Conservation Easements Termed
Slippery Slope To Loss Of Land

Courtesy of the Trans Texas Heritage Association

(Editor's note: Conservation easements have attracted considerable attention in recent years, particularly as inheritance taxes take ever-larger bites out of artificially inflated land values. The Clinton administration has also latched onto the process as a way to accomplish many of its "environmental" goals despite budgetary restrains imposed by a skeptical Congress.

The concept is promoted as a win-win deal, but the following article points out that the "win" for landowners may be short-term, at the risk of great loss to future generations. It should also be noted that elimination of federal inheritance taxes has become an increasingly popular notion on both sides of the political aisle, and may well be accomplished as soon as Congress grows some semblance of a spine. Landowners might wish to consider whether they want to preemptorily sign away the rights of their children and grandchildren to lessen the bite of a "death tax" that may be gone before they are. In most cases, there's no undoing a conservation easement once it's graven in stone.)

Chapter 183 of the Texas Natural Resources Code defines a conservation easement as a non-possessory interest of a holder in real property that imposes limitations or affirmative obligations designed to do any of the following:

(a.) retain or protect natural scenic or open-space values of real property or assure its availability for agricultural, forestal, recreational or open-space use;

(b.) protect natural resources;

(c.) maintain or enhance air or water quality; or

(d.) preserve the historical, architectural, archaeological, or cultural aspects of real property.

A "holder" may be either a governmental body or a charitable organization, association, or trust created or empowered to effect the outcomes listed above. Conservation easements may be enforced by a third party who is not a holder, but who is eligible to be an easement holder. Furthermore, the easements are assignable and are unlimited in duration unless the instrument that creates them states otherwise.

Conservation easements are becoming a more popular tool for governments to control the uses of private land without actually having to purchase the property in fee simple. Private landowners who are looking for tax write-offs often enter into these easements for the income tax benefits and for the lower property taxes that follow when the value of the land falls as a result of the easement.

There are several good financial reasons for entering into conservation easements. First, if a conservation easement is granted in perpetuity, the landowner is entitled to claim a deduction on his or her federal income taxes. Furthermore, since the conservation easement lowers the value of the property, it also lowers the value of the landowner's estate and, ultimately, the estate tax burden as well as the property tax burden.

The Problem

Black's Law Dictionary defines an easement as a "right of use over the property of another." However, in a traditional easement, a grantee's use is limited. For instance, if a landowner grants an easement to an oil company or an electric utility, the easement is limited to that purpose only, and it imposes no further obligation on the landowner and confers no special right to the grantee beyond the original purpose of the easement.

Conservation easements, on the other hand, are more like restrictive covenants than easements. A grantor who enters into a conservation easement agrees to dedicate the portion of his property encumbered by the easement to specified use (or non-use, as the case may be) or agrees to adhere to specified practices thereon — in perpetuity.

Common law dictates that original parties must intend for the restrictive covenant (conservation easement) to run with the land and the covenant (conservation easement) must bind the parties and their assigns. In other words, a landowner who enters into such an agreement not only signs away his right to change the use of the land, but also gives away the rights of any future owner to change the use of the land.

When a landowner dies, the heirs inherit the property along with whatever affirmative obligation is required by the terms of the conservation easement. For example, if the original owner of the land agrees to perform certain management practices, the heir must continue the practices as long as he owns the land. If he doesn't or if he doesn't do it to the satisfaction of some third party, he can be sued by the third party for breach of the terms of the conservation easement.

Conservation easements do provide excellent tax breaks for landowners in the short run. In the long run, however, private property owners are actually hastening the transfer of private land into public hands. Because conservation easements place an affirmative obligation on every subsequent landowner, it seems only logical that at some point in time an heir who cannot afford to adhere to the terms of the easement will look for a way out.

When that happens, the pool of potential buyers is going to be fairly small. Only an individual who is willing to assume the duties prescribed under the terms of the easement, or a governmental entity looking for cheap "park land" will be interested.

Furthermore, since the property has lost its productive potential because of the easement, the selling price would likely be quite low. If the distressed heir could not find an individual interested in owning property with encumbrances, he might then consider donating the land to some governmental entity or nonprofit land trust, take advantage of the federal income tax benefits that come with charitable contributions, and not look back.

Certainly, property owners have the right to do with their land as they please while they are alive. However, by encumbering the property through such a mechanism, they have denied all future owners the right to decide how they wish to use the land. By entering into a conservation easement, the private property owner has set the stage for the government to eventually take full possession of the land.

Landowners should consider carefully the long-term consequences of conservation easements and the burdens they place upon their heirs. If a landowner's purpose in granting an easement is to lower the value of the property and to qualify for tax breaks, then it is a good idea. However, if the landowner believes that a conservation easement guarantees that the land will be cared for and properly managed into perpetuity, he should reconsider. Private ownership holds the greatest hope for protecting natural resources, and a conservation easement that encumbers private land and limits its uses forever will only guarantee that sooner or later the land will be owned by some government entity.