Defining Conservation Easements

For Larimer County Landowners

Larimer County Parks and Open Lands Department developed this document to help Larimer County landowners better understand conservation easements.

Conservation easements are a land preservation tool that can help farmers keep their land in agriculture and help landowners preserve special ecological, geological or historical features on their land while they retain ownership. There are financial benefits to placing conservation easements on land. Larimer County landowners can donate or sell conservation easements on land they wish to keep undeveloped but want to continue to own.

Conservation easements are a fairly new concept for land preservation. Because they have not been used extensively in the past, landowners are not always aware of how they could benefit by selling or donating a conservation easement to a land trust or local government.

Larimer County is growing rapidly and land is quickly being developed and converted from its natural, open or agricultural use to residential use. Some of the land destined for development has values which may be preserved with a conservation easement and still yield a desired financial benefit to the landowner.

What is a Conservation Easement?

A conservation easement is a restriction a landowner voluntarily places on his/her land, which limits development specifically to protect certain special values the land has in its undeveloped state. In Larimer County these values may include unique geological features such as hogbacks and valleys, rich cropland, corridors for wildlife or plant communities, ridgeline views and viewsheds and lands adjacent to already protected lands. The landowner either sells or donates the easement to an organization, which interested in preserving that value. The landowner can receive money for the restriction, and may also receive property, income, or estate tax benefits.

Every conservation easement is unique. The landowner usually gives up some or all of the development rights to protect the specific natural value. Sometimes limited development is permitted and sometimes conservation easements are placed only on portions of a property. A conservation easement only includes public access if the landowner wants it. The landowner works with the agency that will hold the easement to determine its exact stipulations.

A qualified agency holds the easement. This agency is responsible for enforcing the provisions of the easement. In order for a landowner to be eligible for certain tax deductions, a "qualified" agency must hold the easement. These include certified non-profit organizations (such as some Land Trusts) or a government agency that has interest in the land (such as Larimer County Parks and Open Lands Department). The landowner retains title to the land and the easement is enforced even if the land is sold or inherited.

A qualified appraiser determines the value of the easement. An independent appraiser determines the value of a conservation easement by assessing the value of the land both without and with the easement restrictions. The difference between these two appraised values is the easement value. This is known as a "before and after" appraisal. It is important to use an appraiser who has experience with conservations easements to get an accurate easement value.

How Does a Conservation Easement Affect Property Right?

A conservation easement usually involves the landowner giving up some development rights on his/her property to conserve specific values on that land. Though the landowner is limiting some ownership rights, he/she retains the title to the land and all other rights associated with owning that property as long as it does not conflict with the purposes he/she set forth in the conservation easement.

Like some other legal instruments, conservation easements run with the land in perpetuity. That is, if the land is sold, that easement goes with it permanently to all subsequent landowners. This way, the landowner is assured that the values he/she is interested in protecting will be protected no matter who owns the land in the future.

The donation or sale of a conservation easement may reduce income tax, property tax and estate taxes. In order to correctly determine current tax advantages and liability, individual landowners must consult qualified legal and financial advisors.

Generally speaking, the donation of a conservation easement can be treated as a charitable gift. This donation can qualify for federal and Colorado State tax charitable deductions. The donation must meet specific conservation criteria and it must be donated to a qualified agency or local government.

A donated conservation easement can reduce federal estate taxes as well. The conservation easement can be donated during the landowner's lifetime or after death through provision of the will. Limiting or removing the development potential of the land reduces its market value thereby reducing estate taxes. Property taxes on land with a conservation easement may also be reduced.

Selling a conservation easement helps a landowner meet financial needs while still protecting important natural values. Selling an easement can reduce the property tax and estate tax liability for the landowner similarly to donated easements.