Thank you for inviting me to speak today. It is a pleasure to speak to the Tompkins County Farm Bureau. My topic tonight is "A Critical Look at Conservation Easements."
I have been interested in conservation easements as a land protection device since the 1960's. During the early 1990's it became apparent to me that the same groups that were getting land-use restrictions imposed on farming, forestry, and land-based production of every nature, and who were themselves acquiring land to become government owned, were pushing agriculture and forestry into conservation easements.
I noticed that the land trusts, who have a monopoly on acquiring preservation land and flipping it to governmentsometimes at big markupwere focusing intense effort toward conservation easements.
Over the years, I've called attention to these monopolistic insider relationships. An example of how the public is burned is the $5 million land trust markup in the complex $25 million Champion International deal in 1999 with DEC, as was pointed out by our lawyer at a press conference. I've also called attention to the hard-boiled tactics the land trusts use in dealing with landowners.
It seemed to me that the attributes of conservation easements were being oversold and that the negative aspects were unnoticed.
After many years of work and discussion in many aspects of land trust and government land acquisitions, including conservation easements, I circulated a draft paper on conservation easements early last year for discussion among members of the timber industry and other experts concerned with real estate issues and related tax issues.
This discussion grew, and I was invited to address the annual symposium of the National Hardwood Lumber Association in Ohio in May 1999 on pro's and con's of conservation easements.(1)
In May this year, I addressed the annual convention of the Alliance for America in Washington, D.C., with a critical commentary on conservation easements.
The response to all of this effort on my part was intensely positive.
A near vacuum of information existed in an area where great movement of real estate was taking place and accelerating.
People were concerned.
Some were troubled.
There was great interest in my research and presentations.
Then in July PRFA was able to publish the issue of Positions on Property (2) which you have before you. We were inundated with orders and requests for additional copies. We did a reprint. Requests have not diminished. As of today, we have distributed over 2000 additional copies beyond our original mailing and our reprint is nearly gone.
Today I intend to explain to you why conservation easements used to acquire large tracts of rural land are a "wolf in sheep's clothing."
Environmental groups, government and even sectors of resource-based industry laud conservation easements as a permanent way of maintaining "working" forests, ranches and farms while protecting the environment.
In reality, however, the easements place the productive future of the land in grave doubt. At the same time, the easements are eroding that bastion of the American tradition of freedom, private property ownership.
The reasons cited to promote conservation easements are in error.
Better means to preserve productive rural lands are available.
It is important to avert any major government funding sources for conservation easements on large tracts of rural land and to put locally established caps on government land acquisition by either fee simple or conservation easements in any given municipality.
What are conservation easements?
Under these transactions, the government or a land trust acquires a usually perpetual deeded conservation easement which prohibits all but strictly limited forestry, agriculture, and possibly recreational uses of the property by the owner.(3)
The conservation easement gives the grantee and often citizen activists, certain powers to enforce the easement and manage the land.
Non-party groups may have the power to enforce the easement under state conservation easement law, as in New York. This is called the "third party" enforcement power, modeled after citizen activist enforcement powers in environmental legislation, but restricted to the third-party organization designated in the conservation easement.
The so-called "owner" of the forest, ranch or farm actually becomes a residual owner under the terms of the easement, with his rights subsidiary to the rights conveyed, which can be very broad.
The benefits attributed to conservation easements are inaccurate, exaggerated, and inequitable.
The claim that conservation easements arranged by land trusts are "private conservation" is a myth.
Land trusts are exempt from public scrutiny and control, but their funding and operations are so thoroughly woven together in complex monopolistic, often secret, relationships with government that they are essentially quasi-government agencies.
The favored relationships which land trusts enjoy with government include:
- The Nature Conservancy's monopoly of the Natural Heritage program of wildlife mapping in every state
- Non-competitive land acquisition contracts, whether by easement or fee simple, commonly for a flip to government
- Sweetheart land deals where prices and expenses receive little scrutiny
- Non-competitive contracts to do maintenance of government nature preserves
- Free government maintenance and improvements of land trust parks
- Sharing of personnel and office space with government.
Furthermore, the use of conservation easements builds unwarranted financial and other interrelationships among land trusts, industry and government, which is the opposite of privatization.
The relationships, involving interdependency and favored status such as tax breaks and various cash infusions, erode competitive free enterprise and equal protections of representative government.
An alternative is genuine private sector conservation through land agreements practiced, for example by the real estate division of Sotheby's in New York. They preserve ranches by offering cooperative ranch ownership to wealthy multiple buyers without the involvement of land trusts or government. The 40-acre "ranch-steads" selling for $1 million each are located in a corner of the ranch to keep the large expanse open.
Conservation Easements are a threat to private property
Conservation easements cloud title.
Conservation easements sully the title to private property, negating centuries of real estate law to reduce the ability of property owners to use property in ways beneficial to people within our society.
The Uniform Conservation Easement Act, a model state law ramrodded through the National Conference of Commissioners on Uniform State Law in 1981 became New York law with some elaborations in 1983. It swept away centuries of common law that had protected property from such non-functional negative encumbrances, muddying of title interests, and open-ended parties to contracts.
Conservation easements run contrary to seven centuries of history of real property, where the movement has always been toward the free alienability of land, according to James Burling of the Pacific Legal Foundation.
This means that the centuries have brought the ability to acquire the land outright without obligations to kings, nobles or even the family. In the United States, Gray's Rule Against Perpetuities limits ability of testators to control use of land for a period of time longer than the last life in being plus 21 years.
Mr. Burling pointed out that the "dead hand cannot reach beyond the grave to control the living." He believes that, in view of principles of property law, there are serious questions about the viability of conservation easements, which "destroy the economic utility of the underlying fee."
He points out that "conservation easements work by splitting an estate in real property into two or more parts and throwing one of those parts into the dustbin of history." (4)
The result of a conservation easement is the loss of equity and the rights to use the land.
The seemingly lucrative price paid by the easement purchaser, and
The inability to obtain a mortgage to make investments such as a barn expansion or milking equipment. Just ask your bank what you're good for before and after the easement deal.
After the land trusts, often acting as intermediaries, split the title, the remainder title owned by the farmer, rancher or forester ordinarily comprises only ten to fifty percent of the equity of the property, depending on the practical feasibility of developing the land in its unencumbered state and the range of rights acquired in the easement.
The bundle of rights is so severely diminished that the farmer, rancher or forester is essentially a tenant on his own land.
When the land is depleted, as it will often deliberately be by such owners because they are unwilling to maintain their farmer stewardship;
or when financial crises or opportunities arise necessitating the use of the land for equity, where equity essentially no longer exists;
or where times change and uses prohibited by the easement are feasible, while permitted uses are undesired or uneconomical;
the only buyer for the land may be the government.
Thus, the conservation easement is in essence a step along the way from 100 percent private to 100 percent government ownership.
The myth of "voluntary" action as ascribed to conservation easements.
But heavy-handed tactics are often used by land trusts, including:
Ploy of Preserving Production
A false promise of conservation easements is to preserve the land in productive use in perpetuity. Many of today's conservation easements are so broadly written that the primary purpose of agriculture or forestry can easily be held hostage to resource protection.
Defense Against Suburbanization
Conservation easements are sought to protect from subdivision and development. This is, of course, a contrived threat to forestland. For agricultural land, much lost is simply reversion to forest. In areas of urban expansion, farmers should determine the policies to protect their interests, carefully weighing their options, and be fully informed about the terms of sale of conservation easements.
The farmers as a group should evaluate whether enough land is being retained for farm purposes to maintain a "critical mass" to support the agricultural infrastructure and hold off neighborhood intolerance for farm operations. Conservation easements cannot preserve farm practices in a hostile environment.
This brings me to our "Informed Consent" checklist.
Informed consent helps the property owner to level the playing field with the land trust.
PRFA published the informed consent checklist so that the land trusts' intentions for the land are divulged. Will they flip the easement to government at a higher price? What price? Will the property owner be able to build new structures? What structures?
The checklist on pp. 11-12 of Positions on Property (Vol. 5 No. 1) covers sales of land and conservation easements to land trusts.
It even includes the idea of incorporating a reverter clause to, say, prevent the easement from being conveyed to government. (150-year old reverter clauses are currently enabling property owners to regain the land beneath railroad rights-of-way that is no longer used for railroad purposes.)
Farmers should use informed consent at the contract stage. It can be used to protect the owner from some unexpected consequences of conservation easements.
Last week I got word from Jay Walley of the Paragon Foundation that the informed consent checklist is being investigated by one New Mexico legislator for possible consumer-protection legislation.
Inheritance and Real estate taxes need reform.
A lot of pressure to sell conservation easements comes from tax structure.
First, the estate tax should be eliminated.
Second, a minimum reform for real estate taxes is that they should be solely "current use."
A further improvement would be to eliminate charges for school taxes on unimproved forestland and land in solely agricultural production.
But keep in mind that New York case law has not granted tax abatement for sale of conservation easements where there is no development pressure and the land is already assessed on the basis of forest, recreational or agricultural value. (5)
No more advantage should accrue to a declared intent as in an easement, than an actual practice. All of the tax advantages for not-for-profit or government ownership of conservation easements are artificially constructed and should be eliminated by elimination of the taxes themselves. One reported abuse is IRS acceptance of so-called "donations" on the basis of inflated land trust appraisals, and should be stopped.
My talk has focused on the threat to private property, especially the landholders' equity, posed by conservation easements. In the broader sense, conservation easements threaten the historic structure of private property. I have written in more depth elsewhere about the threat of conservation easements to rural communities and hunting.
I would like to recommend to you that you accelerate your efforts to eliminate the inheritance tax, reduce real estate taxes, and improve scrutiny of the IRS law and land trusts. Please take an active part in disseminating information about the negative side of conservation easements and in letting property owners know about the value of informed consent.
(1) LaGrasse, Carol W., "Conservation EasementsWhat They Are and How They May Impact Eastern Hardwoods," Proceedings of the Twenty-Seventh Annual Hardwood Symposium (National Hardwood Lumber Association 1999, pp 67 ff)
(2) "Conservation Easements: Easy Government MoneyFuture Problems." By Carol W. LaGrasse (Positions on Property, Vol. 5, No. 1, July 2000, PRFA)
(3) Conservation easements are non-appurtenant negative easements in gross, granting a non-adjacent holder a restrictive encumbrance on the overall property, such as the right to prevent development. The conservation easement leaves the underlying property owner only with the residual rights.
Positive easements, such as those giving the holder the right to place a utility line over the other party's land or the right to cut the timber, are relatively familiar, but negative easements, which give an outside party the right to restrict the use of land, are less known. The common law has frowned on them.
Also familiar are appurtenant easements (those connected with the ownership of adjacent land), such as those allowing an adjoining property owner to have a right-of-way across neighboring land, but non-appurtenant easements, or easements in gross (those affecting the entire property), are generally unfamiliar to most landowners and also frowned on by the common law.
Conservation easements generally extinguish development rights, but under "purchase of development rights" (PDR's), the development rights are not necessarily extinguished, but become the property of the easement holder.
(4) Burling, James, Pacific Legal Foundation, "Conservation Easements," Comments at the Wise Use Conference, Reno, Nevada, May 1999, pre-publication copy, p. 6.
(5) On the other hand, recent New York statute and administrative instructions have set up procedures for allocation of real estate taxes to the State and the residual landowner after conservation easements are acquired by the State under recent law. The allocation factor to the State is at times as high as 90%, which indeed is beneficial to the residual landowner for tax purposes, but reflects a very low residual equity.