Want to own land rather than lease? Generate enough money to make club improvements and never pay dues again. Conservation easements can accomplish both, but be careful before you sign.
In a nutshell, a conservation easement occurs when two parties sign an agreement to protect a tract of land from development. The owner (hunt club, farmer, ranch, etc.) sells its development rights to a grantee under certain conditions. The price of development rights can be substantial and warrant the attention of any group or organization wishing to perpetually preserve their natural surroundings. Many national organizations offer conservation easements including Ducks Unlimited, Pheasants Forever, The Nature Conservancy, Rural Legacy, Trout Unlimited, and The National Fish & Wildlife Service.
As a quick example, assume a hunt club owns 1,000 acres worth $500 per acre. Selling the development right may generate $250,000 and you still own the land and retain the ability to hunt, fish, farm, timber or other uses jointly agreed upon. If you long to stop leasing and start owning, a conservation easement can make this dream come true. Under optimum conditions, it’s conceivable to buy a property with a large portion of the purchase price recouped from a conservation easement. Timber marketing can further impact mortgage reduction.
Easements Advantages
Conservations easements gained momentum in the 1970’s when the Internal Revenue Service allowed the provisions of perpetual easements under Section 170 of the IRS Code. The true purpose of a conservation easement is to preserve the land in an open space condition and tax benefits serve as a considerable inducement for landowners to undertake this action.
Landowners benefit financially whether they sell or donate their development rights. Since most conservation easements are corporate charitable trusts, the value of the development rights can be viewed as a charitable donation and deducted from the owner’s income tax spread over six years. Property taxes are usually reduced since the value of the property has decreased. Finally, estate taxes can saved when the property is inherited.
Easements Require Great Care
Conservation easements must meet fairly strict benchmarks of the IRS Code. When crafting an easement agreement, owners grant “affirmative” rights to the easement organization. “I like to think of it as co-ownership,” says Dr. Harry L. Haney Jr., Garland Grey Professor of Forestry at Virginia Tech and an expert on the subject. “These rights spell out what the trust organization can do. They may come to inspect your land, allow people to hunt or hike on it, or use the property for educational purposes.” Obviously, landowners will want to spell out very carefully what they will permit the trust organization to do. Affirmative rights are negotiable and vary widely.
“Reserve” rights are the most important from the landowner’s point of view. These are the land use options retained by the owner and can include hunting, fishing, forestry, agriculture and others. The second negative can be the reduction of property value. Once entered, this tract will rarely ever exceed half its normal property value. Property owners must weight carefully the benefit of immediate cash as compared to the property’s escalating value over time.
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