Conservation Easements & Private Land Stewardship

Conservation Easements & Private Land Stewardship

February 28, 1998

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“Conservation easements” are property rights created to ensure that lands are used only in a manner consistent with specified conservation purposes. These purposes include the protection of wildlife, forests, scenic views, and historic places. Under common law rules, conservation easements were permitted but ineffective due to demands that the land be “used”. Now most states have enacted conservation easement statutes. These allow landowners to donate “qualified conservation ease-ments” that are enforceable over time. Such easements are potentially of great advantage to donors and their communities, but have serious potential disadvantages as well. This is especially true to the extent that rigidity and coercion are introduced into what should be a device for private stewardship based on individual circumstances and vision. It is important that landowners exercise care before entering into conservation easements. It also is vital that legislators and concerned citizens work to reform governmental rules and practices so as to restore to conservation easements as much of the common law ethic of free and flexible agreements as possible.

By granting a qualified conservation easement, the donor continues to own and use his lands and may pass them to his heirs. The donor also may deduct the value of the easement for federal income tax purposes and enjoy local real estate tax and federal estate tax reductions as well. At the same time the owner is assured that the land will be used in accordance with principles of good stewardship even after its sale or his death. The community benefits as well, since the advantages of conservation extend well beyond the boundaries of the parcel subject to the easement. All the while, the land is kept in productive use and the costs of enforcing the terms of the easement are borne by the holder.

These potential advantages are increasingly well known, but it is important that prospective donors, legislators, and others interested in good stewardship and individual freedom understand the potential disadvantages of conservation easements as well. One important disadvantage is rigidity– some state statutes and federal tax laws require that easements must be “perpetual.” This discourages some donors and, if the restrictions have ceased to fulfill their original purpose, imposes wasteful under-utilization of land on others and their communities. Another disadvantage is that easement holders (which most states require to be governmental bodies or charities such as land trusts) may not be faithful to their obligations. Self-dealing, laxity, and over-zealous enforcement all are real possibilities. The technical requirements of state laws and federal tax codes also create traps for the unwary. Finally, and of profound importance to those who might prize conservation easements as combining stewardship and individual liberty, some land trusts may have worked hand-in-glove with public officials to intensify governmental coercion and to hold conservation easements out as a more palatable alternative. The challenge remains to enhance the benefits of conservation easement statutes and to eliminate these potential problems.

Introduction

Many landowners pride themselves on their careful stewardship of their lands. They often want to ensure that their love for the environment is respected by succeeding family generations and others who eventually might own their lands. Since they want their progeny to continue using the land, an outright gift or sale to a land trust or similar conservancy group would not achieve their purposes. They also realize that family ownership coupled with heavy-handed governmental regulation is not the answer. Even if regulators understand and respect their environmental concerns, they are apt to effectuate them in an undifferentiated and clumsy manner. They certainly cannot be expected to respect the careful balance between conservation of the environment and the continuation of family heritage and traditional uses that the original landowner wants to achieve.

One answer is for landowners to inculcate a conservation ethic in their children and grandchildren. Yet, even if owners were confident that this could be done successfully, there would still the problem of maintaining stewardship traditions through uncertain times and future generations. In any event, confiscatory death and inheritance taxes often force even conscientious heirs to sell or over-develop lands in order to raise cash.

The conservation easement is a device that attempts to deal with all of these problems. Partly a creature of common law and partly a creation of recent statutes, the conservation easement does not operate through regulations. It does not modify or increase existing regulatory schemes or apply them to parcels not previously subject to them. Rather, the conservation easement works through private ownership. It divides a fee simple (i.e., ownership of all of the rights in a parcel of land) into two distinct interests. The first is the easement itself, which imposes conditions upon land use. The second is the original fee ownership, now subject to the easement. The owner of this interest has full ownership of the land for all purposes except those conflicting with the easement to which it is subject. Thus the owner of a ranch might give to a land trust an easement precluding residential or commercial development. The donor still owns the land and can use it for ranching, but no longer owns the right to use the land for residential or commercial purposes.

The tax benefits resulting from the grant of qualified conservation easements provide some landowners with funds for their retirement years, or allow them to fund or endow conservation management projects on the land at no additional net cost. Also, on the donor’s death, the lower appraised value may mean that family members will be able to keep the land instead of very possibly having to sell large parts of it to pay large estate and inheritance taxes.1 

Since a conservation easement is established through a private agreement between a donor and an easement holder, there is considerable flexibility in tailoring their relationship. On one hand, the land trust or other holder might assume the complete day-to-day management of the donor’s undeveloped land and have the responsibility of nurturing a particular endangered species or other purpose of the easement. Alternatively, the role of the holder could be limited to ensuring that the donor and his successors do not violate the terms of the easement through impermissible development. Or, the parties could structure the easement to provide the holder with an intermediate level of responsibility and authority. Thus, to the extent the law permits and the holder is willing, the donor could structure the easement to provide what in his view is an optimal mix of economic and family utilization of land and stewardship of resources.

However, conservation easements do present potential problems. It is possible that the land trust holding the easement might insist on more Draconian controls on the land than the donor had agreed to. On the other hand, the easement holder might be lax, and the land might not be properly cared for or the donor’s heirs might be permitted to undermine the intended land stewardship. Conditions might change so that, for instance, an endangered species sought to be protected becomes plentiful or extinguished. The Internal Revenue Service might unfairly interpret the highly technical rules for favorable tax treatment. Powerful land trusts might serve as conduits by which land intended for private stewardship comes under the control of government. In all of this, it is important that statutes permit donors to retain as much ability to deal with future changes in scientific knowledge, social and economic conditions, and family needs as is consistent with the purposes of the easement. And it is important that donors structure conservation easements to permit them to exercise that freedom.

Thus, a carefully drafted conservation easement might provide owners with a good method of maintaining private ownership, reducing tax burdens, and ensuring sensitive stewardship. The challenge for the legislator or citizen advocate is to examine each aspect of the state’s conservation easement law or Federal tax requirement to ensure that easements live up to their promise while minimizing potential burdens to families and to the community.

Easements for Conservation under the Common Law

While common law easements, real covenants, and equitable servitudes have been important aspects of property law, they do not provide an adequate foundation for the modern conservation easement. This is because the common law was resistant to the imposition of burdens upon land that were not directly related to the coordination of their use with the uses of neighboring lands. In explaining this situation, it is useful to begin with a general review of these common law methods by which owners coordinated the use of their lands.

The Common Law of Easements

An easement is "an interest in land in the possession of another" that entitles the owner of the easement to "limited use enjoyment" of that land and "is capable of creation by conveyance."2  As one recent case put it, an easement is "the right to use the land of another for a specific purpose that is not inconsistent with the general use of the property owner."3  Easements have been traced back to Roman days. By the early 19th century, their increasing importance resulted in their characterization in England as a separate category of property rights.4  Since the owner of an easement often makes substantial investments in the expectation that the land subject to it (i.e., the servient land) would be used as agreed, it is important that the restrictions survive the death of the servient owner or the sale or his parcel. Likewise, the value of the benefit of an easement is maximized when the holder is free to transfer his interest to another.

The extent to which the burdens and benefits of easements survive beyond their original owners depends on how the easements are categorized in an elaborate common law classification scheme. For our purposes, the most important classification is whether easements are appurtenant or in gross. An easement appurtenant is intended to coordinate the uses of adjoining parcels of land. It is created for the benefit of the then-owner of the dominant land and his successors. On the other hand, the easement in gross is not attached (i.e., appurtenant) to a dominant parcel, but rather provides a benefit that is "personal" to the holder and independent of his ownership of land.

The common law singled out for special treatment the easement with a profit, which permits the holder to remove substance from the servient land. Common examples involve mining, timber cutting and hunting.

Easements may also be categorized as negative or affirmative. Negative easements provide the holder with a veto power over uses of the servient land that otherwise could be engaged in by the owner. An affirmative easement permits the owner to enter the servient land or to engage in activities that otherwise could be blocked by the servient owner, such as engaging in a nuisance.5 

The easement came into being and flourished because it filled a practical need. Neighbors wanted to coordinate agricultural uses and, later, commercial and residential activities. Easements allowed separate parcels to be developed as if they had a single owner who would want to maximize total returns. So long as the agreement made the combined value of the parcels greater, it did not matter that not every party to an easement benefited equally. Even if some parcels lost value, the dominant owners could purchase the consent of the servient owners and still have a net gain. To illustrate, an agreement among A, B, and C that would increase the value of A’s land and B’s land each by $150,000 and would reduce the value of C’s land by $150,000 would be entirely feasible. If A and B each paid C $100,000, every one of the parties would wind up $50,000 better off. The community would be better off, too, since the total value of its land would increase by $150,000.

If C had made an ordinary contractual promise to restrict the use of his land, a subsequent purchaser of it would not be bound, and C subsequently might not be found or might not be able to pay a court’s award of money damages against him.6  The result would be that A and B each would have paid $100,000 and obtained no lasting benefit. Landowners thus would be discouraged from entering into such agreements in the future. To prevent this result, the common law provided that easements appurtenant automatically would inhere in the estate in land acquired by the successor to an original party without the need for any mention of the easement in the deed or will.7  This means that the use of the burdened land would be restricted in the hands of C’s purchaser just as it would had C continued to own it.

Likewise, the value of easements with a profit also could be maximized by free alienability. This type of easement in gross had not been permitted in medieval times, but later became widely accepted in England and America. As the common law evolved, the benefit of commercial easements in gross and most non-commercial easements in gross established for severance purposes were made freely transferable.8 

However, with a few exceptions,9  the common law has treated most easements in gross that were not associated with profits very differently. In England, such easements are regarded not as interests in land, but rather as rights that are granted in favor of an individual and that die with that individual.10  In America, easements in gross have been the subject of great controversy. Some authorities have argued that, consistent with the general common law rule pertaining to interests in land, easements in gross should be freely alienable.11  Others have countered that novel burdens on land are apt to be detrimental to value, to create traps for the unwary over the generations, and to increase the difficulty and expense in land transfers generally (referred to in the common law as creating "clogs on title").12 

Conservation easements are "negative" and "in gross" under the traditional classification scheme. They are negative easements because the owner of the servient land has the obligation not to do something (i.e., not to engage in uses inconsistent with the conservation purposes for which the easement is established). The holder of the easement has a veto power over such inconsistent uses. Conservation easements are in gross because their object is not to benefit the owners of adjoining parcels. Rather, the owner of the easement need own no land in the area, and the easements are intended to benefit a broader community. At common law, the benefit of such an easement did not run with the land. The reason for this largely is a remnant of feudal and medieval times. Most people were illiterate and record keeping was primitive, thus introducing justifiable fears that complicated rights would make land ownership difficult to keep track of. It also was the result of undeveloped economic and social relationships, which made promises regarding land use for the benefit of those beyond the tiny village or manor difficult to comprehend. And, of course, our modern notion of "conservation" hardly was discernable.

The Common Law of Real Covenants

Just as easements permitted private regulation of land uses through real property law, real covenants subsequently evolved to permit regulation through contract law. The crucial issue is whether the promise (i.e., the covenant) is enforceable only against its maker, or whether it "runs with the land" so as to bind successors as well. In order for a real covenant to run, the common law propounded three tests: whether the covenant "touched and concerned" the land; whether the parties intended that successors be bound: and whether the parties had an otherwise close relationship, termed "privity of estate." Whether a given covenant had a close enough tie to the land (as opposed to the owners) so as to "touch and concern" has always been a vexing problem. Privity of estate in England was limited to those in a landlord-tenant relationship. In America, a buyer-seller relationship sufficed.

The influential Restatement of Property has taken the view, as do the laws of many states, that the burden of a real covenant is not imposed on successors to the owner of the servient estate if the benefit does not run with the land to be benefited.13  Furthermore, real covenants, like most contract rights, were enforceable only through money damages. This would be an entirely unsatisfactory remedy in the case of conservation easements, which must bind the burdened land, even though the benefit does not pertain to adjoining parcels, and where money damages are an insufficient remedy for violations.

The Common Law of Equitable Servitudes

The privity requirement for real covenants proved to be unduly technical and difficult to comply with. Also, money damages were viewed as less effective that the ability to enjoin violations of a covenant. For these reasons, courts of equity developed yet a third layer of controls, the equitable servitude. In the case of restrictions that were appurtenant, it was easy. If the parties intended that their successors be bound, if the subject matter of the agreement touched and concerned the land, and if the successor to ownership of the servient tenement had reason to know of the restriction, he was bound to it. Again, however, things were not so simple when a servitude in gross was concerned. If the benefit did not run with the land authorities differed as to whether the burden ran with the land so as to bind a succeeding owner.14  Once again, resistance to new types of restrictive arrangements prevailed.

Common Law Reform Doesn’t Address the Conservation Easement Problem

During the past few decades, American courts and legal scholars have concluded that the common law system of three overlapping but subtly different bodies of law for the private coordination of land use makes no sense. The new version of the Restatement of Property now being developed by the American Law Institute has adopted as a guiding principle that the law of servitudes is "an integrated body of doctrine encompassing the rules applicable to profits, easements, and covenants." Generally, all servitudes "are functionally similar, and … for the most part they are, or should be, governed by the same rules."15  When we look at how interests are "governed by the same rules" under this new Restatement, the crucial distinction becomes apparent: "appurtenant … burdens pass automatically,"16  but a "burden in gross is simply a contract obligation."17  Since conservation easements are not intended to benefit land trusts as owners of adjoining property, these developing reforms in common law land use coordination devices do not solve the problem.