Friday, July 8, 2016

Thinking like a landowner's attorney in Conservation Easement Transactions.

As I prepare for next week's free ABA webinar on conservation easements, I have been thinking a bit about what advice I would give attorneys representing landowners. While I sometimes twice represented landowners in practice, I mostly think about conservation easements from the holder side. I think of my research as generally talking to land trusts and government agencies. So trying to approach things from the perspective of the landowner has been a harder exercise for me than anticipated. 

One of the pointers I have for landowners is thinking carefully about who they want to convey a conservation easement to. It may feel like it doesn't matter too much which land trust (or government entity) holds the conservation easement as long as the as the landowners find the terms favorable, but I caution against that. First, with perpetual agreements it is pretty durn likely that one day an ambiguity or dispute will arise. Your conservation easement didn't contemplate potential highways for flying cars? They aren't expressly prohibited, so they must be allowed unless they conflict with the purposes of the conservation easement or the conservation values. They don't actually disturb the surface... so maybe you can still farm? are they scenic? how high off the ground do they need to be? Maybe we can easily figure this out from the CE, but it helps if the general goals of the holder align with the aims of the landowner. Do you want to give the conservation easement to The Audubon Society or to the Marin Agricultural Land Trust

New scholarship appear in the journal of Landscape and Urban Planning seeks to examine how to match up landowner and land trust desires in making a partnership.  The social scientists (Christopher Bastian, Catherine Keske, Donald McLeod, and Dana Hoag) seek "to improve the efficiency by which parties interested in conservation easement transactions are matched." They suggest that by better understanding preferences of different groups, those engaged in land conservation transactions can reduce transaction costs and improve conservation easement acceptance rates. The authors are focused on market efficiency, which is a challenge with conservation easements because the valuation of them and the marketplace differs greatly from those for other property rights. I think this article might be most interesting for landowners contemplating donating a CE than for land trusts determining which ones to accept.

A few thoughts though about different elements of the article

  • Based on earlier studies by some of these authors and others, the article points out that conservation easements are most likely to arise where landowners are relatively wealthy and well educated. This reinforces concerns that I have generally about who is it that most benefits from CEs. Evidence suggests (meaning that I haven't *actually* gathered data on this) CEs are mostly likely to provide financial benefits to wealthy landowners. As Thomas Mitchell (moving to Texas A&M) has pointed out, minority landowners who are often land rich but cash poor have little incentive to donate a conservation easement when the tax benefits so exceed tax liabilities) 
  • The article mentions that absentee landowners are more likely to choose a CE than where the owner occupies and works the land. Repeat comment above, but add to it a concern that with fewer eyes on the conserved land, we may have higher risks of third party violations or just a lack of interest in actively pursuing land conservation efforts.
  • Additionally, where the land remains valuable for development, CEs are also less likely. Repeat comments from above and add to it a concern that CEs don't actually help us protect the lands that conservationists might target as most in need of protecting. This researchers appeared to focus on donated CEs so maybe this would change with purchased CEs.
  • Neither land trusts nor landowners are really interested in public access. Unsurprising but interesting. Going back to my concerns about who benefits from CEs. I think land trusts used to push for public access until they started to get worried about potential liability issues (again, conjecture on my part, not based on any actual data I have collected)
  • "Contracts for CEs are often negotiated privately in order to maintain landowner confidentiality for sensitive information such as annual income." Lots of interesting things here. First, they call them contracts (see previous post -- contracts or property rights?).  Second, I am not sure what the alternative would be. Public negotiation? Because CEs are individually negotiated for the most part, it makes sense to me that these are just deals between two or three parties (maybe stick a funder or third-party enforcer in there). I was a bit surprised (and intrigued!) to think that the reason might be landowner concerns about sensitive information.Suggestions that such negotiations should have public components at all highlights the mix public-private nature of CEs.
  • Land trusts thirst for info and are a great group to study. The response rates here are phenomenal. Land trusts get inundated with surveys by researchers trying to figure out what makes them tick. Their investment in the land conservation community is highlighted by their willingness to work with researchers. Good on ya!


Lots more good stuff in there. Check it out: Christopher T. Bastain, et al., Landowner and Land Trust Agent Preferences for Conservation Easements: Implications for Sustainable Land Uses and Landscapes, 157 Landscape & Urban Planning, 1 (2017).

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I have been drafting conservation easements since 1987 (Virginia was early in the process). In those early days, the clients were those of the senior partner, Lew Costello, a brilliant tax attorney, one of the top tax attorneys in the country. He always said to advise them not to do it, since “forever is a mighty long time”. We, and then I, would always go over the pros and cons with the client, memorialize the conversation in a letter, and advise them not to do it. In all of those years, only one client didn’t do, and that was the one client who came in leaning against it- the wife said that donating a conservation easement was “like selling your soul to the devil”.
I think attorneys have an ethical obligation to do what I’ve outlined above for every client, in every situation. I’m concerned that many attorneys that purport to represent clients in conservation easement transactions are cheerleaders for conservation easements and don’t adequately represent their clients. I have one law review article on the topic- Conservation Easements and Ethics, 17 San Joaquin Agricultural Law Review 31 (2007-2008). I have enough new information to do another article, but just haven’t gotten around to it. A surprisingly scant amount of literature exists on this- I assume because most writers are also infatuated with conservation easements.
My most recent article, Land Tenure and Sustainable Agriculture, 3 Texas A&M Law Review 799 (2015-2016), looks at how uncertain land tenure in leases, conservation easements and heirs property inhibit sustainable agriculture. Unfortunately, many oversell conservation easements and the families are left with a big mess to clean up. The negative consequences of conservation easements need to be explored much, much more. Conservation easements are, in many cases, contrary to good land use planning, resilience and sustainability.
I also have done a survey of conservation easement landowners in Virginia (over 2,000 of them). They are overwhelming wealthy, high-income individuals that don’t produce much in the way of agricultural products from the land. The land itself, that we have paid huge amounts of money to preserve, is a big unknown. We don’t know what the conservation values are. Anecdotally, the land is low quality ag land, sold to wealthy people for country estates by farmers who kept the best ag land for themselves. Very little conservation value.
Landowners would not donate conservation easements if there was public access. Most donors talk about “me”, “I” and “my family”- little or no focus on public benefit.

Posted by: Jesse Richardson | Jul 9, 2016 7:53:34 AM

Thanks for your comments Jesse. As you know, I am also a frequent critic of the tool, while also appreciating the energy it can bring to land conservation generally. Interesting to hear the perspective of a landowner's attorney counseling against the tool. I also suggest to land trusts that in many cases a conservation easement is not the right tool for what they are trying to do. They might be sometimes, but not always. I agree that people became enamored with conservation easements and saw them as a tool that fit everywhere.

The authors of the article I am discussing here took it as a given that conservation easements were desirable and yielded environmental and societal benefits.

Posted by: Jessie Owley | Jul 9, 2016 8:12:29 AM

As you know, It’s quite a questionable assumption that “conservation easements [are] desirable and [yield] environmental and societal benefits”. That also appears to be the assumption of the IRC regulations, which I think are the source of the problems. My answer to whether conservation easements are desirable and yield positive environmental and societal benefits is “it depends”. Some do, some don’t. One clear result of my survey was that the biggest reason that landowners donate easements (at least in Virginia) is to “stop development” CEs clearly do not “stop development”. They merely move development around- in some cases in good ways, in other cases in bad ways. CEs are not a form of birth control or immigration reform.
Knaap and Frece say it very well, in Smart Growth in Maryland: Looking Forward and Looking Back, 43 Idaho L. Rev. 445, 454=455 (2007) (I wish they would have talked about the negative impact on low- to moderate-income families instead of developers and home builders though):
Marylanders appear to be increasingly anti-growth, or at least in favor of efforts to slow the rate of growth. This has become evident in the rejection by voters of progrowth candidates and the proliferation of NIMBY (“Not in My Back Yard”) organizations. Consequently, land preservation programs have proven to be much more popular than programs that encourage development and redevelopment within existing communities. Land preservation programs generally involve a straightforward process in which funds are made available to purchase land or development rights on land. Parcels meeting stipulated criteria are then targeted, landowners willing to participate are identified, and the transactions are executed. In most cases in Maryland, when development rights are purchased, they are then extinguished rather than traded or sold for use elsewhere in the state as a commodity of value, although there are some functioning Transferable Development Rights (TDR) programs. After such a process, land trusts or other sponsoring organizations are happy, environmental groups are happy, often agricultural or other resource based industries, such as forestry, are happy, and usually neighboring communities are happy that valuable and scenic land has been protected forever from future development.

Developers, home builders, and affordable housing advocates, however, are not necessarily so pleased. Such protection makes unavailable land that might otherwise have been suitable for new development, often driving up the cost of remaining raw land close to or inside existing communities, prompting builders to leapfrog protected lands to develop in formerly rural areas even farther from existing communities, or both. This, in turn, fragments remaining rural areas, degrades more watersheds, requires more taxpayer expenditures on roads, schools and other infrastructure, and creates more long distance driving with attendant problems with traffic congestion and air emissions.

Posted by: Jesse Richardson | Jul 9, 2016 9:32:18 AM