CONSERVATION EASEMENTS AND DEVELOPMENT

by Melissa J. Cooney of Zukowski, Rogers, Flood & McArdle

Private ownership of land has long been a cherished right of Americans, which right carries with it the ability to lease, sell, develop, harvest or otherwise use the land as the owner wishes, restricted only by local rules and ordinances. For several decades, landowners have also had the right to grant an easement to another entity, usually a municipality or conservation agency, for the purpose of conserving the property for future generations. The easement runs with the land, making it binding on all successive owners of record. The potential financial benefits to the donor by granting such an easement are threefold: 1) under Section 170(h) of the Internal Revenue Code, the grantor landowner may qualify for a federal charitable income tax deduction, if the grantee is a non-profit or public agency qualified to hold such easements, if allowed by State law (as in Illinois), and if conveyed in perpetuity and solely for conservation purposes; 2) under Internal Revenue Code 2031(c), the donor of the easement might qualify for an estate tax exclusion for the portion of the property which is the subject of the easement; 3) the landowner may also qualify for property tax savings.

Illinois permits conservation easements under the Real Property Conservation Rights Act (765 ILCS 120/0.01 et seq.), if the land to be preserved includes significant physical and visual characteristics with architectural, historical, or cultural significance, or land or water areas predominantly in their natural scenic, open or wooded condition, or suitable habitats for fish, plants, or wildlife, or the integrity of archaeological sites and artifacts being excavated. The statute further provides requirements for recording, restrictions on usage of the property, and general conveyance of rights.

Conservation easements were initially used by landowners seeking not primarily to obtain tax protection, but rather to preserve parcels of wetlands, forests, farmlands, scenic river sites, and other natural areas for future generations and to ensure that development did not disrupt or otherwise destroy the areas for which protection was sought. Often the easements covered a few acres of land which were uniquely suited to preservation. The landowners had an appraisal completed of the area sought to be preserved; the not-for- profit agency viewed the site to determine its suitability for preservation and determine a baseline for management of the property; an easement was prepared, and if required, the landowner donated not only the property, but an endowment fund for use by the agency to monitor and care for the property. The landowner continued to hold title to the property; the agency monitored the easement only to ensure its protection from violation of the easement provisions. But while single landowners continue to use this vehicle to protect portions of their property, the nature of donations has changed in the past few years.

The Land Conservancy of McHenry County was established in 1991. From its inception to 2005, through easements and purchases, it has protected 285 acres of private land. According to Lisa Haderlein, the Conservancy’s Executive Director, that amount reached 700 acres by the end of 2006 and is poised to double again in 2007.

The reasons for the renewed interest in land preservation with the Land Conservancy and other preservation groups is not only a continued desire by land owners to protect natural, agricultural, scenic, or open spaces, but also by a new desire of municipalities to do the same, while still allowing development within their borders. Many cities, towns, and villages in northern Illinois are now partnering with land trust organizations to ensure that competing needs are met when developers come calling with plans for large projects. And developers are the beneficiaries of this partnership as well.

A developer may seek to build hundreds of homes on property previously used for open space or farming, or which contains tree stands, fens, or maybe a water course. The municipality, seeing the need for the housing the project will deliver, also sees a need for preserving a portion of the land in its natural state. The municipality may require the developer to include open space in the project, avoiding taking down trees, dredging the wetland, or disrupting native plantings, and may suggest that the developer partner with a conservation agency so the designated area will remain in its natural state in perpetuity. The developer and not-for-profit agency, qualified to hold the easement, negotiate an agreement for the natural area to be preserved, assuming there is land owned by the developer which meets the criteria for preservation. The municipality has its open space, the agency has preserved additional land, the homeowners have natural areas to enjoy, and the developer gets a valuable marketing tool for its new project.

Examples of this municipal-conservation agency-developer alliance are becoming more common in northern Illinois. In recent years, The Conservation Foundation in DuPage County partnered with Pulte Homes and the Village of Carpentersville in Winchester Glen on Huntley Road; the Land Conservancy of McHenry County has partnered with the City of Woodstock and the developers of Prairie Ridge, Country Ridge and Spring Ridge, Apple Creek on Route 47, and Riverwoods. In addition, the Land Conservancy has partnered with the Village of Johnsburg in Remington Grove and Dutch Creek developments; the Village of Bull Valley in Colonel Holcomb Estates, Ridgestone, and the Meadowview Development, Lake in the Hills on the Milne property, and Village of Lakewood in Woodland Hills. In some of these projects the Army Corps of Engineers was an additional partner as the permitting agency.

These partnerships are sometimes difficult but lessons have been learned along the way. For example, developers eventually turn their property over to homeowners’ associations and often the ability of the conservation agency to collect funds to monitor the easement area becomes complicated or impossible. To avoid these situations, back up special service areas are prepared, giving the municipality a mechanism to collect the fees in the event of a homeowners’ association, a developer’s or a subsequent landowner’s failure to comply with the terms of the easement. And, conservation agencies have become more attuned to the need to educate the homeowners as to their responsibility to keep the easement area a place for all to enjoy without interference or encroachment.

Many municipalities in Cook County hold the easements in their names, rather than having a third-party conservation agency involved; however, smaller governmental units have neither the time nor expertise to monitor these easement areas. Accepting these easements carries with it a major responsibility to monitor the property, to enforce the terms of the easement, to establish a baseline report against which monitoring efforts are measured, to keep the property free from encroachment, to monitor water quality if applicable, and generally to be stewards of the land and keep it is as it was when entrusted to their care.

There are no cookie cutter easements. Each parcel of land is unique, as are the needs of each municipality and the vision of the developer. But conservation easements are a wave of the future, and present a unique opportunity for all parties to benefit: the municipality gets its development, the homeowners get a unique location in which to live with open space and vistas, and the public keeps a unique space forever free of development.

[Note: ZRFM represents the Land Conservancy of McHenry County in all of its land acquisitions and the preparation of its conservation easements. ZRFM also represents the Land Conservancy as its representative on a committee of Northern Illinois land trusts and conservation agencies meeting quarterly in Chicago.]