Transfer of Title
with Conditions Attached
A conservation easement protects the property against the destruction of natural resources or open space by setting limitations on the use of the land. Conservation easements usually are permanent and apply to all future landowners. Easements are either granted or sold to a qualified public or private organization that will be responsible for the long-term enforcement of the easement prior to the transfer of property.
By restricting some of the future uses allowed on the property, you may reduce the value of the land on the open market and should expect a lower price for the property if sold. However, the loss may be deducted as a charitable deduction for income tax purposes. If the land is donated to a qualified charitable organization or government agency, you may still deduct the value of the land, after the easement, as a charitable contribution. (See Land Donations page.)
The prior granting of a conservation easement provides an excellent way to control the future use of the land. However, other types of limiting conditions should be considered when land is being transferred to a conservation organization or agency. In these situations, an easement may not be necessary since groups are experienced in managing and protecting land.
Restrictions guiding the future use of your property may be placed in the deed at the time the property is transferred. Deed restrictions vary from conservation easements as there usually is not a third party assuming the monitoring and enforcement responsibility. Deed restrictions may be appropriate if the land is being transferred to another landowner or to a landholding agency.
One method to ensure that deed restrictions are enforced after the property is transferred is to transfer the land to a conservation organization or agency, then have them include the deed restrictions before they sell. The conservation agency then holds the right to enforce the covenants, not you. A conservation agency is better able to enforce the restrictions since a major focus of such an organization is to manage and protect environmentally valuable land. Make sure the conservation group or agency is willing to insert and enforce the restrictions in the deed prior to selling the land to them.
Deed restrictions will usually affect the market value of the land if they significantly limit development potential. The presence of restrictions may lower the price if the property is sold or lower the value of the gift if the land is donated to a conservation agency.
The IRS does not allow you to claim the loss in value resulting from deed restrictions as a charitable deduction. This is an additional reason to donate the land to a conservation agency and have the agency insert the deed restrictions. By doing so, you can claim the entire fair market value of the land as a charitable contribution.
Conditional Transfers and Reverter Clauses
A conditional transfer gives more force to a deed restriction. If the restrictions entered in the deed are violated, title to the land will revert automatically to the original landowner and heirs or be transferred to a conservation agency depending on who would be in the best position to protect the land and enforce the restrictions. Thus the penalty in this situation is much greater; the owner can lose the title to his or her land if the restrictions are not adhered to.
The loss in value to your land resulting from conditional transfers may allow you to claim the transfers as a charitable deduction if they are donated to a qualified organization or agency. As stated previously, restrictions may reduce the value of a gift, therefore you may want to transfer your land prior to placing restrictions on it, to a qualified agency or organization which will then place restrictions on the land. The result is a maximum income tax deduction for you and long-term protection of the land.