Advice on Dealing with Conservation Easements

Easements are popping up on land all over the United States. Buyers and sellers are becoming familiar with easements as the demand for land and the increased interest in conservation affects more and more real estate transactions. More specifically, conservation easements are on the rise with western ranchers.

Undeveloped land across the country is becoming scarce. Conservation easements are one way land owners and investors are not only protecting the land, but increasing the value of their investments. Easements, defined by law, is a right held by one person or entity to make use of land or property of another for a limited purpose. In states like Montana and Colorado, conservation easements play a part in nearly 40 percent of ranch land transactions. Ranch owners are selling rights to a portion of their land to an outside entity, sometimes for a hefty price, for conservation purposes. Many times, entities like Ducks Unlimited or Rocky Mountain Elk Foundation will purchase ranch land to ensure healthy habitats for wildlife.

“Right now the most common in Montana are no plow and no drainage easements,” said Bob Sanders, manager for the conservation program for Ducks Unlimited in Montana. “If you’re a rancher, you don’t want to plow anyway and you don’t want to drain because that’s a water source for your cattle. If you get an easement, you could be getting a big payment that is significantly more than what you paid for the ranch to begin with.”

The word easements is a common term in the real estate world. Whether utility, conservation or other type, consumers will have a real estate transaction, or their currently property, affected by an easement during their lifetime. Unlike their counterparts, conservation easements have gained positive momentum in the past several years. Land owners are seeking out entities who would be interested in placing an easement on their property. Ranchers can retrieve up to three quarters of the value of the land in a tax credit – which could mean millions of dollars.

While sellers of land with an easement attached are educated on the terms and conditions, buyers are sometimes wary. For real estate brokers like Michael Kreig, it can be an uphill battle to show buyers than the land still holds its value. Many conservation easements have broad enough terms that it won’t restrict a future owner from doing what they want on the land, such as building an additional house. Kreig said it’s about educating buyers that the property still holds value.

“Let’s face it, there are some properties that are perfect for an easement,” said Kreig, broker for United Country Real Estate | Real Quest Realty in Grand Junction, Colo. “A lot of buyers even love the fact that a property has an easement. It’s all about educating them and it’s the seller’s and the buyers broker’s job to explain it. But I’ve never had a bad experience or a deal go south because of a conservation easement.”

Popularity of easements has increased so much that Kreig said many investors are also seeking out ranch land currently without an easement so they can purchase the land and seek out an entity who will place one. He said it’s changing the way people are investing in real estate.

“I have big clients who are literally looking for an avenue to save them on taxes,” said Kreig. “They don’t care much about the ranch itself, but the tax credit value is attracting them for investment purposes. For example, I did an easement on a big ranch that had gravel reserves worth $100 million, but it was only a $4 million property. The buyer ended up with a $100 million tax credit after he put an easement on it.”

If you’re a ranch owner looking into adding a conservation easement to your land, Kreig and Sanders offer some advice:
• Look around your area for entities that are able to hold an easement. Research is important and you could spend months doing it. Federal agencies, Rocky Mountain Elk Foundation, Ducks Unlimited, fish and game agencies and land trust companies are all paces you can look into.
• Have a good financial advisor that can break down all of the tax benefits and options. Every state is different.
• If you’re the landowner, you have the ability to customize the easement any way you want. Make sure you discuss your options because once you sign on the dotted line, it can’t be changed.
• Be patient. Easements can take up to a year to process and become finalized.

“Overall, don’t rely on the rumor mill to guide you,” said Sanders. “Conservation easements are a viable tool, but it’s not a one-size fits all. They are definitely a good thing, but you need to surround yourself with experts who are educated and experienced with easements. That could be your real estate agent, financial advisor, or local wildlife organization.”

Advice on Dealing with Conservation Easements

  • December 02, 2016
  • All Farm & Ranch News

Easements are popping up on land all over the United States. Buyers and sellers are becoming familiar with easements as the demand for land and the increased interest in conservation affects more and more real estate transactions. More specifically, conservation easements are on the rise with western ranchers.

Undeveloped land across the country is becoming scarce. Conservation easements are one way land owners and investors are not only protecting the land, but increasing the value of their investments. Easements, defined by law, is a right held by one person or entity to make use of land or property of another for a limited purpose. In states like Montana and Colorado, conservation easements play a part in nearly 40 percent of ranch land transactions. Ranch owners are selling rights to a portion of their land to an outside entity, sometimes for a hefty price, for conservation purposes. Many times, entities like Ducks Unlimited or Rocky Mountain Elk Foundation will purchase ranch land to ensure healthy habitats for wildlife.

“Right now the most common in Montana are no plow and no drainage easements,” said Bob Sanders, manager for the conservation program for Ducks Unlimited in Montana. “If you’re a rancher, you don’t want to plow anyway and you don’t want to drain because that’s a water source for your cattle. If you get an easement, you could be getting a big payment that is significantly more than what you paid for the ranch to begin with.”

The word easements is a common term in the real estate world. Whether utility, conservation or other type, consumers will have a real estate transaction, or their currently property, affected by an easement during their lifetime. Unlike their counterparts, conservation easements have gained positive momentum in the past several years. Land owners are seeking out entities who would be interested in placing an easement on their property. Ranchers can retrieve up to three quarters of the value of the land in a tax credit – which could mean millions of dollars.

While sellers of land with an easement attached are educated on the terms and conditions, buyers are sometimes wary. For real estate brokers like Michael Kreig, it can be an uphill battle to show buyers than the land still holds its value. Many conservation easements have broad enough terms that it won’t restrict a future owner from doing what they want on the land, such as building an additional house. Kreig said it’s about educating buyers that the property still holds value.

“Let’s face it, there are some properties that are perfect for an easement,” said Kreig, broker for United Country Real Estate | Real Quest Realty in Grand Junction, Colo. “A lot of buyers even love the fact that a property has an easement. It’s all about educating them and it’s the seller’s and the buyers broker’s job to explain it. But I’ve never had a bad experience or a deal go south because of a conservation easement.”

Popularity of easements has increased so much that Kreig said many investors are also seeking out ranch land currently without an easement so they can purchase the land and seek out an entity who will place one. He said it’s changing the way people are investing in real estate.

“I have big clients who are literally looking for an avenue to save them on taxes,” said Kreig. “They don’t care much about the ranch itself, but the tax credit value is attracting them for investment purposes. For example, I did an easement on a big ranch that had gravel reserves worth $100 million, but it was only a $4 million property. The buyer ended up with a $100 million tax credit after he put an easement on it.”

If you’re a ranch owner looking into adding a conservation easement to your land, Kreig and Sanders offer some advice:
• Look around your area for entities that are able to hold an easement. Research is important and you could spend months doing it. Federal agencies, Rocky Mountain Elk Foundation, Ducks Unlimited, fish and game agencies and land trust companies are all paces you can look into.
• Have a good financial advisor that can break down all of the tax benefits and options. Every state is different.
• If you’re the landowner, you have the ability to customize the easement any way you want. Make sure you discuss your options because once you sign on the dotted line, it can’t be changed.
• Be patient. Easements can take up to a year to process and become finalized.

“Overall, don’t rely on the rumor mill to guide you,” said Sanders. “Conservation easements are a viable tool, but it’s not a one-size fits all. They are definitely a good thing, but you need to surround yourself with experts who are educated and experienced with easements. That could be your real estate agent, financial advisor, or local wildlife organization.”