How to Protect Your Land with a Conservation Easement Although the process of donating a conservation easement is fairly straightforward, you should consult your attorney and financial advisor or accountant early on for advice on tax issues and general review of the legal documents. The time and resources spent on this process are well worth it. In the end, you will create a permanent legacy that will forever protect your land.
You can expect the creation of a conservation easement to take anywhere from three months to a year depending on the complexity of the transaction. Keep this in mind if you are planning to take advantage of tax benefits this year. There are additional time considerations for those landowners wishing to sell Virginia income tax credits.
For more information on this matter, please see our list of FAQs and/or contact the Conservancy's Senior Director of Land Protection, Kelly Watkinson, at watkinson@potomac.org. An approximate range of the front-end costs (which may be tax-deductible as a miscellaneous expense associated with a tax-deductible donation) gives you a general idea of the resources required for this transaction.
The processing of an easement involves nine steps:
- Consideration of Goals and Resources
- Negotiating and Drafting the Easement Terms
- Appraisal
- Title Search and Mortgage Subordination
- Collecting Baseline Data
- Staff Presentation of the Easement to the Board of Directors
- Final Easement Document
- Easement Signing and Recordation
1. Consideration of Goals and Resources
Potomac Conservancy staff will arrange a site visit to your property at your convenience. We can provide information and options to help you meet your goals for conservation. By visiting the property, we can help identify significant natural resources that can be protected through an easement. You will want to spend some time thinking about your long-term plans for potential changes to your property.
2. Negotiating and Drafting the Easement Terms
The Conservancy looks at each individual property on a case-by case basis before committing to work on a property. We currently have several priority areas we work, and place an emphasis on completing land transactions in these areas. However, we will consider holding easements in other areas. The best way to find out if your property can be considered for an easement and if the Conservancy is right for you, contact the Senior Director of Land Protection.
Once you have decided that a conservation easement is right for you (and the conservancy has determined the property meets our criteria), we can begin working together to draft easement restrictions that will adequately protect the natural resources on your land, as well as provide flexibility for you and future landowners. Staff can provide sample terms for your review and draft terms specifically tailored to your property. We recommend that landowners consult with an attorney before finalizing the draft easement.
3. Appraisal
Landowners wishing to take advantage of the tax benefits of conservation easements must obtain an appraisal by a qualified appraiser. You will want to retain an appraiser early on in the process. You are strongly urged to seek professional advice from a tax attorney or accountant if you plan to claim the value of the conservation easement as a charitable donation for state and federal taxes. Though the conservancy cannot make specific recommendation for attorneys, appraisers and tax credit brokers, we can provide landowners with lists of service providers in these areas. Fees for these services are the responsibility of the landowner.
How is easement value determined?
A completed appraisal, by a qualified conservation easement appraiser, determines the value of the easement. The land is appraised at its fair market value without the easement restrictions, and its fair market value with the easement restrictions. The difference between these two values is the easement value, from which potential tax deductions are derived.
4. Title Search and Mortgage Subordination
A brief title report that provides a legal description, explains who owns the property and any interest in it, any liens or mortgages, and any easements such as rights of way, is needed early on in the process. If you have recently purchased your property or refinanced, you may already have a title report on-hand. If there are any mortgages on the property, the mortgagor must be contacted and a consent agreement must be developed. Consent from the mortgage company is required to satisfy the IRS regulations related to conservation easements. Some mortgage companies may charge a fee for this service. Costs for the title work and mortgage subordination are the responsibility of the landowner.
5. Collecting Baseline Data
A Baseline Report will be developed by Conservancy staff to document the condition of the property at the time the conservation easement is donated. This is required by IRS regulations and specific conservation values - such as streams, springs, mature trees, or tree-covered slopes - will be documented and photographed in the Baseline Report. Conservancy staff will work with the landowner in the development of this documentation to insure the current condition of the property is accurately reflected.
Survey
Often times a survey is needed to provide clear delineation of the property or easement area boundaries. If you already have a survey on-hand, this may suffice; or, the same surveyors could update it at a nominal cost to show referenced management areas or, easement boundaries. The costs of a survey are the responsibility of the landowner.
6. Staff Presentation of the Easement to the Board of Directors
The Conservancy's Board of Directors reviews all conservation easements that will be held by the Conservancy. Upon approval, Conservancy staff can complete negotiations with the landowner and finalize the easement.
7. Final Easement Document
Conservancy staff will review with you and your legal advisor the final easement document and obtain your approval. Any attached documents, maps, or exhibits will be included with the final easement document.
8.Easement Signing and Recordation
The easement signing is similar to a closing that you probably experienced when buying or selling real estate. You and the Conservancy's President will sign the final easement document. A notary public must notarize the signatures of the "grantor," the landowner who is donating the easement. You and the Conservancy will also sign an affidavit certifying the accuracy of the baseline data. The Conservancy will ensure that the easement and mortgage subordination are recorded immediately. Recording costs (usually about $50) are the responsibility of the landowner. Some counties do not charge recording fees for donated conservation easements. You and the Conservancy will each retain a copy of the conservation easement. You will probably want to keep the easement in a safe deposit box or other safe place with other documents, such as deeds or wills.
For additional information about donating a conservation easement to the Potomac Conservancy, please contact the Senior Director of Land Protection, Kelly Watkinson, at watkinson@potomac.org.