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RENEGOTIATING THE CONSERVATION EASEMENT

A Proposed Defense for Landowners

By Carol W. LaGrasse

August, 2002

This proposal is not meant as a compromise of the position of the Property Rights Foundation of America to retain property in private ownership, unsullied by deeded encumbrances held by government or the powerful non-profit land trusts, which currently operate in effect as quasi-government agencies. Rather, the proposal is meant to offer creative thought to attorneys who are attempting to protect landowners who are being driven by cash flow considerations, including global marketing pressures, real estate taxes, estate taxes, and income taxes to divert the bulk of their equity to land trusts and government as conservation easements.
This article is not intended to offer legal advice. Landowners should consult specialized real estate attorneys for expert advice when embarking on such complex legal relationships as those created by conservation easements.

Introduction
The Problem of Perpetual Inflexibility

The fundamental objections to conservation easements are that they divert most of the landowner's equity and that, with fewer and fewer exceptions, they are perpetual, splitting the title in two for the indefinite future. The objections point to the harm to the landowner and the threat to preservation of the nation's free heritage for future generations. Connected to both these objections is the problem that conservation easements are set in stone.

Because conservation easements are inflexible, they provide little or no allowance for future changes in circumstances and for future realizations by the landowner that vague, overly broad, or, on the other hand, overly specific, or even formerly unnoticed, clauses, have become burdensome.

The Threat of Third Party Enforcement
Property owners are largely unaware that the Uniform Conservation Easement Act, a model law that has been enacted in one form or another in at least half the states of the Union, can be enforced by third parties.

Even in the simplest type of conservation easement transaction, the two original parties to the easement—the landowner, known in legal terms as the "grantor," and the land trust/government, or "grantee,"— may be placed in a position that is not ordinarily sanctioned in our traditional system of contract law. In contract law, only the parties to the contract can enforce it. There are generally two parties. But when the state has enacted the important parts of the Uniform Conservation Easement Act, a third party, non-profit organization that is not the land trust that holds the easement can also enforce the terms if the grantee, the usual author of the easement, puts the third party's name in the easement. This means that both the landowner and the land trust or government agency may be satisfied with the way the conservation easement is working out so far, but another party with whom the landowner has no dealings except to note the party's name in the complex easement language for some purpose, can bring the landowner to court.

The topic of this feature of the Uniform Conservation Easement Act is avoided by land trusts when they promote conservation easements. In fact, the seeming good faith relationship between the landowner and the particular land trust with whom he is dealing is important to facilitate the sealing of the transaction.

Because third party enforcement is buried in the body of state law and the easement's fine print, the landowner may not realize that another organization with which he has never had any dealings can go to court to enforce the easement.

Renegotiation Provision
Unforeseen circumstances may arise in the future where the grantor of the conservation easement may find that he cannot tolerate the original terms of the easement. Since the conservation easement is a perpetual encumbrance, the owner cannot count on being able to alter its terms in the future. A possible, but untried, solution to the problem of perpetual inflexibility is to incorporate into the original conservation easement a pre-agreement for periodic renegotiation.

The concept behind the renegotiation provision, is that the grantor would set up a procedure, agreed to by both parties, whereby certain clauses in the conservation easement can be periodically renegotiated.

Initially, the conservation easement could establish a five-year review process with both parties. A mediator or mediation process could be specified. But the essential feature would be that the cited restrictions in the conservation easement cease to be in effect until they are renegotiated to the satisfaction of both parties.

After the five-year initial review, standardized ten-year reviews would follow on a regular basis, as provided for in the original easement.(1)

Potential Areas for Renegotiation
Assuring Adequate Water Supply for Ranching
In western states where water rights may be quantified in a conservation easement, the stated goal of protecting ranching could be foiled if the water rights reserved to the rancher turn out to be inadequate. A renegotiation clause specifically focused on water rights provisions would allow future revelations of realistic water needs to be applied in a practical way.

Other Likely Areas for Possible Renegotiation
These include access of cattle to riparian areas and other aspects of protection of riparian areas; access by recreational vehicles; development of aggregate resources to maintain roadways; or even changes in focus of land use over the years to, say, educational uses requiring more structures.

Vague or Overly Broad Terms
The renegotiation clause could also be used to deal with future realities when vague terms in the original conservation easement are applied as scientific knowledge becomes available or new opinions predominate. For instance, a conservation easement provision for land of Champion International Corporation that passed to the Conservation Fund, then to the State of Vermont, then to the Vermont Land Trust, then by quitclaim deed to The Nature Conservancy, included the following:

"As primary purposes, a) to conserve and protect biological diversity, wildlife habitat, natural communities, and native flora and fauna on the Protected Property, and the ecological processes that sustain these natural resource values as these values exist on the date of this instrument and as they may evolve in the future..."(2)

Even though this land is considered to be preserved as "working forest," this "primary purpose" clause could relegate a substantial portion of timberland off-limits to production or access if new species that "evolved in the future" are deemed worthy of protection. Renegotiating such terminology could save the productive future of the timberland.

Future Penalties, Real Estate Taxes
One clause that a major land trust includes in some western conservation easements could take the grantor by surprise if the state legislature changes real estate tax law. This clause requires that if the law changes so that the real estate tax benefit is eliminated, the tax will fall entirely on the grantor, leaving the land trust free and clear. A rancher might be in the untenable position of not being able to pay real estate taxes if this clause takes effect.

Before agreeing to a conservation easement, the grantor should review all clauses involving affirmative duties or potential penalties imposed on the grantor and consider whether any should be subject to renegotiation.

Changes in Ranching Needs
Conservation easements can be lengthy documents that attempt to set up inflexible ranch management plans into the indefinite future. But new needs may arise and improvements be desired. For instance, it might be beneficial for previously uncultivated pasture to be cultivated to enhance the ranch's productivity and viability. It might be critical to ranch operations to change water distribution and storage, such as by diverting water to a pond or stock tank.

Foiling Third Party Enforcers
Landowners may be vulnerable to third party enforcements in unexpected ways. For instance, some conservation easements with the stated primary goal to protect commercial forestry values also contain a clause that allows natural resource values to be paramount. The very broad wording in the "primary purpose" in the Vermont conservation easement cited earlier, "to conserve and protect biological diversity, wildlife habitat, natural communities, and native flora and fauna," could be construed in the future to argue for closing all access roads because they are routes for infestation of "natural communities, and native flora and fauna" by what preservationists decry as "invasive species."

As non-profit legal activist groups who back "The Wildlands Project" activate their litigation potential as third party enforcers of conservation easements, or as legal activists under state or federal environmental law, it would not be surprising that broad clauses giving them jurisdiction to protect natural resources become their legal lynch-pins.

At this point, however, if a renegotiation clause exists, it could be activated as a defense by either of the two parties to the agreement, the grantor or the grantee. The offending clause could be renegotiated out of the conservation easement. This defense might make the point of the litigation moot.

The uncertainty about enforcement of the conservation easement in the future should be a great incentive to negotiate more protections for the original landowner into the conservation easement.

Additional Preparation
In addition, conservation easements have many other troublesome features that argue for special protections for the landowner. Although the land trust may provide much of the terminology when the landowner grants a conservation easement, the land trust becomes the dominant party in the split title. The easement is legally considered a restrictive covenant. The landowner becomes the "residual" owner, whose rights are defined by the remainder left after the easement holder owns what is defined for itself.

Common law may have protected the landowner from the enforceability of broad, distant negative encumbrances on land of the nature of those in today's conservation easements. However, the Uniform Conservation Easement Act contains an important set of provisions with the purpose of nullifying common law protections for the integrity of title to land. This situation argues even more that the landowner who is selling a conservation easement needs to be protected from the uncertainties of the future.

Although various conservation easements have been the genesis of litigation in recent years, information available to PRFA does not present any evidence that these elaborate, lengthy modern conservation easements that restrict large tracts have been tested in court.(4)

Informed consent should be also attempted through a checklist of areas of interest to the landowner. Although such a checklist is only partial protection, it is a step toward giving the landowner a better footing during negotiations. Even though PRFA disapproves of conservation easements in principle, we have published a short checklist(5) giving some critical ideas for the landowner to consider in addition to the ideas for renegotiation contained in this article.

Finally, advocacy groups such as those representing ranching, forestry, and farming, should promote legislative remedies, perhaps incrementally, beginning with the repeal of provisions for third party enforcement. Such associations should monitor the state legislature for activity related to the Uniform Conservation Easement Act where it has not yet been enacted.
Notes:

Notes:
(1) Terms of renegotiation provisions should comply with IRS law and other applicable statutes.
(2) "Study Committee on West Mountain Wildlife Management Area Leaseholds," January 2002, Vt. Leg. 144376.2, Attachment C: Champion - State Lands-Grant of Development Rights, Conservation Restrictions, Public Access Easement and Right of Entry, Para. l. A. 1.
(3) Because this idea is untried, however, expert written commentary is invited from others. Keep in mind that the concept is, that to protect the property owner from litigation, any broad natural resource protection clause and other economically critical clauses would have to be renegotiable.
(4) Information about experience in any state with litigation related to elaborate modern conservation easements would be welcomed.
(5) "Informed Consent," Positions an Property Vol. 5 No. 1, p.11, PRFA July. 2000.

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