Introduction
The surest methods for permanently protecting land involve acquisition of property rights by land trusts. It is the regular use of property acquisition as a conservation tool that most clearly defines a conservation organization as a land trust.
Land trust efforts revolve around working cooperatively with landowners and crafting projects with win-win outcomes for communities.
Land trusts vary in character and priorities. Most land trusts are private charitable corporations. Some are governmental or quasi-governmental agencies that operate with much of the flexibility and freedom of a private land trust. Some land trusts are quite small, run entirely by volunteers, doing their work in just one municipality or small watershed. Some utilize large staffs of professionals and work region or nationwide.
Some land trusts own and operate preserves and recreation areas open to the public. Others own no land at all but hold conservation easements, which protect certain natural values on properties. Others work to acquire and then transfer critical land to government for use as parks, game lands, etc.
Land trusts may have one or more conservation priorities. They may conserve land to protect our rivers, streams and groundwater. They may protect community open space for new parks, scenic views, wildlife preserves or neighborhood gardens. They may conserve productive farmland or working forests. Some focus on protecting biodiversity while others preserve traditional hunting grounds.
More than 1,200 land trusts work in all fifty states, conserving land using a variety of techniques. Nearly a hundred of these organizations work to protect Pennsylvania’s special places. Regardless of size, methods and priorities, land trusts share a commitment to conserving important lands for the people of today and for the generations not yet born.
Land trusts can also work on land use planning, nature education, trail development, and other areas. While these activities are important, this article focuses on the defining function of a land trust—conservation through property acquisition.
Land Ownership and Conservation Easements
To understand the powers of a land trust, one must have a basic understanding of the types of property ownership available to the organization.
Fee-simple ownership of land gives a landowner maximum control over the use and management of the property and its resources. Generally, when someone owns land in fee simple, he has title to the land. A land trust holding title to a property may provide the strongest guarantee of long-term conservation, but fee ownership is not always the best option or even a viable one.
A landowner may not wish to give up all control over his land. A land trust may not wish for fee ownership for any number of reasons. For instance, an organization may lack the resources to purchase the property or meet the long-term demands of ownership. In these cases, a land trust may work with a landowner to secure a conservation easement.
Landowners have the right to use their property for many different purposes, subject to local zoning and public health and safety requirements. An owner can plant trees or cut them down, build buildings or demolish them, grow crops or dig holes, allow public access or prohibit it, subdivide the property, etc. To understand the conservation easement concept, it is helpful to think of these rights as a bundle of rights. A landowner may donate or sell the whole bundle, or just one or two of the rights in the form of a conservation easement.
A conservation easement is an agreement between a landowner and a conservation organization that limits certain specified uses on all or a portion of a property for conservation purposes while leaving the property in the landowner’s ownership. Easements are almost without exception of perpetual duration. They are recorded at the county office where all deeds are recorded, and the easement’s terms are binding on all future owners of the eased parcel.
Every conservation easement is unique, the terms of the easement tailored to the particular property and to the particular needs and goals of the landowner and conservation organization. An easement might state, for example, that no building or road may be placed within 200 feet of a stream passing through a property but allow for a house to be built on another portion of the same property. Another easement might permit farming on a property but forbid residential, retail and industrial development. Yet another easement may prohibit all activities except for sustainable forestry and recreation. The flexibility and applicability of conservation easements is nearly endless.
Donation and Purchase of Property
A variety of methods exist for acquiring conservation easements and fee interests in land. Some transactions are quite simple—a landowner may donate a property or conservation easement to a land trust. Other transactions may be rather complicated, involving combinations of techniques. Because each property is unique, the key to saving land is finding the technique or combination of techniques best able to provide the protection desired by the parties involved. Complicated projects may involve several different players, including conservation organizations, developers, government agencies and individuals, as well as various sources of funds.
Donation
A land trust’s preferred method of acquisition is, of course, outright donation by the landowner.
Donations can generate substantial benefits for the landowner. The donor’s federal income and estate taxes often can be significantly reduced with a properly structured donation. Some form of conservation donation can be critical in cases where the landowners have an emotional attachment to the land and wish it to stay in the family. Although many donors have a strong philanthropic motive, the tax benefits certainly give an appealing additional impetus for conservation donations. The specific tax benefits and the requirements for receiving these benefits are described at length in other publications.
Landowners may donate almost any property right or interest in their land, including the entire parcel in fee, a conservation easement, or other property rights such as an option or lease. Some donation variations are described below:
Bequests. A landowner may leave land, a conservation easement or other assets to a land trust in his or her will. Donation by bequest can reduce the estate tax for the donor’s heirs by removing the value of the donation from the taxable estate. However, because the gift does not vest until the donor dies, there are no income tax benefits.
Conservation Easements. Conservation easements are usually acquired by way of donation. To qualify for a deduction, an easement must first be donated in perpetuity. Second, it must be given to a qualified organization such as a land trust or public agency. Third, it must be given exclusively for conservation purposes.
Remainder Interests. Landowners may donate their land to a land trust but reserve the right to live on or use the land for their lifetimes. Since this reservation could have considerable value, especially if the donor is relatively young, donations of remainder interests can result in considerably smaller tax benefits than outright donations.
Undivided Interests. An undivided interest is a portion of an entire interest in a property. Landowners may donate undivided interests in property over a period of time, As such, an owner of undivided interests in a property becomes a co-owner of the property, sharing in all ownership rights. While a conservation organization may be uncomfortable with a co-ownership arrangement, even when temporary, a landowner may find the donation of undivided interests over time preferable for tax purposes.
Bargain Sale
In a bargain sale the landowner and land trust negotiate a purchase price below fair market value. Bargain sales can be an attractive option for landowners who wish to preserve their land but who also need income from the transaction. Although a landowner will receive more from a sale at fair market value than from a bargain sale, certain tax benefits can substantially reduce or eliminate the disparity.
Purchase at Fair Market Value
Purchasing land or conservation easements at fair market value is obviously an expensive acquisition method. However, if the land in question is important enough and the landowner has absolutely no philanthropic interest, there may be no other option for the land trust. Fortunately a number of approaches to funding the purchase exist.
Private Donations. Individual people are the largest source of donations in America and are therefore critical to long-term conservation efforts. This cannot be over-stressed. Foundations and businesses are also sources of potentially substantial contributions.
Government Grants. A variety of federal, state and local government agencies fund conservation projects. Land trusts sometimes qualify for these government funds. The Pennsylvania Department of Conservation and Natural Resources supports land trust acquisitions with Keystone Fund and Environmental Stewardship Fund (Growing Greener) grants, which support 50% of the costs of priority acquisitions. The Pennsylvania Bureau of Farmland Protection reimburses land trusts up to $5,000 for the costs of acquiring agricultural conservation easements. County and local governments vary widely in their commitment to conservation.
Loans. A crisis situation may warrant a land trust buying a property using a loan to finance the purchase. Loans may be obtained from banks, individuals, foundations, other nonprofits or businesses. A loan may be available from the seller or adjacent landowners who would benefit from the transaction. The Conservation Fund and the Trust for Public Land have helped many communities across the United States with interim financing for their conservation projects.
Trade Lands. Land that has no specific conservation value may still be donated to a land trust for its monetary value. The land trust can then sell the property to finance other land protection projects or possibly trade the land for conservation property.
Buying Time
Conservation organizations do not always have the resources on hand to conserve a highly desirable property. On the other hand, landowners are not always prepared to take an action that would permanently conserve their property. Several approaches exist for dealing with these types of situations.
Installment Sale. If the landowner is agreeable, the property could be purchased in an installment sale. The land trust could make payments over a period of time for a single land transaction or property interests could be conveyed in a series of purchases.
Option. An option grants an exclusive right to purchase a particular property under certain terms and conditions by a certain date. Acquiring an option through sale or donation from a landowner gives a land trust time to raise funds for the ultimate purchase of the property without fear that the property will be sold to another bidder in the meantime. If the land trust fails to raise the necessary funds before the option expires, the land trust forfeits any money it paid for the option and the landowner is free to sell the property to another party.
Right of First Refusal. A right of first refusal is an agreement between a landowner and land trust that gives the organization the opportunity to match any legitimate purchase offer made on a property that is acceptable to the landowner. If the land trust does not match the offer within a specified period of time, the landowner may sell to the prospective purchaser. A right of first refusal places no obligation on the land trust to acquire the property and places no obligation on the landowner to sell the property.
Other Conservation Methods
Conservation Buyer
A land trust may be able to link a conservation buyer with a landowner who wants to sell a property having conservation values. The conservation buyer is someone who wishes to own a property but who also wishes to preserve the property’s natural values. To be effective in the long-term, the transaction should involve a conservation easement being transferred to the land trust. This method requires little or no financing by the land trust; obviously the trick is identifying interested conservation buyers.
Purchase and Resale
A land trust can purchase land and then resell the land subject to a conservation easement. The land trust can accomplish its conservation goal through the easement and also recover much of its expense associated with the original purchase.
Land trusts often acquire land in need of quick protection with the expectation of later selling it to a government agency for parkland, game land, forest or other open space purposes. This involves some risk, since the agency may—perhaps counter to earlier assurances—choose not to acquire the land from the conservation organization. However, this approach has many advantages. Unlike most government agencies, land trusts can usually move swiftly to complete critical land transactions. In some cases, a landowner may not be willing to deal with government but would be happy to work with a private nonprofit.
Limited Development
In a limited development project, a land trust acquires a piece of property and opens a portion of the property to development in order to help finance the original acquisition and the permanent protection of the remainder of the property. The conservation organization may simply subdivide the property into two parcels and sell one to a developer who will further subdivide, or the organization may take a more active role in the development of the property.
Limited development can be complex, time-consuming, controversial and financially risky. A land trust must be very cautious, well informed, and have good access to variety of experts in the real estate and development fields before taking on such a project.
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