Below are best practices that members of the Partnership for Conservation (P4C) believe should be followed when using private funding to advance conservation efforts in the United States. Most of these best practices apply regardless of the form of the landowner, whether they are a real estate investment partnership or an individual. Many P4C members have already implemented these practices as standard procedure, and we encourage land trusts and other qualified recipients to accept conservation easement donations that adhere to these guidelines.
Deliver on Conservation Purpose
Conservation easements must satisfy at least two of the conservation purposes identified in the statute (as compared to just one of the four).
To confirm that conservation purposes are met, a baseline report must be prepared by a well-qualified expert who physically inspects the subject property. The baseline report must specifically focus on the conservation values and must include maps and photographs as appropriate. Those preparing the report must consult state and local natural resource officials as appropriate.
Donors or their representatives must scrutinize the baseline report and speak with the qualified expert to confirm that at least two conservation purposes are met. Donors or their representatives must then draft the conservation easement deed carefully to achieve the specific conservation purposes identified in the baseline report.
Examine Land Trust
Donors or their representatives should confirm that the land trust or other intended donee is qualified to accept the conservation easement donation and has adequate resources to monitor the donation in perpetuity. Ideally, several land trusts should be interviewed because the land trust that receives a donated easement will be forever tied to the owners of the land. Donors or their representatives should review all of the land trust’s available IRS Forms 990, noting cash contributions reported on a yearly basis, amendments to currently held easements, and the size of the organization’s endowment. Land trusts who publicly describe the conservation easements they hold should be given preference and land trusts should be encouraged to provide their baseline reports on their website. The amount of any endowment for the perpetual stewardship of the conservation easement should not be determined based on the value of the donation.
Strengthen Appraiser Credentials
Donors or their representatives should properly vet qualified appraisers. Appraisers should be interviewed about their qualifications and an up-to-date resume should be obtained to ensure all elements required to be a qualified appraiser, as defined by statute and regulation, are met. Moreover, appraisers must have taken specific classes on valuing conservation easements, such as “Conservation Easement Appraisal” by the Appraisal Institute, within the 24 months prior to the completion of a qualified appraisal. Donors or their representatives should ascertain how many conservation easement appraisals the appraiser has completed, request a list of the appraiser’s other conservation easement clients and contact such other clients to discuss their experience. Additional diligence should include donors or their representatives asking the qualified appraiser whether, in the preceding three years, he or she has been prohibited from practicing by the Internal Revenue Service. Finally, donors or their representatives must confirm that the appraiser is currently licensed in the subject property’s state and verify that the appraiser’s insurance information is current.
Validate Appraisal Value
The accuracy and completeness of the qualified appraisal should be independently verified. Donors and their representatives should hire a second, separate, and independent qualified appraiser to review and confirm the qualified appraisal’s findings through a complete desk review.
Substantiate HBU and Market Feasibility
Donors or their representatives should obtain a written and independently verified opinion from a qualified real estate attorney confirming the feasibility of the Highest and Best Use (HBU) identified in the qualified appraisal. This feasibility opinion should identify whether the current zoning and land use plan, if applicable, would permit the identified HBU and, if not, opine on the likelihood of the local government’s decision regarding the required changes to zoning or land use plan. In addition, a market feasibility study by an independent third party should be conducted. Both the opinion and the independent study should be provided to the qualified appraiser.
Examine Property Title Thoroughly
Property title must be reviewed to ensure that the conservation easement can be donated free and clear. Donors or their representatives must examine the title of the property subject to the proposed conservation easement meticulously back at least 50 years, if not further back to “patent” (that is, initial and exclusive land grant from a sovereign entity such as the United States of America). Such an examination must include a review of both surface and sub-surface property rights.
Survey and Document Property
To properly document what is being donated, donors or their representatives must prepare a current survey that clearly identifies the property subject to the conservation easement. Such a survey ensures that that all parties, particularly the qualified organization receiving the easement, are aware of the specific area to be protected. Furthermore, the survey will ensure that the property’s legal description is free of errors and that any applicable encumbrances, restrictions, covenants, rights of way, access easements, etc. are current and clearly delineated, so that both the donor and donee are mutually aware of these property features and/or limitations.
Verify Building Sites with Precision
In the survey, building envelopes (including building sites, existing roads, and access or utility right-of-way) allowing for future development of any kind should be surveyed or determined with Global Positioning System (GPS) coordinate precision and are not permitted to relocate following the donation of a conservation easement. If these building envelopes cannot be identified precisely, they should not be included.
Specify Reserved Rights
If the donor intends to reserve rights in the conservation easement, the exact terms applicable to these rights must be specified and agreed upon between the donor and the donee – in advance, and incorporated into the deed of conservation easement. This information must also be communicated to the appraiser.
Pursue Third-Party Review
A third-party attorney, with no prior exposure to the particular conservation easement should be retained to complete a thorough, independent legal compliance review. The attorney’s examination should include reviewing all documents related to the donation to ensure it complies with all applicable laws and regulations, including evolving case law on reserved rights and proceeds clauses on extinguishments, condemnations, and/or amendments.
THESE BEST PRACTICES ARE INTENDED AS A GUIDE AND NOT A COMPLETE LIST OF ALL POSSIBLE FACTORS THAT LAND OWNERS AND LAND TRUSTS MAY NEED TO CONSIDER. EACH CONSERVATION EASEMENT IS UNIQUE, AND THE PARTICIPANTS INVOLVED MUST BE PREPARED TO ADDRESS THE PECULIAR CIRCUMSTANCES AND CHALLENGES OF THEIR PROJECT.
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