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Saturday, November 16, 2019
Considering Buying a Property With a Conservation Easement ?
On the surface, buying a large property, a farm, or other large acreage for a potentially reduced price sounds like a great idea. After all, it's more acreage than you have now, or you wouldn't be considering it. But what does it mean, now and in the future, for you, the property and for your own inheritees ? Should you BUY a property than is already in a permanent conservation easement ?
A conservation easement is something you can decide to legally draft paperwork at an attorneys, in order to implement. The benefit is that you are legally agreeing not to develop the land, now or in the future, and to preserve the land as it is. The benefit is that your land afterward, will be worth much less. Your taxes may be worth much less. You may also obliterate the possibility of your children or other inheritees from paying inheritance tax, by lowering the value of your large acreage. This choice may make it much more possible for your family to keep the farm or acreage intact and within the family. Sometimes, there are other significant tax advantages in addition.
If you are considering buying a property that is already within a conservation easement, then make sure that you have the Contract that specifically runs with the piece of land in question, and that you, and your attorney understand it. Such Contracts are not identical and could prevent you from doing something you wish to do with the land in the future. For example, some Contracts might allow you to construct barns in places where they already exist, but may not allow you to build additional barns. The Contract might restrict the types of farming you could do, even though you might be allowed to continue to timber when selected stands are mature and ready for it. Do not buy a conservation easement property without understanding the specific contract as it applies to the land you intend to purchase.
If you are considering placing land you already own within a conservation easement, make sure you use an attorney who is well versed in this type of law. Secondly, think of your access and rights to the land as parcels of sticks. There are some parcels of sticks you wish to keep, and then others you might wish to agree to forego in order to reduce your property value and your taxes. For example, I might not have any trouble agreeing never to mine uranium on my farm, since I would never do it anyway. I might not feel that way about other mineral rights that could be safer to extract though.
Some of the negatives might be that a conservation easement is perpetual. It may be able to be amended, but it cannot be terminated. Future owners or even your inheritees may curse your choice to place the property in a conservation easement because a property that could have been worth millions developed, might simply exist to preserve a habitat for animals, and to preserve wetlands.
Not all properties qualify for such a thing. A sharp tax accountant and an attorney skilled in drafting conservation easements is a MUST when considering placing your own property in one.
If you are considering purchasing a property that is already within a conservation easement, then don't let anyone rush you. Have your realtor obtain the recorded copy of the easement for THAT property. If you wish to hunt on your own large acreage, make sure the easement permits that. Make sure you understand ALL of the restrictions on the property you are buying, because they will not be changing. Even when the original owner has died, the restrictions will remain in full force. Don't buy such a property unless you truly agree with the restrictions and the reasons for such.
Remember also that if you buy a large acreage property or farm with a conservation easement,that even if you bought it reasonably, that your children will never be able to sell it for its true value when you leave it to them. In a sense, it's Deed will always be restricted in terms of its possible uses, by the fact that it is held under a conservation easement. These are the reasons that I recently declined to purchase a particular large acreage parcel myself.