Erika Benson, co-founder at Gokce Capital, recently explained the benefits and drawbacks that conservation easements offer property owners.
Benson used to be the affordable housing director for the City of New York, but now she works as a full-time land investor at Gokce Capital. Her focus is on assisting individuals in locating reasonably priced land all over the United States.
According to Benson, conservation easement is a voluntary agreement that permanently limits the use of the land to protect its conservation values. Placing a conservation easement on a property allows the owner to continue to control the land and take advantage of a tax deduction as long as they don't develop it. Owners can deduct 50%, or 100% for farmers and ranchers, of their income for 16 years up to the easement's appraised value. A conservation easement agreement is generally permanent even if the property is passed to an heir or sold.
In relation to conservation easement, land trusts are entities, usually nonprofits, that buy the development rights from a property owner in order to conserve the land as well as restore and maintain it once it has been conserved. Benson said these groups will work with landowners to execute and record the easement. Land trusts are also responsible for enforcing the restrictions laid out in the easement and will make annual monitoring visits to inspect the property.
Benson discussed the benefits of conservation easements, which include tax deductions, the opportunity to protect agricultural, recreational or natural land from development and easement agreements, which can be customized by property owners to allow certain uses for the land (farming, recreation, etc).
Conservation easements also come with certain drawbacks, including the development restrictions imposed on the property, not every property will qualify and owners could face penalties by overstating the value of the easement. Having a conservation easement on your property can also limit the pool of future buyers and lenders.
Land owners that enter into easements can continue to use their property as long as it doesn't interfere with the conservation value of the land.
"In particular, farmers, ranchers and foresters are often able to keep using the property as they have done in the past," Benson said. "On the flip side, the conservation easement will limit future development or surface mining on those portions of the land covered. In some circumstances, wind turbine development or ATV use will be restricted as well."
Property owners usually enter into easements for financial benefits, including a substantial tax deduction if they donate an easement or selling the easement for money upfront, but owners may choose easements for other reasons.
"Many owners use conservation easements as a way to ensure that their farmland, hunting land or recreational property remains preserved for future generations," Benson said.
Conservation easements are typically permanent, but Benson said property owners could opt for the conservation reserve program instead, which offers an agreement that is similar to a lease. Under the program, land owners can select to enroll for a 10-15-year period after which they can choose to leave or re-apply.
The Farm Service Agency (FSA) oversees the Conservation Reserve Program (CRP), which aims to conserve land. Farmers who participate in the program agree to take environmentally sensitive land out of agricultural production and plant species that will enhance environmental health and quality. In return for an annual rental payment, farmers enrolled in the CRP commit to contracts lasting 10 to 15 years.
In 1985, President Ronald Reagan signed the CRP into law, making it one of the biggest conservation programs for private lands in the United States.
