|This article was published on: 10/01/2004|
FRONT LINES: Conservation easements
BY PAT TAYLOR
The cost of open space
Efforts to conserve land raise property rights, affordability, and tax concerns.
The volatile environment surrounding conservation easements makes it important to tread carefully when working on a deal involving one. Sellers who’ve previously ceded development rights may have focused on the tax breaks but not on how the restrictions would impact a future sale. If you represent the seller or buyer of a property already encumbered with an easement:
What if property owners want advice about putting a conservation easement on their property in order to reduce the selling price? Wade Weathers Jr., of LandVest Inc. in Burlington, Vt., suggests proceeding with caution. His company has a separate division that consults with property owners on a fee basis, bringing together a team that includes not only appraisers and attorneys but also marketing specialists, who can advise the owner about issues like retaining the right to build a house on a certain portion of the property. “The wording of a conservation easement is very delicate,” cautions Weathers. “Remember, you’re affecting value of land long-term. With the additional IRS scrutiny, you need to be even more careful.”
Because valuation is at the core of many IRS concerns, getting a good appraiser is key to ensuring that the appraisal is neither inflated nor undervalued, says Clayton Andrews, managing broker of Sotheby’s International Realty in Jackson, Wyo., and a member of the Jackson Hole Land Trust’s Open Space Advisory Council.
But another fine point is the deductibility of easements that aren’t in perpetuity. Only perpetual easements (meaning they remain with the property forever, even if it’s sold or passed on to heirs) qualify for IRS tax deductions. That can run into conflict with some state laws. In Wyoming, for example, conservation easements can’t be perpetual because of the legal premise that “the dead hand cannot reach beyond the grave to control the living,” says Laurie Urbigkit, contract lobbyist for the Wyoming Association of REALTORS® and owner of ACMS Realty in Riverton, Wyo. What to do?
· Defer to the experts. At the same time, learn all you can about conservation easement laws in your state. Check whether your state association offers classes. Many do. In fact, the Virginia Association of REALTORS® says “Appraising Rural Land/Environmental Law/Conservation Easements” is one of its most popular classes.
· Make your voice heard. Get involved with your state association, Urbigkit says, to help formulate policies that ensure balance between development and preservation.