Conservation Easements

Alachua County Forever's Definition of Conservation Easements

Generally, conservation easements are agreements between landowners and a second entity, usually a conservation organization, for the preservation and protection of land in its natural, scenic, historic, agricultural, forested, or open space condition. If the landowner is seeking any favorable tax benefits, the conservation organization must be authorized under 26CFR1.170A-14(c), to hold conservation easements. In Florida, 704.06, Florida Statutes also apply. Local governments meet these tests.

In the case of Alachua County Forever, there is an additional legal test. The easement must satisfy the bond covenants. They must be essentially a capitalizable asset acquired to meet one of the three purposes of the 2000 Bond Referendum: protect wildlife habitat, protect water resources, or provide natural areas suitable for resource-based recreation.

Alachua County will be among the very first local governments in Florida to hold conservation easements. They have been used extensively elsewhere in the United States and by the Water Management Districts. They are extraordinarily flexible tools since they are adaptable to any property, and the landowner's personal, land use and financial situation and goals. The property is kept in private hands, remains on the tax rolls and usually under private management. It widens the opportunities for Alachua County to conserve natural resources beyond public ownership and environmental regulations.

Buying Property Rights

Real property can be thought of as a "bundle of rights." When a property is "owned in fee," the landowner possess all of the rights to that parcel, subject to the police powers of the government. Under a conservation easement, the bundle is legally divided among the landowner (grantor) and Alachua County (grantee) such that the County can protect the conservation values of the property. The conservation values is that set of characteristics of the property that make it worthy of protection. It may be outstanding wildlife habitat, ecological function, scenery or recreation potential. They are identified in the ACF Project Evaluation and in the Conservation Easement Baseline Documentation.

Once the conservation values have been identified, ACF has to determine the appropriate conservation option. I have attached a document that I wrote for my use when I initiate this discussion with landowners. I have a lengthy discussion about what are the current uses of the property; what future uses the landowners want to reserve; what rights are they not using, will not use and can they give up; and in what condition do they want to pass it on to their heirs or to sell it. Each of these questions identifies uses and rights to the property that the owner will keep or give up. Although I never discuss price at this point, we do discuss whether the owner is contemplating a donation, a partial sale/donation, donation over time, or outright sale. Usually the more rights the landowner reserves to themselves, the less money the easement is worth. They also run the risk that the County is unable to protect the taxpayers investment and staff or the BoCC will not accept the easement.

From Negotiation to Appraisal
Lochloosa Connector Wood Conservation Easement picture 1

The next step is to negotiate the separation of the bundle of rights so that the landowner can continue to enjoy the property and the County can protect the property for the term of the easement. This is easily the most complicated part of the process and the reason why these are so different from fee simple deals. Because of the bond covenants, ACF is limited to acquiring perpetual easements. At a minimum, the development rights are acquired by the grantee either in whole or part. Additional rights range from mining, timber, hunting, motorized access, recreation, educational and scientific use, and public access.

For example, the Water Management Districts' primary mission is to protect water resources. The loss of open space and its percolation, flow reduction and filtering functions affects water quality. Therefore the Districts usually seek to acquire the development rights only, meaning that the grantor and all future owners cannot ever develop the property. They may retain the right to hunt, timber and exclude the public from the land, unless the District also acquired those rights.

Acquiring just the development rights may not be enough. You can imagine a property covered in native forest over which the County purchased an easement containing just the development rights. The purpose of the easement was to protect the forest values. Soon thereafter, the landowner cuts down the forest and converts the property to pasture. While legal under the easement, we have not protected the conservation values. We should have purchased the timber rights and the mining rights in addition to the development rights.

Occasionally, the landowner wishes to reserve the right to subdivide the parent tract into separate tracts for their children. Depending on the number of children, the size of the parent and the size of the resulting tracts, this may be acceptable to the County. It will also depend on what uses the children want to put their lots into. Splitting a 20-acre tract into four 5-acre tracts, each with the right for a 3,500-square foot house to be built on it may not protect the conservation values. However that same 20-acre tract with the right for four 1-acre tracts, with a 16-acre common conservation area might be acceptable even with the four houses built on the 1-acre lots.

The usual conservation easement does not grant the public the right to access the property. It is still private land, and the owner may be liable for accidents on the property, not to mention the loss of their privacy and exclusive use of the resources. The Lochloosa Wildlife Management Area conservation easements that the St. Johns River Water Management District acquired from a large timber company were possible so long as no one lived on the property, and the public hunting and recreation does not interfere with the timber operations. Most owners of properties with onsite residences, or with private hunt or recreational clubs will not grant public access. Access is required for County staff to monitor the property and conduct resource management as necessary.

Once the easement has been negotiated, the County and the landowner go over the baseline documentation to ensure it represents the property in its current condition and documents the resources that are the subject of the easement. From these two documents, a management plan is developed. This document details how each of the conservation values will be managed and who will be responsible. Depending on the easement, the land management responsibilities will fall to the landowner, the County or some combination of the two. In my opinion, it is essential that the conservation easement is not executed until the management plan and baseline documentation are agreed upon. It is only with the development of the management plan that any affirmative obligations - activities that the owner is now responsible for - are detailed. It is possible for a landowner to decide that one or some these are to onerous and seek to renegotiate the easement. It is my preference that the landowner have this option. I'd rather have an amicable split than a hostage landowner and start this partnership off on an adversarial footing. Amending the easement once approved by the parties and recorded is to be avoided at all costs, especially once the purchase is consummated. It opens up the easement to amendments that would allow inconsistent uses and violate the Bond Covenants.

Appraising the Value of the Easement

Once all the documents are agreed upon, the easement is appraised. Usually I will have a fair idea of what it is worth and whether that is within the grantor's expectations. The value of the easement is the difference between the property unrestricted by the easement and the restricted value. For example, let's assume timber tracts in a particular area are going for $2,000/acre, and 40% of that value from the timber. If the easement prohibits timber harvest, then the subject property has a market valued of $1,200 (60% x $2,000). Therefore the value of the easement is $800/acre.

An easy way to appreciate easement value is to consider a 10-acre tract on the corner of Main Street and University Avenue. If we were to purchase the development rights on that hypothetical tract, we'd probably pay 95% of the fee simple value of the property. That same easement on the same tract but now it is located in Watermelon Pond would be worth about 40-50% of the fee simple value. The difference is due to the value of the development rights in the market place, driven for the demand to develop that property.

Appraising easements is far more complicated than residential, commercial or even rural property. With standard appraisals, you can rely on either comparable sales or on income stream valuation. With easements, with the unusual restrictions and rights on the property due to the easement, the appraiser has to find comparable sales restricted in similar ways to the subject property. This is not so easy for a 500-acre tract, with no timber harvesting, but with deer hunting but not fowl hunting, no public access, and the right to subdivide four 1-acre lots and build a 3,500-square foot home on each.

It is possible that a landowner is selling the easement and gets the best offer from the County based on the appraisal. But it does not rise to their expectations. In this case they can seek to sell additional rights and the property has to be re-appraised delaying the transaction.

But let's assume we have successfully negotiated an easement that protects the conservation values, protects the public trust and the public dollars; we have developed an appropriate management plan and had the property appraised and the offer accepted. A contract is drawn up between the County and the landowner for A Deed of Conservation Easement. The deal is approved by the County Commission and the Deed is recorded in the County records. How is the easement, the public investment and the grantor's conservation legacy protected? Easements run with the land and usually give the grantee the power to enforce against the grantor, their successors, heirs and assigns for violations of the easement. Remedies range from mediation to legal action. So the County will periodically visit the property with a checklist, sit down with the landowner and cover the list together. Any violations can be immediately brought to their attention and corrective actions taken. Finally, the County has available remedies under the easement for any uncorrected violations.

Good Stewardship

The final issue of easement management is one in which we will be setting conservation easement history. Easements were developed and used extensively in the northeastern and western United States. These areas have very slight problems with exotic plant infestations usually because their weather knocks them back before they can get a serious foothold.

In this area, exotic plants are a problem. In a few years, they can wipe out the conservation values without proper resource management. It may not be enough to visit the property and expect the landowner to manage the pest plants. We can require them not to plant any prohibited species, but if one recruits to the property, it may be our responsibility to eradicate it. Most landowners are not trained or willing to expend resources to treat what could be considered a natural phenomenon. The County may seek to change a part of the sales pitch on easements slightly so that the County is responsible for management of the easement as far as exotic plant control is concerned.

I anticipate negotiating easements on the gamut of property. From 1,000-acre commercial timber tracts to 6-acre backyards that happen to have some outstanding feature; from 40-acre tracts that have a primary residence to 100-acre private hunting reserves. Many of these properties, with the conservation values they possess, the contribution to the unique scenery and feel of Alachua County, the benefits they bring to the community, would be protected without the possibility of using conservation easements.

Tax Benefits

 In many states, donors of conservation easements can enjoy four significant tax benefits; one being state income tax deductions. As Florida does not have an individual state income tax, easement donors in Alachua County enjoy only three. They are federal income tax deductions, estate tax reductions and property tax reductions. There are many publications on the web available to potential donors for their information. Below are some links to the laws and some good publications. You should note their publication date and check for updates since the tax code is revised constantly.

Federal Tax Code related to conservation easements. 26 CFR 170

State Law related to conservation easements. Ch. 704.06 F.S. 

Conservation Easements and Tax Benefits. Publication Date: 2014. Conservation Law, P.C.

A Simplified Guide to the Tax Benefits of Donating a Conservation Easement. Publication date: 2001. Jackson Hole Land Trust.

Using the Conservation Tax Incentive. Publication date: 2010. The Land Trust Alliance.