Law of the Land

10 Risks Conservation Easement Agreements May Raise for Landowners

Victoria G Myers
By  Victoria G. Myers , Progressive Farmer Senior Editor
Conservation easements are a good fit for some landowners, but for others, the risks may outweigh the benefit. (DTN/Progressive Farmer file photo by Kurt Lawton)

There is a postcard image of conservation easements. A landowner wants to preserve some little slice of heaven for future generations to enjoy. It's often about family legacy, and the ideal is almost always well-intentioned, even philanthropic.

Sometimes the postcard matches up pretty well with reality. But not always. These agreements can come with major risks, mostly borne by the landowner.

A conservation easement is, at its most basic, a contract between two parties. The landowner is considered "servient" in this contract, and the easement holder is "dominant." These terms, as I'm using them, have legal significance. If there is a difference over an interpretation of terms in an easement agreement, the dominant estate is often in the stronger legal position.

1. BOILERPLATE AGREEMENTS

Landowners must protect themselves when entering into a conservation easement. They should always have a neutral attorney, experienced in their state's land law and working solely on their behalf, review any conservation easement agreement and point out the risks. These agreements are negotiable and should be approached that way. State laws vary, so what may be an issue in one state may not be an issue in another. Due diligence is very important. Landowners who sign one of these agreements should do so with their eyes wide open and apprised of the risks.

2. EASEMENT LANGUAGE IS OPEN TO INTERPRETATION

What does it mean when an agreement says: "Any change, disturbance, alteration or impairment of the natural, open and aesthetic features of the Conservation Area is prohibited, except in furtherance of the conservation purposes of this Conservation Easement as specifically set forth herein, or as otherwise permitted herein"?

What are "aesthetic features"? What is a "change" or a "disturbance"? What is considered to be "in furtherance of the conservation purposes"? It's all open to interpretation.

In another example, the landowner "reserves the right to use the Conservation Area for hunting with or without dogs, shooting, fishing, hiking, biking, and horseback riding and other passive recreational activities and recreational uses not inconsistent with the purposes of this Conservation Easement." I have no idea what passive recreational activity really means. Again, this is open to interpretation.

To be clear, these examples come from actual conservation easement agreements on file at the courthouse.

3. EASEMENTS CAN BE FLIPPED

When landowners decide on a conservation easement, they usually try to find some entity to work with that they believe holds their similar values with regard to the land. They look for an entity they feel they can work with in the future.

Many landowners are not aware that the entity to which they sold their easement can later sell (assign or transfer) those same rights to another entity, for more money. The landowner may be left with a new partner, which is more zealous in enforcement, interprets the terms of the agreement differently, or requires more reporting.

4. PERMISSION TO USE YOUR LAND

Once a landowner enters into an agreement to create a conservation easement, making changes to the land will almost always require permission from this new partner. This could be important if the landowner is time-strapped and needs to make a decision quickly. What if local regulations change? Can the landowner comply without violating the terms of the easement?

5. JUDICIAL INTERPRETATION

Because the easement holder is dominant, the law often finds in their favor if there is a legal disagreement.

The Alabama Supreme Court held in the 1978 case, Duke v. Pine Crest Homes, Inc.: "(W)e wish to make it clear that the servient owner must not in any way interfere with or impinge upon the right secured by the dominant estate under the express grant of the easement. ... Nor must use by the servient owner create any such additional burden upon the easement as would interfere with those rights granted by the express terms of the easement."

In a later case, Blalock v. Conzelman (1999), the Alabama Court reiterated the power of the easement holder, stating: "The landowner may not, without the consent of the easement holder, unreasonably interfere with the latter's rights or change the character of the easement so as to make the use thereof significantly more difficult or burdensome."

6. MERGERS IN LAND LAW

In some states if the holder of an easement buys the actual land, the easement is extinguished. In this scenario, imagine that the landowner sold an easement, reducing the market value of the actual land. At some point in the future, this landowner sells that physical property. The easement holder may buy that land at the lower market value. Under the Merger Doctrine, the easement is extinguished. Now the new owner possesses the land, without an easement, meaning it has a higher market value. The new owner can sell the land, one assumes for a nice profit.

This only works in one direction. The landowner who originally sold the easement can't buy the easement back and remove it, in most cases, because those rights were sold in perpetuity, or forever.

7. PAYING THEIR ATTORNEY FEES

Most conservation easement agreements provide that the landowner gets the privilege of paying all attorney fees should an issue arise over the easement. If the landowner is sued by the easement holder, or if the landowner is the plaintiff and files a complaint against the easement holder, they pay both their attorney and those working for the easement holder.

8. INSURANCE AND LIABILITY

If a conservation easement calls for public access, as many do, it is often the landowner who must consider the increased liability and look at buying more insurance to protect them. The landowner may also be tasked with protecting the easement holder, should an issue arise.

9. EQUITY IN THE LAND

Talk to a tax adviser and a lender about how a conservation easement can affect land equity and future borrowing power for the landowner. This is a cost that isn't always considered, and it can be considerable.

10. CEASE AND DESIST, AND PUT IT ALL BACK

Once that easement is in place, no news is considered good news. Life goes on, and maybe 10 or 15 years later, there's a new barn, changes to a cropping program, maybe new forages. Suddenly, a cease-and-desist order shows up, followed by an order to put it all back to baseline. Imagine the costs.

Consider the case Lyme Land Conservation Tr. Inc. v Platner, where the Supreme Court of Connecticut handed the holder of an easement a judgment against the landowner. The landowner had, among other things, put in irrigation and sodded part of the property. Those actions were found to be in violation of the easement agreement, which had been put on the land by a former owner. That easement, said the court, was to assure retention of the premises predominantly in their natural, scenic or open condition and in agricultural, farming, forest and open space use. ..."

The total acreage under this easement was just 14.3 acres. A judge found the landowner deliberately violated the terms of the easement and awarded the easement holder damages of $350,000, plus attorney's fees of $300,000. In addition, the court ordered the landowner to restore the property to the condition it had been in when she took ownership.

PUTTING A PRICE TAG ON FOREVER

When a landowner agrees to a conservation easement that lasts in perpetuity on their property, they are selling private property rights and making a change that will affect every holder of that land in the future. Forever is a long time.

What happens when that tract of land becomes fully surrounded by development and all the easement allows it to be used for is farming? Because of the development, and community regulations, the land can no longer effectively be farmed because it can't be sprayed for pests, it can't be fertilized, large trucks can't come and go, maybe the landowner can't even pump water anymore. At some point, future landowners, maybe heirs of the landowner who added the conservation easement, would benefit much more by being able to sell that tract at maximum market value and relocate to some place where they can actually farm or ranch and be a productive force.

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Law of the Land is provided for informational purposes only and is not intended as legal advice or legal services. Victoria Myers is an attorney licensed in the state of Alabama and a senior editor with DTN/Progressive Farmer magazine.

Victoria Myers can be reached at vicki.myers@dtn.com

Follow her on X, formerly Twitter, @myersPF

Victoria Myers