How does one go about donating or selling a conservation easement? There is no one right way to go about it. However, the following outline shows the most common steps to the process. Conveying an easement may take anywhere from a few months to a couple years, depending on a variety of factors. The landowner usually must pay for basic legal expenses, and appraisal, and in many cases is asked to make a stewardship donation to ensure that the land remains protected forever. Although the following outline discusses easements, a similar process typically applies to donations of whole interests in land as well.
1) Planning and Gathering Information
The first step for any landowner is to engage in some planning and information gathering. A good place to start is your local land trust, which should have information to send you on different options for selling or donating a conservation easement.
Often, many different family members will have an interest in the property, and one or more family meetings might be useful. Some families have found it useful to hire the services of a mediator or a facilitator to help the group reach a decision. It is difficult to convey an easement if everyone does not agree on how to proceed.
Another part of the planning process may involve meeting with an adviser, such as an attorney who has experience in conservation transactions. This adviser can help you figure out how donating or selling an easement fits with your overall estate planning, financial planning, or retirement goals. Although it is recommended that landowners meet with an attorney early in the process, so as to more fully understand his or her options, some choose to hire an attorney near the end of the deal, to perform a review of the easement. Either way, it is useful and usually less expensive to hire someone who is experienced with easements.
2) Negotiating the Terms
The heart of the process involves negotiating the specific terms of the conservation easement. Although the land trust or government agency will usually start with a model easement, this document must be tailored to meet the particular goals for you and the property. Easements include a variety of provisions, and most of these are negotiable. Among the key issues to be worked out are whether any building lots will be reserved, what uses of the land will be permitted or prohibited, and whether to allow public access to the property. In addition, in certain cases there are money issues to be discussed, as the land trust or government agency may have funds available to acquire the easement.
3) Appraisals, Surveys and Other Supporting Documents
If you will be seeking a deduction for the donation of an easement, you will need to commission an appraisal of the value of the easement. The land trust should be able to refer you to appraisers who have experience in conservation transactions. It is usually not necessary to commission a survey of the property in order to donate a conservation easement.
The land trust or government agency that will hold the easement will be doing most of the work in the period leading up to the signing. For instance, a land trust representative will tour your property in order to prepare what is called a Baseline Data, which will serve as a benchmark to facilitate the trust’s monitoring efforts.
4) Signing the Easement
As with any real estate transaction, there comes a time for all of the parties to sit down at a closing. As a general rule, the deal becomes official at the moment you sign the easement.
5) Claiming Tax Benefits
Just because you have signed your easement does not mean that you automatically receive tax benefits. You must inform the proper taxing authorities of your donation. If the easement meets basic requirements, you should be able to claim a federal income tax deduction for your donation. To do so, you must file a special form with your income tax return (Form 8283). The amount of your deduction will be determined by the appraisal of the easement that you commissioned in Step 3. In addition, depending on where you live, you might be eligible to receive state and local tax savings as well. In Maine, you should ask your local tax assessor for an application to enroll in the Farm and Open Space Tax Program, which allows a reduction in your property taxes.
6) Monitoring and Enforcement
As the landowner, you will continue to remain in touch with the land trust after the easement is completed. Most importantly, someone from the land trust will make an annual monitoring visit to make sure that the terms of the easement are being followed.