I’m Interested – What is the Process? Conservation easements are one of the most powerful, effective tools for permanently conserving private lands in the United States. The use of conservation easements has successfully protected millions of acres of wildlife habitat and open space nationwide, keeping land in private hands and generating significant public benefits. A conservation easement is an agreement between a landowner and a land trust or government agency that permanently preserves scenic open spaces, agricultural lands, wildlife habitat, or recreational areas. This voluntary, legally-binding agreement limits certain uses and development on a property in perpetuity. A conservation organization, such as Aspen Valley Land Trust, agrees to hold the landowner’s promise not to exercise those rights.
Exploring the possibility of a conservation easement on your land begins with a site visit to the property by AVLT staff who will evaluate the conservation values of the property. If the project meets the criteria for a conservation easement, AVLT will help guide you through the process of conserving your land. In order to complete your easement, you will need to commission the reports listed below. A list of consultants we have worked with in the past is available here. AVLT does not provide legal or tax advice. We strongly recommend that you consult with legal and tax professionals throughout the process.
Once you decide to move forward, you will sign an engagement letter and provide a $500 deposit for a title review, which should reveal any unexpected factors that might need to be addressed in order to create an easement. Signing an engagement letter does not bind you to complete the transaction, but it does indicate a level of commitment to the process.
The next step is to hire an appraiser. Knowing what your property is worth and the value of the development rights you are retiring is a key piece to making this big decision. Conservation easements devalue the land by the retiring development rights. If you could have previously built ten houses on your property and now can only build two, your property will have less value on the open market. The more rights (value) you give up, the greater the tax benefits. This can be especially important to anyone who is land rich and cash poor, or for estate planning when one intends to pass the property down to the next generation. Appraisals must be dated no more than 60 days before the easement donation. A conservation appraisal is a different animal than a standard real estate appraisal and AVLT requires that you work with an experienced and qualified conservation easement appraiser.
The value of your easement will be determined by comparing the highest and best use of your property both before and after the easement is granted, based on recent comparable sales. The appraisal must also take into consideration “enhancement” – the value that an easement may add to adjacent or nearby property owned by the donor or the donor’s immediate family members. In short:
Property value before it is placed under conservation easement (“Before Value”)
– Property value after it is placed under conservation easement (“After Value”)
= Value of the conservation easement.
The tax benefits associated with donating an easement are based on this value.
BASELINE OR PRESENT CONDITION REPORT
A baseline study or present condition report is required before land can be placed into a conservation easement. This inventory documents the condition of the property at the time of the easement donation, including existing improvements and conservation values (such as wildlife, natural habitat, scenic qualities or irrigated lands), which together provide a record for comparison in future years. This report is used by the landowner to demonstrate the conservation values of the property and by the land trust to track any changes to the property during annual monitoring visits.
In Colorado, mineral rights are separate from a property’s surface estate, and may be owned and developed by a third party. Often surface owners have little control over mining activities on their land. The IRC and Treasury regulations distinguish between surface mining (gravel pits, coal mines, etc.) and subsurface mining (oil and gas) and prohibit landowners from claiming a tax deduction if there is any possibility of surface mining on the land. If you do not own 100% of your mineral rights, a qualified geologist must complete a mineral resource assessment (MA) that examines the possibility of surface mining. The MA must find that the likelihood of surface mining is “so remote as to be negligible” in order for an easement to be tax deductible. This helps assure the landowner, the land trust, and the public that conserved land will not be permanently damaged by mining activities.
A conserved property subject to oil and gas drilling may qualify for tax benefits if the surface disturbance is “temporary and reclaimable” and “not irremediably destructive of the conservation values.” Therefore, disturbance from oil and gas development must be minimized and properly reclaimed so as not to damage the perpetual conservation values of the property. AVLT cannot guaranty the deductibility of any easement subject to oil and gas drilling.
In Colorado, water rights, like mineral rights, may be transferred or sold separately from the land. In 2003, the Colorado legislature became the first state to legally permit a conservation easement to protect water rights by permanently attaching these rights to conserved land. Protecting water in this way is important if the purpose of the conservation easement is to preserve productive agricultural lands, or habitat dependent on water rights. By tying water rights to land through a conservation easement, the landowner maintains ownership and control of the water rights, while AVLT has the right to ensure that the water rights are not lost through abandonment or transfer, and remain with the property to enable continued historical agricultural use.
The Deed of Conservation Easement
While all of these reports are being prepared, you and AVLT staff will work together to draft the conservation easement document. Each one is unique because each property and landowner is unique. Certain sections are common to all conservation easements but the decisions about reserved building rights and future uses of the property will be between you and the land trust. The lawyers (yours and ours) will have input and a final look to make sure everyone is comfortable with the final deed.
Once the reports are in and the easement finalized, the easement deed is signed, notarized and recorded with the county clerk. Now it’s time celebrate!
Conserving your land does not prevent you from continuing to live on it, sell it, mortgage it or enjoy it. All of this will continue with the knowledge that it will never be developed or transformed into an unrecognizable subdivision or sea of asphalt. Your decision to conserve your land will be recognized and appreciated by generations to come – your grandchildren will be able to wander the same open meadows and stream banks you now know.
Monitoring and Ongoing Support
After AVLT accepts a conservation easement, we are legally required to observe the property at least once a year. Monitoring visits are not intended to intrude upon the landowner’s privacy but to ensure that the terms of the easement agreement are satisfied. Landowners will be notified in advance and may be present during the visit if desired. Afterward, the landowner will receive a copy of the report and will have the opportunity to review it for accuracy.
Stewardship and Transaction Fees
In order to carry out our perpetual monitoring and stewardship obligations, AVLT maintains a sizeable fund dedicated to the stewardship and defense of its easements. To maintain this fund, AVLT requests a one-time contribution for each conservation easement. If a conservation easement is conveyed over two or more years, the landowner is responsible for an additional fee for each added phase, which helps cover the transaction costs. Ask our land protection specialists about the current fee schedule.
Those are the basics. If you are ready to pursue a conservation easement, we would love to hear from you and will arrange for a site visit. Talk to your friends and neighbors who have gone through the process about their experience or contact us for more details. AVLT staff is excited to work with you to preserve your property for future generations.