by Ariel Steele, RLI member
So, you’ve found your dream property, only to discover that it has a conservation easement on it. Or, that beautiful tract of land is just out of your budget, and your broker has suggested a conservation easement to bring it into financial reach. While conservation easements are a hot topic within the ranch brokering community, many buyers do not know all the facts before they enter the land buying process. Whether you are considering purchasing property that already has a conservation easement (CE), or you’re weighing the benefits of placing a CE on land after you purchase, this article will help you make the best choice for your land and your family.
What is a conservation easement, anyways?
Conservation easements are legal agreements placed in the county record that permanently restrict how land can be used . When a landowner places a CE on their land, they are giving up some uses of the land. It will limit subdivisions, mining and number of buildings, but often doesn’t restrict activities like agriculture, hunting, and fishing. Each CE has its own unique terms and restrictions so you’ll want to do your research on the property that you are looking at.
Two ways conservation easements save you money when buying a ranch
Conservation easements offer two great benefits for land buyers. When you purchase a property that already has a CE in place, you should get the land for cheaper than full market value. If you buy a property with no restrictions and place a CE after your purchase, you will be eligible for federal and sometimes state tax benefits. By putting a CE on your property after you buy it, you can often stretch your budget and recoup some of your investment through the tax benefits you receive.
So, you found a bargain? Tips on buying land with a conservation easement
Properties that have CEs are often less expensive than comparable properties in the same market. If you find an amazing deal on a property, you’ll want to talk to your broker and check to see if the property already has a CE in place. CE properties are priced lower because they have restrictions. For instance, they usually cannot be subdivided, so they have limited value to developers. If you are planning to use your property mainly for recreation or love the idea of conservation, buying a property with a CE already in place may be the perfect fit and allow you to buy a larger or higher quality property than you could have afforded without the CE.
It's important to do your research before you purchase land with a CE so that you know that you are comfortable with what you are buying. You will want to ensure that the CE is not restricting activities or buildings that you would like to enjoy on your land. Every conservation easement has different terms, so you will want to ask whether the property can have subdivisions, how many buildings are allowed, where the building envelopes are placed, and whether there are other restrictions on hunting, fishing, agriculture, or water rights. If the current restrictions match your plans for the land, you may have just found a property that is a great fit and a great bargain.
You and your broker will want to read the deed of conservation easement that you will be able to get from your title company. Because your broker can’t give you legal advice, you may want to talk to a lawyer and it is always a good idea to talk to the staff people at the land conservation organization that holds the conservation easement. The staff people are usually very excited to talk with potential buyers and will give you an idea of what it would be like to have them monitoring your property on an annual basis.
Stretching your budget: Putting a conservation easement on land that you buy
We all know that land is expensive these days. If you find that your dream property is out of reach for your budget, you may be able to use a conservation easement to help bring the purchase within comfort for your wallet . Of course, there are other wonderful benefits of placing a CE on a property, such as protecting scenic landscapes, preserving habitat, or simply ensuring that you’ll never have neighbors building a house right next to your peaceful getaway.
Many states offer conservation easement tax credit programs, including programs that allow tax credit holders to sell their tax credits to buyers. In certain cases, there may also be grant funds available that would put money back in your pocket. The benefits for CEs vary for people in different states. You will also qualify for a federal deduction for the value of your donation minus everything you received in either cash or state tax credits. You’ll be able to deduct up to 50% of your income each year until you have used up the deduction, or until the 15 year expiration date.
To understand the incentives and programs that are available in your area, get in touch with your local land trusts. Along with stewarding conservation easements, land trusts help to educate landowners on programs that will help them get the best value from their donation.
Local land trusts, your partners in conservation
Whether you are considering the purchase of a conserved property or are weighing the benefits of doing your own conservation easement, your local land trust will be your go-to resource. It’s important to find a land trust that is the right fit for your goals. After brainstorming your wishes for your property and thinking through its unique characteristics, you can visit the Land Trust Alliance to view their database of land trusts near you. You will be working closely with your land trust throughout the process, and they will steward your land in perpetuity, so you will need to make sure that you find an organization that shares your values about the land and how it will be protected.
We spoke with Bradford Griffith, who recently purchased Rough Hollow Ranch (pictured to the right) in Hinsdale County, Colorado. Bradford worked with Colorado Open Lands to place an easement on this 184 acre parcel, which is an important scenic view corridor and wildlife sanctuary for deer, elk, moose, osprey and Bighorn sheep. Bradford emphasized that it’s critical to find the right organizations to hold the easement and to shepherd you through the process. He notes that, with Rough Hollow, “the easement allowed me to preserve both the view and its wildlife refuge status for perpetuity. As an added bonus, the tax credit revenues allowed me to address much in the way of deferred maintenance. In short, the conservation easement protects the property while making a contribution to its acquisition and maintenance costs. I couldn’t be happier.”
You should also consider working with a professional land consultant when buying or selling land. They have the expertise and land specific education to guide you in making decisions that fit your goals.
The bottom line: there are many advantages to buying a land with a CE or putting a CE on land that you have purchased. Because a CE places permanent restrictions on how land can be used, it is critical to know what you are stepping into when you make a purchase or donation. When the terms of the conservation easement align with your desires for your land, you’ll typically be getting a great deal on a property that fulfills many of your wishes and dreams. And you get to be the hero who makes your community a little better for the wildlife, the views, and possibly producing food. Not too bad to get all that and save money, right?
Ariel Steele works with farmers and ranchers in Colorado to get money for conserving their land with conservation easements. Her company Tax Credit Connection, Inc. is the leader in Colorado transferable income tax credits. She loves working with ranch brokers to help their clients understand how conservation easements are an opportunity to save them money. If you’d like to learn more or get further guidance on conversation easements, contact Ariel Steele at firstname.lastname@example.org.