Questions & Answers
About Conservation Easements

What is a Conservation Easement?

A conservation easementis a legal agreement between a landowner and a land trust or government agency that permanently limits uses of the land in order to protect its conservation values. It allows you to continue to own and use your land and to sell it or pass it on to heirs.

The conservation easement provides a practical, legally effective means for a private landowner to protect forever the significant features of a property, or a portion of a property, while retaining private ownership. By defining and removing particular rights from the ownership of a parcel of land, the conservation easement creates permanent safeguards against uses of the land that could damage or destroy its ecological, scenic, recreational or resource values.

Each conservation easement is written specifically to address the needs and desires of the owner, the natural characteristics of the land, and the conservation objectives of the protecting organization. Conservation easements are most often donated to non-profit land conservancy organizations such as Maui Coastal Land Trust, or to a governmental agency. The holder of a conservation easement is obligated to safeguard its conditions in perpetuity.

What are a landowners property rights under conservation easements?

Every landowner is the holder of certain rights related to the use of land and its resources. Historically, some of these rights - such as mineral and timber rights - have been used, taxed, or transferred separately from outright ownership. Road and utility easements also are examples of modifications of the rights of exclusive ownership. A conservation easement arises out of this principle of separating and modifying land ownership rights. A conservation easement is created by a landowner (the "grantor") who desires to transfer certain rights to a conservation organization ("the grantee"), under an agreement which prohibits the grantee's exercise of those rights. Working cooperatively, the landowner and the grantee identify appropriate uses for the land and detail activities which should be prohibited. For example, a landowner may transfer the right to use a property for residential development to the grantee. The grantee organization then holds that right, but is prohibited by the terms of the conservation easement from ever using it. Thus, it is assured that no future owner will have the right to use the property for residential development. Conservation easements are perpetual, restricting future land uses regardless of who may own the land in the future.

Land subject to a conservation easement is still privately owned and managed. All rights of ownership which have not been transferred to a land trust may be exercised by the current owner. For example, a landowner may transfer the rights to develop a property for commercial, industrial, or multi-residential purposes while retaining rights to use the land for farming, harvesting of timber, or for the owner's personal residence.

Who accepts or holds conservation easements?

Under Hawai`i State laws, a conservation easement may be held by a non-profit nature conservancy corporation or by a federal, state, or local government. Maui Coastal Land Trust, which was incorporated by local residents in 2001, meets all of the qualifications of these laws as well as those imposed by federal law to qualify as a tax-exempt charitable institution under section 501(c)3 of the Internal Revenue Code.

Does a conservation easement grant public access to land?

No. Only the property owner specifies public access as a permitted use of the land. A landowner may allow limited access for educational or scientific purposes, but public access is not required by Maui Coastal Land Trust as a condition of accepting a conservation easement. However, the Land Trust is obligated to arrange an annual visit to the site by its representatives) to assure compliance with the terms of the conservation easement.

Does a conservation easement restrict a landowner's ability to sell or bequeath land in the future?

No. Land protected by a conservation easement may be sold, bequeathed or otherwise transferred at any time. Transfer of ownership, however, will not affect the integrity or enforceability of the easement. Restrictions defined in the recorded conservation easement run with the title to the property forever, providing landowners effective means of perpetuating their caring stewardship.

Does a conservation easement always prohibit all development or subdivision?

No. An easement might apply only to certain portions of a property, preserving open or wooded areas, for example, while permitting development of the remainder. Alternatively, ownership of the portion protected by the conservation easement might be divided for purposes of limited or cluster development if deemed appropriate by the granting landowner and the land trust.

What are the financial benefits of donating a conservation easement?

INCOME TAXES: Potential federal income tax benefits vary with the particulars of each conservation easement. To qualify as a charitable gift, which may be deductible for federal income tax purposes, donation of development rights through a conservation easement must be granted in perpetuity to a qualified conservation organization -- such as Maui Coastal Land Trust. The value of the gift, determined by a formal appraisal, is the difference between the fair market value of the property before and after donation of the conservation easement. To be deductible, an easement must serve conservation purposes, by preserving natural habitat, historic sites, unique scenic landscapes, wildlife corridors or connections to other protected parcels, areas of concern for public education or recreation, or open spaces in the vicinity of intense land development. In general, the maximum allowable deductions arise from conservation easements donated over large tracts of open space in areas where development pressures are intense.

ESTATE TAXES: State and federal inheritance taxes on unrestricted land are often so high that heirs are forced to sell some or all of the land just to pay these taxes. Because a conservation easement reduces the market value of the property by reducing its development potential, inheritance taxes are also reduced. A conservation easement can enable heirs to retain property that would otherwise have to be sold.

GIFT TAXES: When a gift of land is made to a family member or other person, it is subject to federal gift taxes if its value exceeds the maximum tax-free amount. A reduction in the value of the property through a conservation easement may allow a landowner to give more land in any one year without creating a gift tax obligation, or it may help reduce the amount of gift tax owed.

PROPERTY TAXES: Under Hawai`i property tax law, land subject to a conservation easement can qualify for a reduction in assessed valuation.

What if my property is mortgaged?

In order for a donated conservation easement to qualify for an income tax deduction the landowner must acquire a mortgage subordination agreement from the mortgage holder, usually a bank. With this document, the mortgage holder agrees to follow the terms of the conservation easement in the event of foreclosure.

Can a conservation easement protecting open space in a real estate development qualify for an income tax deduction?

Maybe. No tax deduction will be allowed if the donation is made under compulsion, or in exchange for a benefit that the developer expects to receive. Also, charitable income tax deductions fro real estate developers are generally limited to the tax basis of the property. Landowners contemplating protection options should consult the land trust and an experienced attorney well in advance of planning a development on the property.

How are conservation easements enforced?

At the time a conservation easement is created, plant and wildlife inventories are added to photographic information to provide a baseline for future monitoring. Annual visits are arranged by the Land Trust in order to determine that the terms and conditions of the conservation easement are being honoured. If a violation is identified, the landowner is promptly notified, in accordance with procedures outlined in the conservation easement, and steps must be taken to repair any damage. The easement also defines the process to be followed to resolve disputes regarding an alleged violation of the easement. If necessary, the Land Trust will take legal action to fulfil its conservation easement obligations.

A STEWARDSHIP FUND is created in conjunction with the acceptance of each conservation easement. It is used to cover future expenses of monitoring, enforcing compliance with easement restrictions, and underwriting legal defence of the easement protections. The amount required for a stewardship fund is proportional to the responsibility being assigned to the Land Trust under the terms of the conservation easement and is typically provided as a tax-deductible gift by the easement donor..

Can conservation easements be changed or revoked?

Because conservation easements qualifying under IRS regulations are designed to be permanent, landowners should assume that it will not be possible to revoke an easement. However, in rare circumstances, conservation easements can be amended if:

• both the easement holder and the landowner agree to the terms of the change; and
• the IRS recognized "conservation purpose" of the conservation easement is not affected

Is a conservation easement appropriate for every landowner?

No. Conservation easements are designed to meet the site-specific needs of the individual landowner and land trust. They may not, however, be appropriate for every situation. Landowners considering an easement should consult with family members, professional tax and legal advisors, and a land trust representative to determine whether this tool will help accomplish one's long-term conservation and economic goals.

The Land Trust Advantage. . .

While any landowner may attach conservation restrictions to a property title before transferring it, that person or their heirs are the only ones who can legally defend those restrictions. An owner who donates a conservation easement to Maui Coastal Land Trust can be assured that compliance with the identified protective goals will be annually reviewed by a third party with legal standing, and that future owners will not alter the land contrary to the donor's wishes.