Dallas Bar Association

Conservation Easements and the Enhancement of Planned Communities

by John Dugdale

A conservation easement is a voluntary and perpetual restriction on the beneficial use of a property a landowner places in the hands of a “holder,” in this instance a land trust. In the context of this article, a conservation easement is a contract between the developer and the land trust to preserve in perpetuity what are known as conservation values.

The intent of a conservation easement is to protect ecological/biological, cultural, historical, aesthetic or vegetative/geological features unique to the property. Like any deed restriction, a conservation easement runs with the land and therefore diminishes the bundle of rights inherent to a property. However, the landowner does retain legal title to the property in question.

Typically, the purpose of establishing a conservation easement is to preserve a property that has significant conservation values.  Residential development and conservation are not mutually-exclusive.  The preservation of open space that conserves native habitat is something people in North Texas value.

Developers of planned residential communities can use conservation easements in their plans of development to provide “green” aesthetic and recreational common areas that prospective homeowners purchasers find appealing and, therefore, enhance the value of the development project and of the homes situated therein. If the conservation easement and the affected property meet certain IRS requirements, a conservation easement can provide developers and landowners with distinct income and property tax advantages. Please note that this article will not address tax issues in any detail—should you require such information, you should consult with a qualified tax professional.

In order for a conservation easement to qualify under IRS regulations as a charitable donation, it must a) serve a bona fide and recognized “conservation purpose,” b) must be permanent and run with the land, and c) must be donated to a qualified 501(c)(3) charitable or governmental organization.

Both Federal (26 U.S.C. § 170(h)) and Texas (Chapter 183, TX Natural Resource Code) law treat for tax purposes as charitable donations the granting of qualifying conservation easements, typically where the conservation easement:

1.                  provides at least one of the following public benefits:

  1. the preservation of land for public outdoor recreational or educational purposes;
  2. the protection of natural or manmade habitats of plant, animal or insect resources;
  3. the preservation of open space, which includes farms, ranches or forests, either for scenic enjoyment or in keeping with a clearly delineated public policy (such as a local open space plan); or,
  4. the preservation of historically important land or certified historic structures.

2.                  is granted in perpetuity;

3.                  is granted to a qualified organization that is either:

  1. a nonprofit 501(c)(3) charitable organization (i.e., a land trust) with a conservation purpose and the means to enforce the easement, or
  2. a local, state or federal public agency.

As a general rule, for a conservation development to qualify for such treatment, the ratio of preserved acreage must meet, or exceed, 50 percent of the total landmass (be “density neutral”). In fact, in practice the percentage of the whole preserved ranges from 50 to 70 percent.

A model for a successful conservation development is one where the municipality has in place a master development plan that includes a land use plan for a conservation development district. Such conservation development districts would have to encompass the specific eco- region where the proposed development would be sited, and the development would necessarily have to conform to any applicable land preservation standards, regulations and ordinances.

An easement’s preservation requirements must be enforceable and protect all of the conservation values intended, and none of the gross area of the proposed development may change so that the ratio or identity of the net preserved areas may not change. Therefore, once the conservation easement is executed and filed, the specific preserved acreage within the development cannot be reduced, and the remaining developable acreage that is not subject to the easement cannot be increased.

Finally, homeowner associations typically serve as stewards of the conserved lands that form the living core of their community. A conservation ethic homeowners share in common helps to strengthen their community, while the tax advantages and higher sales values help to add to the developer’s bottom line.

 

John Dugdale is Of Counsel at Guida, Slavich & Flores PC and can be reached at dugdale@guidaslavichflores.com.

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