Conservation Drafting and
Documentation
Pennsylvania Land Conservation Conference:
Working Together to Protect Land, Water and
Communities
May 8, 2009
Presenters
Patricia L. Pregmon
Lauren Pregmon Tetreault
Dawn Gorham, PhD
What is a Conservation Easement?
• Owner declares covenants
– Subdivision
– Improvements
– Activities and Uses
• Conservation Organization commits to enforce
in perpetuity
SAMPLE DEED COVENANT
And the Grantee, by acceptance of this Deed, covenants to and with the
Grantor that the following covenants shall be binding upon the abovedescribed premises granted herein in perpetuity as covenants running
with the land:
1. That the premises shall never be subdivided.
2. That there shall be no building or other improvement erected or
constructed within 50-feet of Winding Creek.
3. That the premises shall be used only for residential and
agricultural purposes.
DEED COVENANT
ADVANTAGES
• Inexpensive
• Fast
•
•
•
•
•
•
DISADVANTAGES
Black and white – no grey
Who’s going to enforce?
Who’s going to pay for
enforcement?
Who is going to monitor?
And how?
Whose consent needed to
amend?
What happens when
conditions change?
Pennsylvania Land Trust Association
Model documents available online at:
www.conserveland.org
Model Conservation Easement
Commentary
Regular Updates
Conservation Easements Protect
Natural Resources
• Water
• Soil
Biologic Resources
• Trees, plants and vegetation
• Animal, bird and aquatic habitat
Scenic View
• Nature appreciation
• Outdoor recreation
Three Levels of Protection
Highest Protection Area
• Few Improvements (fence, trail)
• Little or no activity (walking, removal invasives)
Standard Protection Area
• Wide range of outdoor activities
• Limited improvements
Minimal Protection Area
• Little or no limitations on activities
• Residential Improvements
Aerial photo of Ohner Farm
350 acres owned Mary Ohner bounded by Sycamore St. and Fairview
Ave. in Growing Township, Progressive County, PA. 135 acres
farmland; 215 acres woodland; traversed by Winding Creek. Has
been in Ohner family for 100 years.
Perspectives on Conservation
Mary Ohner
Widow
Age 65
Lives on Property
Albert Ohner
Betty Ohner
Age 35
Age 40
Married, no children
Married, three children
Lives on Property
Lives in Seattle
Your
LandTrust
Preparation for Interview
• CLC Conservation Easement Checklist (p.72 74 Workbook)
• Aerial - GPS
• Zoning – Subdivision/Development Approvals
• Property tax records
• Title records – liens, last deed
• Google - Networking
Morning Break
Breakout Session
• Interviewing Mary Ohner
– What are her conservation objectives?
– Are they feasible for Land Trust to enforce?
– How will preparation and long term enforcement be
funded?
• Proposal for Conservation Easement
–
–
–
–
Subdivision
Location of HPA (if any)
Location and number of MPA(s)
Number and size of buildings permitted within SPA;
Impervious Coverage limit
• Recommendations to Board for approval
Conservation Plan for Ohner Farm
Conservation Objectives
Land Planning Objectives
Estate and Tax Planning Objectives
Charitable Contribution
• Conservation Tax Outline
• Course Workbook pp. 26-33
• Section 1.06 of Pennsylvania Conservation
Easement and Commentary
• Lindstrom, Tax Guide to Conservation
Easements
• Small, Preserving Family Lands
Exclusively for Conservation Purposes
Relatively
Natural
Environment
Preservation
of Open Space
Scenic views
from public
access points
Public Access
In furtherance
of public
policies
Enforceable in Perpetuity
Qualified
Organization
• Non-profit recognized as charitable under
501(c)(3)
• Governmental authority
Commitment
to Enforce
• Funding
• Organizational mission
Perpetuity
• No outstanding interests to cut-off
• Subordination of all mortgages
Potential Income Tax Benefits
Fair Market Value of Property: $2,000,000
Donation of a Conservation Easement on the Property to a Qualified Conservation
Organization
Fair Market Value of Property with Conservation Easement: $1,000,000
Owner has a $1,000,000 charitable income tax deduction for donating the
conservation easement (equal to the diminution in value of the Property).
Generally, Owner can take the income tax deduction up to 30% of her adjusted gross
income for the year of the gift (50% if donated in 2008 or 2009), with a 5-year
carry-forward of any unused amount (15 years if donated in 2008 or 2009).
With a $1,000,000 Deduction . . .
Without the Donation
Income:
$100,000
Tax Due:
$ 33,000
With the Donation
Income:
$100,000
Deduction:
$ 50,000
Tax Due:
$ 16,500
Tax Savings: $ 16,500
*Tax Savings over
15 years:
$264,000
*Assumes 2007 federal tax incentives are made permanent.
Estate Tax Benefits
Land subject to
Conservation Easement
is valued as restricted
for Estate Tax purposes
IRC 2031(c) Exclusion
• Exclude up to 40% of
value
• Must be owned 3 years
preceding death
• CE granted by decedent
or family member
• Maximum $500,000
• CARRY OVER BASIS
Lunch Break
12:00-1:00pm
Summary of Objectives for First Draft
Conservation Easement
Land
• HPA – riparian buffer; habitat
• Minimal Protection Area(s) - Subdivision
• Improvements within Standard Protection Area
• Maintain integrity of Property
• Treat children equally
Personal • Buffer working farm from MPAs and vice versa
• Reduce value for estate tax
• Qualify for federal income tax benefit
Financial • Possible estate tax exclusion
Drafting the Conservation Easement
based on the Pennsylvania Model
Articles; Sections; Definitions
Using the Commentary
Parties; Property
• “Undersigned Owner or Owners” and
“Owners” (8.30)
• Property; Conservation Area
• Conservation Plan
Conservation Objectives; Baseline
Documentation
• 1.03 Select and apply to Property
• 1.04 Support with Baseline Documentation
– Sources of information
– Photographic documentation
– Descriptions of Native, endangered or threatened
resources found on or about; use as corridors;
connection to larger landscape
– Support for IRC public benefit test
Section 1.06 and other legal
requirements
• Tax Requirements
– 1.06 Federal Tax items
– 1.04 Baseline Documentation
– 5.01 Grant in Perpetuity; Superior to all Liens
– 5.02 Duty to enforce in perpetuity
– 7.03 Assignment only to Qualified Organization
• Conservation Easement Act
– Coal Rights notice
Structure Articles II, III and IV
No
Yes
Maybe
• No Subdivision
• No Improvements
• No activities and uses
• Permitted as a matter of right
• No approvals
• Permitted subject to Review
• Procedure for Review 5.04
Article II Subdivision
• Broad definition in 8.44
– Transfer of Existing Lot
– Condominium and HOA units
• Option to add other “Permitted Subdivisions”
per Commentary
• Option to add, delete or move “subject to
Review” (procedure in 5.04)
Article II – Future MPAs
• Option to establish MPAs in future
– Within Designation Area
– By ruling out certain areas
• “Floating” MPA can jeopardize charitable
contribution
Afternoon Break
Article III Improvements
Site Improvements
Utility Improvements
Additional
Improvements
Agricultural
Improvements
Residential
Improvements
Improvements
Existing Improvements
Expansion or Relocated
Improvements in HPA
• Highest Protection Area
– Fences and signage - Owner concerns re security,
trespassing, etc. vs. protection of scenic views
– Trails – Impervious Coverage (8.20)
– Other access subject to Review to protect
Conservation Objectives for protection of habitat,
water resources
– Extraction Improvements (may be deleted)
Improvements within SPA
• Agricultural
• Utility Improvements and Site Improvements for
agricultural and recreational uses
• Limitations to preserve Conservation Objectives
re: scenic views, open space preservation and
water resource preservation
• Numbers in model for illustrative purposes only
• Option to permit Renewable Energy
Improvements
Improvements within MPA
•
•
•
•
Adds Residential Improvements
Option to limit Habitable Improvements
Option to limit Impervious Coverage
Option to permit Extraction Improvements
Article IV Activities, Uses; Disturbance
of Resources
• Prohibition (4.01) broader than Article II and III
• Zoning and TDR issues (4.02)
• Important definitions
–
–
–
–
–
Native Species (8.29)
Wet Area (8.48)
Best Management Practices (8.08)
Sustainable (8.45)
Resource Management Plan (8.38)
• Soil conservation plan (8.42)
• Agricultural management plan (Commentary)
• Forest management plan (Commentary)
Activities within HPA
• Existing Agreements – check whether need
subordination or surface use agreement
• Disturbance of Resources
– (i) Liability issues
– (iv) Vehicular – ATV issues (also (d))
– (v) Removal of downed trees, cutting live trees
– (ix) Accommodates possibility of change
Working Landscape within SPA
• Sustainable Agriculture
– No plan required for grazing, hayfield
– Soil Conservation Plan for field crops
– Option: Agricultural Management Plan (Commentary)
• Sustainable Forestry
– Resource Management Plan
– Option: Forest Management Plan (Commentary)
– Certified Sustainable or compliance with requirements
• No conversion of woodland to agriculture
Recreational within SPA
• Any kind of outdoor recreation activity subject
to overall prohibition on frequency and
intensity of use (4.01) and availability of
improvement for that use under Article III
• Motor vehicle issue
Activities and Uses within MPA
• No limits on planting or removal of vegetation
(other than introduction of Invasive)
• No limit on uses or activities within
Improvements (Residential and Agricultural)
permitted within MPA
• Residential and Agricultural uses
Articles V Rights and Duties
• 5.01 Rights AND duties of Holder
• 5.02 Rights but NOT duties of Holder
• Option: add selected rights NOT duties for
Beneficiaries
• 5.04 Procedure for Review
– Option: Add Alternative Dispute Resolution
• Option: add Public Access
Article VI Enforcement
Violation
• Notice and Opportunity to Cure
• Exception for Imminent Harm (6.02(c))
• Compulsory Relief – Injunction or Specific Performance
• Damages
Remedies • Self Help
• SODDI (some other dude did it) 6.07
• SOODI (some other Owner did it) 6.09
Defenses • SLODI (some later Owner did it) 6.10
Closing
• Satisfying title requirements
– Subordination of liens
– Existing Agreements
• 3-4 originals CE and Baseline Documentation
– Acknowledgment by Notary Public
• Recording
Post-Closing
• Written acknowledgment
• Appraisal/IRS Form 8283
– Qualified Appraisal if over $5000 (1.170A-13(c)(2))
– Summary of conservation purposes
– No quid pro quo
– Disclosure of related person’s property in vicinity
• Policy on signing 8283