The following summary of steps involved in conveying a conservation easement is intended as an overview. Contact Montezuma Land Conservancy at (970) 565-1664 for more information.
- Talk with qualified consultants and conservation organizations. To determine whether a conservation easement is a good fit for you and your property, we encourage landowners to seek the advice of their attorneys and financial advisors. MLC can provide a general overview of what it’s like to live with an easement on your property and how the process works. If you decide an easement is right for you, select a qualified land trust to draft, hold, and steward the conservation easement. Note: Conservation Easement holders must be Certified by the State of Colorado in order for a Colorado State Tax Credit to be claimed.
- Determine whether the land has qualifying conservation values. A property must posses significant conservation qualities to meet the purpose of a conservation easement. MLC staff and other experts can help you determine if your property qualifies.
- Negotiate the conservation easement and seek legal review/advice. A conservation easement is legally binding and restricts some uses of the land forever. MLC uses a model conservation easement that can be modified to protect specific conservation values and to meet the needs of individual landowners. A landowner should make sure his or her conservation easement will allow for future needs while meeting conservation goals. You may need professional financial advice if you have complex estate or income tax issues. MLC strongly recommends you seek a professional familiar with the state and federal tax laws pertaining to conservation easements and their drafting.
- Obtain a qualified appraisal. A “qualified” conservation easement appraisal, completed by a “qualified” appraiser, is required in order to substantiate income tax deductions and credits. MLC plays no role in determining the value of the easement a landowner conveys. Note: A conservation easement appraisal is more complicated than an ordinary real estate appraisal, and it is very important to choose an experienced appraiser who understands and works in accordance with the regulations for conservation easement appraisals. Poorly structured appraisal reports and/or overstated estimates of value can result in both rejection of tax benefit claims and penalties.When selecting an appraiser the landowner should ask about the appraiser’s experience in appraising conservation easements, his or her experience appraising easements locally and on similar properties, and his or her experience, if any, with the Internal Revenue Service in defending easement appraisals. While MLC does not recommend one appraiser over another, it can provide contact information for independent, experienced conservation easement appraisers in southwestern Colorado. Appraisals are costly; make sure you discuss fees in advance. MLC recommends you contact an appraiser early in the process if you are seriously considering an easement. They often have waiting lists.
- Obtain Title Report, Mineral Remoteness Letter and Survey if Needed Evidence of title, including encumbrances and exceptions, is required. If you do not own 100% of the minerals underlying your property it will be necessary to get a geology report analyzing the potential for the development of those minerals. If the geologist concludes, “the potential for the development of those minerals by any surface mining method is so remote as to be negligible,” the property is still eligible for a qualified conservation easement. Surveys may be necessary if there are boundary uncertainties or disputes. MLC will help you determine if a survey is necessary. Again, discuss fees in advance and ask what additional charges might occur.
- Obtain Mortgage Subordination. Because conservation easements carry forward with the land and not the landowner, banks must be willing to agree that should a property be foreclosed on, the conservation easement will remain in full force and effect. This step is often not a problem, but must be done at the time of the conveyance of the easement in order to claim a qualified charitable donation. A fee may be associated with this process. Again, obtaining legal advice is strongly advised.
- Document the conservation values and condition of the property. A baseline study is required to accompany every conservation easement. This study documents the condition of the property at the time of the easement, and is critical to protecting the grantee’s interests in perpetuity. Costs associated with developing baseline documentation include aerial photos, travel, inspection of the property, photography, mapping, and preparation time. The cost for baseline documentation can range from one to several thousand dollars depending on the complexity of the easement.
- Sign and record the conservation easement. The landowner (“Grantor”) signs the easement document to convey the easement, and the land trust (“Grantee”) signs to accept it. The document is then recorded in the official county real estate records.