solutions are being examined as consideration for alternative term restrictions arise. For example, econometric methods are being developed that may offer some assistance to this end (Plantinga, 2001). The Colorado Coalition of Land Trusts identifies the problem in a different manner: If annual payments are calculated based on the difference between the lease value of developable land and the lease value of agricultural land (or formulas based on a similar notion) then the sum of those payments over 20 or 30 years might approach, or exceed, the cost of outright purchase. On the other hand, if an arbitrarily low one-time payment is used then farmers won t find it worthwhile to participate (Colorado, 2001). The Coalition goes on to offer a solution; to decouple estimates of the land value that is temporarily being given up from the amount of the payments going to the landowner. By instead providing benefits in the form of economic development consulting assistance, or additional tax benefits, or access to low-cost capital, the value is in the form of actual benefits received, not compensation for foregone land use options. Other Considerations The practicality of using less-than-perpetuity easements is somewhat determined by its marketability as well as other factors. A potential less-than-perpetuity easement holder must determine if such an investment is fiscally prudent. In doing so the holder must assess whether or not funds invested in a term-type easement are cost effective by considering among other things: (a) the cost of the term easement, (b) the length of the term, (c) the restrictions conveyed or implied by the easement document and (d) whether or not the easement contains some form of a right of first refusal or an option to buy. These latter negotiable provisions may be an important provision to include in an easement or agreement to strengthen the concept of less-than-perpetuity easements. (Colorado, 2001). A Right of First Refusal (to buy the land in fee) is drafted on behalf of the holder of the easement at such time as the landowner decides to sell the property in the case of a term easement, usually after the term easement expires. This right runs with the land and gives the holder of the term easement the right to match the purchase price if the owner ever decides to sell the property. Even though it may be very expensive to exercise such a right, this provision provides an opportunity to protect the public investment made through the term easement at some point in time. A disadvantage of relying on this provision is that both the purchase price and the purchase date will not be known until the landowner decides to sell and an offer is made on the property. An Option to Purchase provides the holder of the easement with an option to buy a permanent conservation easement at a predetermined price at the time the easement 11

12 expires, determined by the expressed term of the agreement. Like a Right of First Refusal, an option to purchase runs with the land, but alternatively, the purchase price is listed at the time the term easement is negotiated. CONCLUSION The future of less-than-perpetuity conservation easements hinges on some of the same factors that have made conservation easements designed for perpetuity so popular and desirable; whether or not there exists a statutory or legal authority for their existence, their ease and flexibility in use, their ability to accomplish what they have been designed to do and the costs and benefits they provide for the landowner and the community or public at large. The extent to which perpetual easements will continue into the future to provide the intended public benefit for which they were designed and for which landowners were originally compensated remains to be seen. In the interim, as long as policy makers and stakeholders at all levels continue to seek alternatives to the sometimes intimidating and unpredictable perpetual easement, options of agreements offering shorter term duration to achieve mutually beneficial results are most likely to develop for specific uses and circumstances. 12

13 REFERENCES: American Farmland Trust, Saving American Farmland: What Works. Northampton, MA.: American Farmland Trust American Farmland Trust. Farmland Information Center Fact Sheet Agricultural Conservation Easements November Anderson, Judy, and Jerry Cosgrove. Agricultural Easements: Allowing a Working Landscape to Work Exchange; Land Trust Alliance Vol 17:4 Fall 1998 Colorado Coalition of Land Trusts, Term Easement White Paper, February Dukeminier, Jesse, and James E. Krier, Property 856 (4 th ed. 1998); John P. Dwyer And Peter S. Menell, Property Law and Policy: A Comparative Institutional Perspective (1998). Economic Research Service. 6 March < Farmland Preservation Report. March Deborah Bowers (editor and publisher), Street, Maryland Gustanski, J., and R. Squires (eds.). Protecting the Land: Conservation Easements Past, Present and Future. Washington, D.C.: Island Press Heller, Michael A., The Boundaries of Private Property,108 Yale L.J (1999). Land Trust Alliance, National land Trust Census. 4 April < Lawrence, Douglas. Personal interview. 15 April Mayo, T. A Holistic Examination of the Law of Conservation Easements. Protecting the Land: Conservation Easements Past, Present and Future. J. Gustanski and R. Squires (eds.). Washington, D.C.: Island Press, Pp Mahoney, Julia D. Perpetual Restrictions on Land and the Problem of the Future 740 Virg L.R. 744 (2002) Morrisette, Peter M. Conservation Easements and the Public Good: Preserving the Environment on Private Lands 41 Nat. Res. J.389 (2001) Plantinga, Andrew J., and Douglas J. Miller. Agricultural Land Values and the Value of Rights to Future Land Development, Land Economics 77(1):56-67; February

14 Quinn, Vivian. Preserving Farmland With Conservation Easements; Public Benefit or Burden? Annual Survey of American Law January 1994 Small, Stephen J. The Federal Tax Law of Conservation Easements. Washingon, D.C.: Land Trust Alliance

15 APPENDI A STATE STATUTES Duration of Conservation Easements STATE Perpetual Mandatory Perpetual by Default Term by Default Alabama Alaska Arizona Arkansas California Colorado Connecticut Delaware Florida Georgia Hawaii Idaho Illinois Indiana Iowa Kansas Kentucky Louisiana Maine Maryland Massachusetts Michigan Minnesota Mississippi Missouri Montana N/A N/A Nebraska Nevada New Hampshire New Jersey New Mexico N/A N/A New York North Carolina N/A N/A North Dakota N/S Ohio Silent Oklahoma N/S Oregon Pennsylvania N/S Rhode Island South Carolina South Dakota Tennessee Texas Utah Vermont Virginia Washington West Virginia 25 years Wisconsin Wyoming N/S Note: N/A = not applicable. N/S = no enabling statute Source: T. Mayo. A Holistic Examination of the Law of Conservation Easements. Protecting the Land: Conservation Easements Past, Present and Future. J. Gustanski and R. Squires (eds.). Washington, D.C.: Island Press, Pp

16 ENDNOTES 1 J.A Gustanski and R. H. Squires eds., (2000). Protecting the Land: Conservation Easements, Voluntary Actions, and Private Lands Protecting the Land, Conservation Easements Past, Present and Future, reports that a conservation easement was written in the late 1880s to protect the parkways in and around Boston designed by renowned landscape architect Frederick Law Olsted., at 9. 2 Peter M. Morrisette (2001). Conservation Easements and the Public Good: Preserving the Environment on Private Lands 41 Nat. Res. J., 374..[U]nder common law a conservation easement is not a traditional easement, a real covenant, or an equitable servitude. The common law did not recognize a restriction on land use that was not held by an adjoining landowner and that ran with the land in perpetuity p 381. Morrissette goes on to say A conservation easement functions much like a negative easement in gross. A negative easement is a restriction on land use that prevents the owner of the property that the easement encumbers (referred to as the servient estate because it is the property that is burdened by the easement) from doing specific activities on this property. A negative easement always benefits another piece of property. 3 Morrisette at 388 notes that the authors of the Uniform Conservation Easement Act (UCEA) explain that a basic goal of the UCEA is to remove outmoded common law defenses that could impede the use of easements for conservation or preservation ends. This same holds true for state conservation easement statutes not designed after the UCEA. 4 CA GOVT ' The original California Land Conservation Act of 1965, commonly referred to as the Williamson Act provided that an owner of agricultural land may enter into a contract with the county whereby the landowner agrees to restrict the use of the land to the production of commercial food or fiber for a term of not less than 10 years in return for substantial tax savings (fair rental value divided by a capitalization rate specified by law). The term of the contract is automatically extended each year unless notice of cancellation or nonrenewal is given. CA GOVT ' Super Williamson Act passed in 1998 essentially increased the term of the contract to 20 years in return for landowners receiving a 35 discount on their property tax bill. 5 The Farmland Protection Policy Act of 1981 designated farmland a natural resource whose preservation is required for the general welfare of the nation (7 USCA Section 4201). 16