Property rights and conservation easements

by Cat Urbigkit

Sublette County is about to be at the center of a discussion over the use of conservation easements and the purchase of development rights to preserve agricultural land.

Last month, at the instigation of the Green River Valley Land Trust, the Sublette County Commission appointed a working group to begin examining the idea of having the county use tax money to purchase development rights (PDRs). The group has been charged with gathering community input, developing the program structure, including the ranking criteria and proposed funding levels, and reporting back to the commission before the end of the year.

Most of the information about conservation easements and PDRs in general circulation is put out by the land trusts whose purpose is to purchase these rights, although a few organizations have specialized in amassing more critical information about such programs.

Carol W. LaGrasse, president of the Property Rights Foundation of Amer-ica, is a national voice urging landowners to proceed carefully when considering conservation easements.

LaGrasse said: "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."

LaGrasse is critical of conservation easements because, in her view, such easements cloud 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 terms "conservation easements" and PDRs are often used interchangeably, although rights may differ. Conservation easements extinguish development rights, while the purchase of development rights doesn't necessarily extinguish the right, but transfers the development right to the easement holder.

"A property owner must understand that by granting a conservation easement, he is not only restricting the future use of his property, he is actually conveying an interest in the property to a government agency ..." according to property-rights advocate Rachel Thomas of the Paragon Foundation.

Conservation easements are filed like deeds because they are rights to real property. The title becomes split between the landowner and the holder of the easement.

"Many easements allow sale or transfer of the easement title to other organizations or agencies, so you may find yourself or your heirs with an entirely different partner than the one to whom you sold the easement," according to a fact sheet distributed by the Paragon Foundation.

According to the Property Rights Foundation of America, "The conservation easement creates a right in favor of others over the property, with the remaining property owner the subservient residual owner."

Some conservation easements are written for a term of "in perpetuity," which Wyoming Farm Bureau Federation Executive Director Marvin Applequist said is unconstitutional in Wyoming and is opposed by his organization.

James Burling of the Pacific Legal Foundation pointed out that centuries of property law are based on the premise that the "dead hand cannot reach beyond the grave to control the living," and in his view, conservation easements "destroy the economic utility of the underlying fee." Burling said, "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."

LaGrasse said the result of such easements is the loss of equity and the right to use the land. The loss of equity is reflected in two ways: the seemingly lucrative price paid by the easement purchaser; and the inability to obtain a mortgage to make investments such as barn expansion or equipment, according to LaGrasse.

"Just ask your bank what you're good for before and after the easement deal," LaGrasse said. "The loss of rights to use the land is reflected in the ability of the land trust to litigate to enforce the easement if required environmental protection investments are not maintained or if access roads or structures can be interpreted to violate the easement."

According to LaGrasse: "The bundle of rights is so severely diminished that the farmer, rancher or forester is essentially a tenant on his own land." LaGrasse said the use of conservation easements is just a step from 100-percent private ownership to 100-percent government ownership of property because the financial crises can arise necessitating the use of the land for equity, but the equity essentially no longer exists; or times change and uses prohibited by the easement become feasible, while permitted uses become undesirable or uneconomical.

Conservation easements are often used in areas where the risk of development is deemed to be high. At 22 percent, Sublette County had the second-highest growth rate in Wyoming during the last decade. According to the University of Wyoming's Institute of Environment and Natural Resources, much of this population increase occurred in rural areas of the county, where the growth rate was 30 percent, comparable to the overall growth rate in Colorado, the third-fastest growing state.

About 80 percent of the land mass of Sublette County is owned by the government, whether it's local, state or federal. This ownership of property severely limits rural development or population expansion into rural areas.

LaGrasse also cautioned landowners: "Considerations such as whether the landowner would like to build another structure, divide out small parcels of a limited nature, exploit a gravel deposit for road building, or even build more roads, need to be faced in black and white at the negotiation stage. The landowners' interests in these details need explicit protection."

LaGrasse pointed out that while conservation easements may attempt to set up ranch management plans for the future, new needs arise and improvements may be needed. "For instance, it might be beneficial for previously uncultivated pasture to be cultivated to enhance the ranch's productivity and viability," said LaGrasse. "It might be critical to ranch operations to change water distribution and storage, such as diverting water to a pond or stock tank."

Other issues involved in conservation easements include the threat of third-party enforcement of the easement and the cost of litigating easement violations.

Thomas recommends: "Prudence dictates that every landowner considering a conservation easement carefully explore the far-reaching consequences for entering into such a scheme. The complexity of the conservation easement demands that competent legal and tax counsel review and analyze any conservation easement proposal. The landowner should weigh the present benefit to be derived against the long-term burdens any such easement will place, not only upon himself, but upon his heirs."

All property owners are advised to consult professionals, including attorneys and accountants, in any type of land transaction.

The Paragon Foundation published a fact sheet called "Myths about conservation easements." Here are a few of the topics:

• If I sell a conservation easement, I can still use my property just as I always have.

FALSE. No, you give up control of all property covered in the easement. Forever, there will be an organization or agency with the power to look over your shoulder and approve or disapprove management practices. Most easements require you to give access at all times, even during the growing season when access can damage crops. You may have to obtain approval for weed control, grazing or other management practices. Many easements allow "approved" practices, but may not list specific practices. That's a loophole that allows the easement holder to change the list of approved practices without your consent.

• Selling property with a conservation easement will be easy.

FALSE. You are required to inform the buyer a conservation easement exists. This may lessen the value of the property, the number of people willing to share title with an organization or agency, and banks willing to lend money to purchase property with a split title.

Some easements require the bank to take a secondary interest in deference to the easement. This can decrease the willingness of a financial institution to loan money on the property.

• I need money right now and a conservation easement will put cash in my pocket.

TRUE or FALSE. If your land is mortgaged, chances are the conservation easement payment will go directly to the lender and may be used for the interest payment instead of reducing the principle. Read the fine print. Regardless, you are responsible for paying income taxes on the full amount of the easement. Selling an easement may actually harm your cash flow because of tax complications.

• Shorter term (30 years or less) easements are better than perpetual easements.

TRUE. Easements of a shorter duration allow future generations more options and flexibility in managing their property. But short term easements still give up control of your property, so it pays to talk to professionals before you make any decisions.

• My easement allows "normal management practices," so anything I normally would do with my property will always be allowed.

FALSE. While the easement might allow for "normal management practices," the definition of that term may change over time and in ways you cannot imagine now. Selling an easement to be managed in conjunction with an organization or agency does not guarantee a particular management practice for years to come. Many easement contracts allow the purchasing organization or agency to sell or transfer title to the easement, so it may be an entirely different entity who interprets "normal management practices," for your heirs or future owners of this property.