Conservation Easements, a Benefit to the Environment and the Landowner
This article explores the uses of conservation easements in Florida and the benefit not only to the environment, but also the advantages to the landowner.
Methods for Preserving Property for Conservation Purposes
A conservation easement is a perpetual interest1 in land provided by a landowner to a governmental entity or nongovernment conservation organization. Conservation easements may only be held by governmental or charitable entities that have the conservation purposes described in F.S. §704.06(3).
In order for a governmental entity or charitable organization to accept the conservation easement, F.S. §704.06 (2014), specifies that the conservation easement must serve the purpose of:
[R]etaining land or water areas predominantly in their natural, scenic, open, agricultural, or wooded condition; retaining such areas as suitable habitat for fish, plants, or wildlife; retaining the structural integrity or physical appearance of sites or properties of historical, architectural, archaeological, or cultural significance and maintaining existing land uses.2
Most people regard a conservation easement as only a method to preserve property in its natural state and as “suitable habitat for fish, plants, or wildlife.”3 However, as indicated in this statutory language, conservation easements may also be utilized to maintain the existing land use or retain land or water areas in an open, agricultural, or wooded condition, or even to protect sites that have “historical, architectural, archaeological or cultural significance.”4
Land uses that are maintained must be limited to exclude any or all of the following:
(a) Construction or placing of buildings, roads, signs, billboards or other advertising, utilities, or other structures on or above the ground.
(b) Dumping or placing of soil or other substance or material as landfill or dumping or placing of trash, waste, or unsightly or offensive materials.
(c) Removal or destruction of trees, shrubs, or other vegetation.
(d) Excavation, dredging, or removal of loam, peat, gravel, soil, rock, or other material substance in such manner as to affect the surface.
(e) Surface use except for purposes that permit the land or water area to remain predominantly in its natural condition.
(f) Activities detrimental to drainage, flood control, water conservation, erosion control, soil conservation, or fish and wildlife habitat preservation;
(g) Acts or uses detrimental to such retention of land or water areas.
(h) Acts or uses detrimental to the preservation of the structural integrity or physical appearance of sites or properties of historical, architectural, archaeological, or cultural significance.5
An important aspect of a conservation easement is that while the instrument is most commonly granted to a governmental entity, public access is not included. Although not necessary, most conservation easement instruments still specifically state that no rights are granted to the public in general and no public access is allowed.
There are several methods authorized by F.S. §704.06(2) to preserve land in perpetuity for conservation purposes. The most common method is the traditional conservation easement. Florida statutes also allows conservation easements to be created through less common methods, such as restrictive covenants, conditions in a deed, or restrictive language in an order of taking.6 These methods will be referenced generically as conservation easements throughout this article.
Previously, plat restrictions were an additional conservation method available. However, these were not specifically mentioned in Florida statutes. This involved the placement of specific language on the plat reflecting the use limitations found in F.S. §704.06(1)(a)-(h).7
The most common use of conservation easements in Florida is to satisfy regulatory requirements pursuant to the Florida Water Resources Protection Act, set forth in Part IV of F.S. Ch. 373, and the rules promulgated thereunder by the Florida Department of Environmental Protection (DEP) and the state’s five water management districts (WMD). F.S. §373.413(1) provides that DEP or the WMDs “may require such permits and impose such reasonable conditions as are necessary to assure that the construction or alteration of any stormwater management system, dam, impoundment, reservoir, appurtenant work, or works” will satisfy the requirements of Part IV and will not be harmful to the water resources of the WMDs. Pursuant to the authority granted in Part IV, DEP, in coordination with the WMDs, promulgated the Statewide Environmental Resource Permit rules found in F.A.C. Ch. 62-330. More specifically, §10.3.8, Environmental Resource Applicants Handbook, Vol. I (AHI), containing provisions on conservation easements, was incorporated by reference into F.A.C.R. 62-330.014(4).
In seeking a permit, applicants should first endeavor to reduce or eliminate impacts to wetlands and other surface waters.8 If impacts remain, F.S. §373.414(1)(b) requires DEP and the WMDs, in considering whether to grant a permit, to consider measures proposed by the permit applicant to mitigate the adverse effect of the proposed regulated activity. One such measure includes onsite or off-site mitigation, utilizing a conservation easement. Conservation easements may also be appropriate to prevent secondary impacts to wetlands and other surface waters.9
Florida Statutes and AHI provide that conservation easements shall be granted in perpetuity. Additionally, AHI provides that conservation easements shall be granted without encumbrances, unless the encumbrances do not adversely affect the ecological viability of the mitigation. All liens and mortgages shall be released or subordinated to the conservation easement.10 The conservation easements must be consistent with F.S. §704.06.
Prior to October 2013, only the South Florida Water Management District had adopted conservation easement forms into its rules. Now, however, standard conservation forms are adopted statewide in F.A.C. Ch. 62-330. Forms are adopted to address a multitude of situations including the need for third-party beneficiary rights; the retention of rights to make passive recreational uses or riparian uses; and a specific form for local governments and the Army Corp of Engineers’ third party rights.11 Forms are also adopted for declarations of restrictive covenants.12 The use of these standard forms constitutes consistency with F.S. §704.06.
The adoption of the forms as rules is advantageous to permit applicants. Time is saved because the standard forms are utilized and it is not necessary to individually negotiate each conservation easement. A permit applicant is required to utilize a standard form unless the permit applicant demonstrates that project-specific conditions necessitate deviation from language of the accepted forms and the alternative language meets the intent of F.S. §704.06.13
Preservation Requirements for Permits Issued by the Army Corp of Engineers
The Army Corps of Engineers (Corps), DEP, and the WMDs coordinate on the permitting, compliance, and enforcement pertaining to activities that affect waters of the U.S. under the jurisdiction of the Corps and wetlands, and other surface waters under the jurisdiction of DEP and the WMDs. The Corps permits are issued pursuant to §404 of the Clean Water Act; §10 of the Rivers and Harbors Act of 1899; or §103 of the Marine Protection, Research, and Sanctuaries Act.
The Corps generally takes the position that it may not hold conservation easements in its name. Many times, the areas to be preserved under a DEP or WMD permit are the same areas as will be preserved pursuant to a Corps’ permit. Pursuant to 33 C.F.R. §332.7(a)(1), the Corps may allow the WMD or DEP conservation easement to satisfy its requirements. The specifications for a conservation easement to meet ACOE requirements are set forth in the recently adopted operating agreement among the ACOE, the WMDs, and DEP.
If the Corps agrees to allow the conservation easement to satisfy its permit requirements, the Corps will require the grantor of the conservation easement to make the Corps a third-party beneficiary of the easement, with the right to enforce the terms and conditions of the easement. The easement must also provide that the Corps be given notice, of usually at least 60 days, prior to an action to amend, alter, release, or revoke the conservation easement. The Corps, DEP, and WMDs worked together to develop a standard third party beneficiary conservation easement for the Corps. This standard form, which meets the requirements of all these agencies, is located at F.A.C. R. 62-301(13).
This is very beneficial to the permit applicant because it avoids the necessity of duplicative state and federal preservation to address regulatory requirements. It is beneficial to the environment because waters of the U.S., wetlands, and other surface waters under the jurisdiction of DEP and the WMDs can be protected from development in perpetuity.
Leadership in Energy and Environmental Design Certification Credits
Developers who are interested in promoting the environmental benefits of a project may look to the U.S. Green Building Counsel’s Leadership in Energy and Environmental Design (LEED) rating systems as a method to obtain public acknowledgement and certification for their green building practices. The LEED Green Building Rating System is a point-based system that offers recognition for conservation easements. Points are potentially available under the sustainable site categories §§5.1 and 5.2, pertaining to the protection and restoration of habitat or the maximization of open space. To qualify for credit for protecting habitat, 50 percent of the site, excluding the building footprint, or 20 percent of the total site, including the building footprint, whichever is greater, must be preserved. LEED also offers the option for credit for donating off-site property in perpetuity, equal to 60 percent of the developed area, including the building footprint, to a qualified land trust.14
If the conservation easement is provided by a developer as part of a residential development, some land is removed from production. However, the lots adjacent to the conservation areas can generally be sold at a premium and the potential buyer has the assurance that the property will be preserved in perpetuity. The conservation easement is generally considered a common area and dedicated by the developer to the homeowner’s association.
Landowners may receive a federal income tax deduction if their conservation easement qualifies as a gift. The IRS may allow the deduction if the easement satisfies certain requirements, including that it is perpetual and donated exclusively for conservation purposes. The IRS treats gifts of qualifying conservation easements like other gifts of land to qualified recipients. Therefore, taxpayers may be able to deduct the present value of a qualified easement gift to a qualified entity as a charitable deduction from income. In order to determine the value of a donation, a qualified appraiser will generally determine the property’s value before and immediately after the grant of the easement as a gift.15
For state ad valorem taxes, F.S. §196.26, which became effective in January 2010,16 provides a property tax exemption for real property dedicated in perpetuity for conservation purposes.17 F.S. §196.26(2) states: “Land that is dedicated in perpetuity for conservation purposes and that is used exclusively for conservation purposes is exempt from ad valorem taxation.” According to the statute, land that is “dedicated in perpetuity” is “land encumbered by an irrevocable, perpetual conservation easement.”
Conservation purposes is limited to the conservation purposes set forth in federal law in 26 U.S.C. §170(h)(4)(A)(i)-(iii).18
The exclusive use of the land for conservation purposes does not prevent the owner from receiving income from activities that are consistent with a management plan when the income is used to implement, maintain, and manage the property pursuant to the management plan.19 Also, utilization of the land for commercial purposes does not prevent the land from being exempt from ad valorem taxation. However, the exemption will then be limited to 50 percent of the assessed value of the land.20
Generally, land that is less than 40 contiguous acres will not qualify for this exemption. However, the exemption may be available if, in addition to meeting the other statutory requirements, the property has a management plan with a designated manager and the Acquisition and Restoration Council determines the conservation use will fulfill a significant public benefit. The factors utilized by the Acquisition and Restoration Council include documentation that the land:
“contains a natural sinkhole or spring providing a water recharge or production function; contains a unique geological feature; provides nursery habitat for marine and estuarine species;” protects or restores vulnerable coastal areas or preserves natural shoreline habitat; or retains natural open space in a densely built area.21
Conservation easements can provide a significant benefit to the environment. Additionally, they are beneficial because they may help a developer satisfy permit requirements, add value to adjoining land, create LEED credits, and reap the benefits of tax incentives.
1 To qualify as a conservation easement under Florida Statutes, the interest must be perpetual. However, federal government programs, such as the Wetlands Reserve Program, coordinated by the USDA Natural Resources Conservation Service, may be of a lesser duration.
2 Fla. Stat. §704.06(1) (2014).
3 Fla. Stat. §704.06(1) (2014).
4 Fla. Stat. §704.06(1) (2014).
5 Fla. Stat. §704.06(a)-(h) (2014).
6 See Fla. Stat. §704.06(2) (2014).
7 This method was previously allowed in §4.3.8, South Florida Water Management District Basis of Review for Environmental Resource Permit Applications (BOR), incorporated by reference into F.A.C.R. 40E-4.091. This method is no longer utilized in the South Florida Water Management District or provided for in Statewide Environmental Resource Permit rules.
8 AHI, §10.2.1.
9 See AHI, §10.2.7.
10 AHI, §10.3.8.
11 See F.A.C.R. 62-330.301(6)(a)-(f).
12 See F.A.C.R. 2-330.301(6)(g) and (h).
13 F.A.C.R. 62-330.301(6).
14 See LEED 2009 for New Construction and Major Renovations Rating System with Alternative Compliance Paths for Projects Outside the U.S., USGBC Member Approved (Nov. 2008).
15 T his article is not intended to provide tax advice.
16 Florida H.B. 7157; see also Fla. Stat. §193.501.
17 Form DR-418C.
18 2 6 U.S.C. §170(h)(4)(A)(i)-(iii) states that “conservation purpose” means “the preservation of land areas for outdoor recreation by, or the education of, the general public, the protection of a relatively natural habitat of fish, wildlife, or plants, or similar ecosystem, the preservation of open space (including farmland and forest land when the preservation is for the scenic enjoyment of the general public, or pursuant to a clearly delineated federal, state, or local government conservation policy, and will yield a significant public benefit; or the preservation of an historically important land area or certified historic structure.”
19 Fla. Stat. §196.26(2).
20 Fla. Stat. §196.26(3).
21 Fla. Stat. §196.26(4).
Susan Roeder Martin is a senior practice expert attorney with the South Florida Water Management District. She graduated with honors from the University of Florida Levin College of Law and received her bachelor of science degree from Florida Atlantic University. She is board certified in state and federal government and administrative practice and is accredited by the Green Building Certification Institute as a LEED professional. She is also a Supreme Court certified mediator and a frequent speaker throughout the state on environmental resource issues.
This column is submitted on behalf of the Environmental and Land Use Law Section, Kelly Kathleen Samek, chair, and Susan Martin, editor.