Establishing a conservation easement involves several steps from start to finish, including the following:
Producing a baseline documentation report
Completing a title search
Surveying the area to be protected under easement
Drafting the terms of the easement
Obtaining a qualified appraisal of the easement’s value
Subordination of mortgage interests
Completing an environmental assessment of the property
Endowing the easement’s enforcement
Baseline Documentation In order for you to claim a charitable tax deduction for your easement, the IRS requires documentation of the property’s conservation values. This “baseline documentation” provides a description of the property and its important features. The baseline documentation report typically includes: photographs and map of the parcel, a survey, aerial photographs, topographic and soils information, biotic information, a conservation plan, and a management plan for the property’s natural resources, if applicable. Radnor Conservancy will help you to make arrangements for this work to be done by qualified personnel, if you decide to pursue an easement on your land.
Title search A title search will need to be undertaken to ensure that no liens, or other encumbrances will impede execution of the easement agreement. Survey Pennsylvania law requires a “metes and bounds” description of the eased area. Unless there is an existing survey document available clearly identifying the boundaries of the property, you will need to have a survey completed. A survey will also be needed in cases where only a portion of the property will be under easement.
Drafting the easement document The terms of your conservation easement will reflect your individual priorities for your property, within constraints imposed by the IRS and Radnor Conservancy. These terms will be negotiated with you, tailored to the unique features of your property and your individual concerns. The agreement will be drafted by an attorney hired by Radnor Conservancy and should be reviewed by your lawyer as well.
Qualified appraisal If you intend to claim a tax deduction for the donation of your conservation easement, the IRS will require documentation of the value of the easement in the form of a “qualified appraisal.” This document must include an assessment of the easement’s fair market value, a description of the property, explanation of the valuation method used, as well as providing information on the appraiser’s qualifications and a description of the fee arrangement between you, as the easement donor, and the appraiser. Treasury regulations require that the appraisal be made no earlier than sixty days before the date of the donation. You are responsible for hiring the appraiser; Radnor Conservancy cannot provide you with financial advice nor guarantees on the value of your easement and its corresponding tax deduction.
Environmental Assessment Radnor Conservancy may require that an environmental assessment of your land be completed prior to completing our easement negotiations with you. This step will be requested if we feel it is in our best interests to protect us from future environmental and legal issues. As the easement process moves forward, we will apprise you of our intent to request an environmental assessment, if we feel circumstances warrant this step.
Mortgage Subordination If there is a mortgage on your property, it is possible that the conservation easement could be extinguished by the mortgage holder if a foreclosure were to occur. Consequently, it is an IRS requirement for tax deductibility that the mortgage be subordinated by having the mortgage holder record an agreement which subordinates its rights in the property to the rights of the easement holder.
Stewardship Fund To enable Radnor Conservancy to carry out its legal obligations with respect to ongoing monitoring and enforcement, each easement donor is expected to provide an endowment which will be used to cover future costs of stewardship of the easement. In scrutinizing your request for a tax deduction for your easement, the IRS will examine whether the receiving party (Radnor Conservancy) has adequate resources for future enforcement of the terms of the easement. The standard practice for addressing this requirement is for stewardship moneys to be dedicated at the time the easement is created. Consequently, we will request each donor to provide a monetary stewardship fund donation at the time that their easement is established. The money that you provide for the stewardship of your easement is a tax-deductible expense.