The land we own has great value to us personally, to our family and future generations, to our neighbors, and to the community. This value is not based entirely on the land’s publicly accepted monetary value or potential for future development, but the property’s greatest value may simply lie in its natural state. For example, your land may contain family farms, wildlife habitat, open space, scenic or historic features, woodlands, streams, and picturesque vistas. You may find the value that these natural features provide to be greater than the value of any future development possibilities. In these cases, a conservation easement is a great tool to ensure permanent protection on your land.
A conservation easement is a legal agreement that contains specific permanent restrictions on the use of the land without transferring title of the land to another. A conservation easement may be created through a sale or donation. The landowner, known as the “grantor”, enters into a voluntary agreement with a land trust or approved government entity, known as the “grantee.” The agreement restricts the landowner’s use or development of the property and indicates their intention to preserve the land in its natural condition. Appropriate conservation purposes are generally those that include the protection of wildlife habitat, the protection of open space, and the preservation of agricultural lands.
Simply put, a conservation easement protects the property’s natural value through a donation or sale of the future development rights to a private land trust, public agency, or qualified conservation organization. The landowner retains title to the land and, unless altered in the conservation easement, continues to use and control the land.
Each conservation easement is unique. The terms of the easement are negotiated between the landowner and the recipient of the easement. The conservation easement can be particularly crafted to specify the land restrictions and may include future development possibilities. For example, a landowner may create a conservation easement that allows limited additional development to include homesites for their children or reserve a specified number of homesites as a source of future income.
Most conservation easements are made to a land trust, private entity, or public entity. Most land trusts and private, non-profit corporations are directed by members of the community in which the land trust operates. Alternatively, a public entity, such as the Virginia Department of Forestry, the Virginia Department of Conservation and Recreation, or the Virginia Department of Historic Resources, may be the recipient of a conservation easement. In either scenario, the grantee of a conservation easement has the responsibility of enforcing development and use restrictions contained in the conservation easement. The grantee’s representatives will periodically visit the property to ensure the conservation easement is being honored.
The creation of a conservation easement can provide great tax relief and certain tax benefits. A conservation easement will sometimes lower property taxes as the value of the property subject to a conservation easement is reduced. Another charitable tax benefit may occur if the landowner donates a conservation easement to a public entity. The charitable deduction is based on the loss of value that occurs when the rights to any future development are permanently restricted through the sale or donation. Additionally, it is possible for an estate to donate a conservation on land after the landowner has passed away in order to obtain an estate tax deduction for the value of the easement.
The Virginia tax code provides powerful financial incentives to landowners for donating conservation easements including the Virginia Land Preservation Tax Credit. Anyone who donates a conservation easement on property located within the Commonwealth of Virginia may be able to claim up to 40% of the value of the easement gift in Virginia income tax credits. If the landowner cannot use these tax credits, they may be sold which results in providing cash for conservation.
Conservation easements are a great tool to enable landowners to preserve the natural value of their land while also reaping helpful tax benefits. There are particular rules which must be followed in order to create a proper conservation easement. And there are a number of real estate and tax law factors to consider when structuring a conservation easement.
The Virginia conservation easement attorneys at MartinWren, P.C. can provide helpful counsel to clients regarding conservation transactions and strategies. For more information about a conservation easement, please contact Lewis A. Martin, III or Gregory M. Johnson at (434) 817-3100. Greg and Lewis have great experience in working with clients to meet their land preservation objectives while obtaining the greatest tax benefits available to them.