Thoughts on Conservation Easement?

[JD5210]

The first question to ask yourself is do you want the land to remain open after you are gone. Second question are you willing to get a few more gray hairs to accomplish that. If you answered, NO to either of those questions stop here. I would see if there is a local non-profit conservation group in your area and contact them. Often they will have meetings, which you do not even need to give your name, where they will bring in a conservation holder group, an attorney that specializes in this, someone that has done one and someone that sells the tax credits. They will do a presentation, you can ask questions and you can pick up some material to read. Sometimes, they will make someone available for free to help you, but do not sign anything until you have an attorney read it. If your plan is to make money on the land this not the way to go. At least in the county in Virginia that I live in it is a way to greatly reduce your property taxes and not have an agricultural business on it. Do not let anyone rush you or tell you what to do. As stated earlier there will be restricts, if you think you or your family will want to live on the land in the future plan for that now. There will be some up front costs and they are not cheap. Most likely you need a current survey and an attorney to review the easement agreement. You are not locked into anything until you file the easement. On the tax piece, if this not something you understand well, if you can get someone to sit with you and pencil it out, it is not that hard to understand. Some people in advance cut off pieces of land to not be included in the easement. Often people will pay a lot more for land, knowing no one can build behind them. If you do decide to do it, in advance I would like to thank you.

 

[beppington]

The only "right" you lose is the ability to build on the land. You can still clear paths, cut trees, maintain trails, hunt, etc... You just cannot build any structures on it. Also your taxes are MUCH cheaper since the land is placed "in current use".

This doesn't have to be the case. The guy right next door to me put his 282 acres in Conservation, got $2.6M for doing so, but I've read the entire agreement; He made sure it included provisions for being able to build up to 2 more homes with swimming pools (he already lives in the 1 with a pool). You just gotta make sure it's included, & don't sign if it isn't. And, don't sign if there's anything else about it you don't approve of ... just like any other agreement.

I should say, I'm in FL; Maybe your Rules/ Laws are different.

I did this with a few small parcels and got $9k per acre for parcels under 15 acres and $6k per acre for parcels over 15 acres. The land had to be at least 50% "wetlands", this does not mean standing water either poorly drained soils are considered just as "wet" as standing water. If you have good buildable land then it's not worth it but most of these parcels are barely buildable with the wetland setbacks around here so this is a perfect deal to make money and keep your land. It includes a free land survey too! :thumbsup:

I agree that that's probably usually if not always the case. That guy next door, probably 250 of his 282 acres are within "Special Flood Hazard Areas", although only about 40-50 are "Wetlands". Nevertheless, our county probably wouldn't ever let him develop it, so he might as well get paid for those restrictions.

 

[beppington]

They sound serious and urgent... which raises a Red Flag... at least to me.

I say serious because they offered to fly down to meet me and urgent because the "Deal" has to be completed by December 31 or funding expires... it is about preserving watershed for Salmon Habitat.

Pushy sales folks put me off & are a warning sign to me, too. But, the funding expiration could be real. I work with govt grants, & they definitely do have expirations dates ... although we've never had any trouble getting extensions when needed.

I certainly wouldn't rush into it until you're comfortable & confident about the deal.

 

[sweettractors]

I assume these conservation easements are good until the landowner dies and are not transferable? Ken Sweet

 

[beppington]

I assume these conservation easements are good until the landowner dies and are not transferable? Ken Sweet

I believe they are usually (always?) permanently attached to the property, regardless of owner, & would show up in a title search, like a lein, etc.

 

[sweettractors]

I believe they are usually (always?) permanently attached to the property, regardless of owner, & would show up in a title search, like a lein, etc.

If that is the case. The landowner is putting todays price on his land that goes into conservation. If I am thinking correct, the land 30 years from now could be worth 3 times what it is today and his heirs lose out on the gain. This is not adding up or I am not thinking right. For example I bought my first 100 acres in 1973 for $300 per acre and now surrounding farms are bringing $2500-$3000 per acre. That is a 10 fold increase on my initial investment. Lets just say that I put that 100 acres in conservation the first year I bought it, the conservation people would have land worth 10 times what they gave for it and I would have a house and a couple acres that was actually mine? Ken Sweet

 

[beppington]

If that is the case. The landowner is putting todays price on his land that goes into conservation. If I am thinking correct, the land 30 years from now could be worth 3 times what it is today and his heirs lose out on the gain. This is not adding up or I am not thinking right. For example I bought my first 100 acres in 1973 for $300 per acre and now surrounding farms are bringing $2500-$3000 per acre. That is a 10 fold increase on my initial investment. Lets just say that I put that 100 acres in conservation the first year I bought it, the conservation people would have land worth 10 times what they gave for it and I would have a house and a couple acres that was actually mine? Ken Sweet

Ken, yes that's correct. Of course, as always, if you don't like the price, you can always not sign the agreement.

You're referring to your land in terms of its cash value, as though it's an investment, so you might want to consider any money gained today by putting that land into conservation to also be an investment ... which would imply it would also be worth a lot more in 30 years.

The Dow has increased by about 13-fold from about 850 to about 11,000 since '73. So, invested wisely, the $300 per acre you paid could've been put into stock mutual funds, & would be worth the equivalent of about $3,900 per acre today. And with no property taxes, insurance, fencing costs, etc.

Of course, you can't play, hunt, camp, ride or plant on stocks either :laughing:

 

[Reverend Blair]

It varies widely. I've heard of conservation trusts where the land goes to the conservation organization when the owner dies. I've heard of trusts where various levels of development are allowed. I've heard of trusts that basically leave you a squatter on your own land.

Read the agreement. Get the advice of a lawyer. Make sure it works for you.

 

[beppington]

It varies widely. I've heard of conservation trusts where the land goes to the conservation organization when the owner dies. I've heard of trusts where various levels of development are allowed. I've heard of trusts that basically leave you a squatter on your own land.

Read the agreement. Get the advice of a lawyer. Make sure it works for you.

That's right. My county has a standard "boiler plate" conservation easement agreement they gave me a copy of when I bought my land. But it looks & reads absolutely nothing like the one my neighbor described above entered into. The boiler plate one is nothing I would ever sign, but my neighbor's is one h3lluva sweet deal! :thumbsup:

 

[charlz]

Of course the property tax breaks are only likely to last until your local goverment has a 'budget crisis'.

 

[beppington]

Of course the property tax breaks are only likely to last until your local goverment has a 'budget crisis'.

Yes, I've seen no mention of "taxes", "tax break", "tax reduction", etc. in any easement. So, you're really only "hoping" you get it. And you might not, now or someday.

Remember ... The Tax Dept is a totally different dept than the Environmental Protection Dept, the Growth Management Dept, or whatever your govt calls it. And, I haven't seen any evidence that any of them cares what the other does, what "promises" were made, etc.

 

[dmccarty]

They sound serious and urgent... which raises a Red Flag... at least to me.

I say serious because they offered to fly down to meet me and urgent because the "Deal" has to be completed by December 31 or funding expires... it is about preserving watershed for Salmon Habitat.

What would Eddie Walker do?

:laughing: Is this a TBN bumper sticker?

What would Eddie Walker do?

They might very well have to spend the money this year. But given how little time you have to make an informed decision I would be very careful. If the habit is that good they will get more money and be back.

My question would be why are they waiting until the last moment? I can think of some good reasons but I would be asking.

Later,
Dan

 

[dmccarty]

I saw a documentary last week on this "carbon credit" thing and I understand there is already a exchange. Like you say, it is only for the big traders currently. I take that back, Now that I am remembering the story, the women in India are gathering fresh cow dung and delivering it to the local utility that dumps it into a big vat and produces methane gas for sale in the community. They said they made more gathering the dung than farming. Ken Sweet

I think I saw in the WSJ this week that the Carbon Credit Exchange is dead. I found this article, The Crash Of The Climate Exchange - Investors.com which was interesting for a variety of reasons.

Maybe I am reading the graph wrong but it looks dead, Chicago Climate Exchange

Later,
Dan

 

[sweettractors]

I think I saw in the WSJ this week that the Carbon Credit Exchange is dead. I found this article, The Crash Of The Climate Exchange - Investors.com which was interesting for a variety of reasons.

Maybe I am reading the graph wrong but it looks dead, Chicago Climate Exchange

Later,
Dan

I hope the Carbon Credit Exchange and "Cap and Tax" legislation are both dead. They are both a joke. Ken Sweet

 

[ultrarunner]

I bought the land when I bought my place... I would only by the place if the 10 acres adjacent came with it. Main reason is I didn't want my private drive to become a right of way serving someone else's property next to me.

Paid $10,000 an acre and county tax man says it is now worth $20,000 an acre.

I had perk tests and identified one clear building site. Also new septic regs require alternate or reserve leach fields... with 10 extra acres should not be a problem.

I really enjoy walking the land and still can't believe I own it... (with the Bank). I looked for more than 20 years to find my little spot of heaven.

It's a place where I can turn the nieces and nephew loose with the dogs to just have fun and explore without the ever present poison oak that is the scourge of much of California.

Never realized this was such a big business... last year they had 70 million dollars to protect critical habitat... they have already asked for $100 million for 2011.

Taxes are high and there is no guarantee what they will be in the future with or without the easement... I have been unsuccessful in getting any concessions... Assessor maintains it is buildable and one of the few unencumbered buildable sites it the area.

I do have a commercial timber restriction that expires as soon as the land is fully paid for.

No immediate plans to develop any of it other than part of my shop/barn straddles the property line and the 10 acres.

Tax records always showed the barn to be on the 10 acre parcel till last year where it now shows as part of the home parcel

 

[jinjimbob]

I also like The Nature Conservancy, I give them donations every year.
Similar groups buy land around me, I think its great!

In WA, any land you have is buildable, but you might not have a choice where you can build, you can be told where to build and it can cost you a lot, but its still buildable even if you have to spend millions building a 500 squ ft cabin. Thats how they see it.

 

[Furu]

From your profile, I can't tell. Is this a California or Washington property? I think you said it was 10 acres. In Washington if it is more than 5 acres then there are a couple of different programs that you can try that may reduce your taxes significantly. If it is more than 5 acres and is forested; then it can be placed in Timber tax status or if more than 20 acres it can be placed in Forest Tax status. Very significant tax reduction. $100 or so on 50 acres, $40 on 20 acres.

 

[dmccarty]

...

Paid $10,000 an acre and county tax man says it is now worth $20,000 an acre.
.....

Tax records always showed the barn to be on the 10 acre parcel till last year where it now shows as part of the home parcel

Have you checked to see if the land is still worth 20K an acre? In my area some of the counties list the prices that property has sold for on the county website. Depending on the property it can be real easy to get comparables.

Our house lot is NOT merged with our other raw land. The county cannot merge the two since there are separate deeds. Not sure if the merging of the two helps our hurts tax wise. In our case it would hurt since we have a timber valuation on the non house land.

There is a county meeting in Dec or Jan regarding timber valuations. The note I got made me feel uneasy with what the tax man is up too. It seems to be pushed from the state not the county.

The funny thing is, our county does not want development. Our land is all subdivided and ready to sell. But we do not want to sell. If it had not been for the timber valuation we would have had to sell the land since we could not afford the taxes. So if they raise the tax we are paying they will get more development they do not want. At least the last round of idiots aka Commissioners got voted out of office this month.

Later,
Dan

 

[dmccarty]

I hope the Carbon Credit Exchange and "Cap and Tax" legislation are both dead. They are both a joke. Ken Sweet

I hope so. The article in the link was very interesting regarding which government officials have strong money ties to the exchange. Course this was not widely reported in the press.

Later,
Dan

 

[ultrarunner]

From your profile, I can't tell. Is this a California or Washington property? I think you said it was 10 acres. In Washington if it is more than 5 acres then there are a couple of different programs that you can try that may reduce your taxes significantly. If it is more than 5 acres and is forested; then it can be placed in Timber tax status or if more than 20 acres it can be placed in Forest Tax status. Very significant tax reduction. $100 or so on 50 acres, $40 on 20 acres.

Land is in WA State... I did look into it a few years ago... the next step in the process as I understood was to prepare a formal management plan with the help of a forester... I was also told that the lines may have to be redrawn since part of my home shop is on the 10 acre parcel.

Property Taxes, home and land/acreage, are a real concern... went from around $7000 (Based on my Purchased Price in 2005 to $12,000 the last 3 years.

I did my research prior to purchase and decided to buy because WA had I-747 property tax limits in force... it was later overturned in the courts and taxes went up overnight.

Assessor office has been friendly but will not budge... they say land with water resources... streams, creeks, etc... is the only segment increasing in value each year.

High Taxes based on buildable land have forced several in the area to sell for development... Neighbors that built in the 1950's have also seen taxes spike on their 3 acres and home... it is a real concern for them...

Now, if I only had a crystal ball...