A conservation easement is a legal agreement between two entities, but there are a number of others who play critical oversight or support roles. Understanding the role that each of these can and does play is vital to understanding the conservation easement tool and process.
When a landowner enters into a conservation agreement, they are said to “grant” a conservation easement – thus, they are the “grantor.” This term applies regardless of whether the grant of a CE was a donation, sale or some other kind of transaction.
The grantor is the landowner – i.e., they hold the legal title to the parcel of land in question, and have the right to assign interests in that land to others. They may be an individual, a commercial corporation, a group like a co-op or some other entity entitled to hold private land. The grantor continues to be the land manager throughout the term of the conservation easement.
In the conservation easement negotiation, the grantor is one of the two primary players. The motivations of the grantor are rarely singular or simple. Though the grantor enters into the conservation easement process with a goal to protect the conservation values of their property, they may have associated financial, succession, development approval or other goals.
The grantor may or may not initiate the conservation easement. In some cases they commence the process; in others they are approached by a qualified organization, offered the CE opportunity by a municipality, or are part of a collective effort or broader program.
Grantee (Qualified Organization)
When a landowner “grants” a conservation easement, the entity receiving the CE is the “grantee.” In the case of Alberta, eligible recipients of conservation easements are called ”Qualified Organizations,” and are generally a conservation charity (land trust/conservancy), a municipal government or a provincial government agency (for more information see Who can hold a conservation easement? and Are you a qualified organization?
The grantee is the other primary player in the conservation easement negotiation. Grantees – or Qualified Organizations – are eligible to receive the grant of a conservation easement because they represent the societal interest; they hold the conservation easement in trust for future generations. As such, they do not actually have a right to exercise the land interests they receive (for example, if the grantor gives up the opportunity to pursue some type of development, the grantee does not then have the right to pursue that development).
The role of the grantee is to hold and monitor the conservation easement on behalf of society and the conservation goals prescribed by the legislation, the Alberta Land Stewardship Act (see What does the law (ALSA) say? [Link: What does the law (ALSA) say?]). For the term of the conservation easement, the grantee will monitor and enforce the terms of the CE, working in conjunction with the grantor as the land manager.
For more information about conservation easement “grantees,” see:
- Who can hold a conservation easement?
- Are you a qualified organization?
Even in the case where a landowner (grantor) has full control of the property in question, there are generally implications of a conservation easement for others around them. Those others can play a significant role in supporting – or confounding – the successful grant and stewardship of a conservation easement.
The ones most affected tend to be family members or business partners who may have an existing or future stake in the land and in its conservation and use. Often, consideration of future generations is the principal reason for pursuing a conservation easement.
It is vital to begin discussions with these parties in the earliest stages to design a conservation easement that best meets everyone’s needs, current and future. As such, family and partners can pay a critical advisory role in the conservation easement negotiation process.
Other Interest Holders
Often, land being considered for a conservation easement has other interests registered on the title. The most common situations involve lending institutions with mortgages or industrial players with other types of easements or caveats.
At the very least, the landowner should notify each interest holder to ensure they understand the implications of the conservation easement. Generally these interests, having been registered first, are paramount to the conservation easement, but there is the potential for the “order” of interests to be changed.
For example, land being considered for a conservation easement may have a mortgage. This results in the lending institution having an interest in the property (i.e., a mortgage being registered on the title). In the unlikely event that a mortgage is foreclosed on, the conservation easement is at risk, having a lower priority on the title. In these cases, it is advisable to seek a mortgage postponement to ensure the conservation easement will survive the foreclosure. Most land trusts have a standard mortgage postponement request form.
Conservation easements are conceptually straightforward, but complex in implementation. Neither the Grantor (the landowner) nor the Grantee (the qualified organization) has all the expertise required to craft and enact a robust and effective conservation easement. Both will need to consult a variety of professional advisors; in some cases, each will need to consult their own advisor.
Advisors the parties will most likely seek to engage include:
Legal advisors – A qualified organization’s template conservation easement document is generally a starting point, as modifications can be made. Restrictions lists, baseline reports, and management plans also need to be created. All of these are best reviewed by legal counsel of both parties.
Financial advisors – Landowners generally already rely on the advice of financial advisors (including accountants, financial planners, succession and estate planners, investment advisors, etc.) who are familiar with their circumstances, and ideally look to them to review and clarify the financial implications of entering into a conservation easement.
Conservation Advisors – The basis of all future monitoring and stewardship is the Baseline Documentation Report or Baseline Report, a catalogue and assessment of the ecological, agricultural, and/or scenic values of the property. Some landowners may already have an inventory, but even in those cases, it is worthwhile to have professional assistance to compile the inventory, frame it in a conservation context and gather supporting maps, photos and data.
Appraisers – To understand the financial value of a conservation easement, an appraisal is required. The parties to the CE negotiation need to agree on a certified appraiser with experience and the ability to appraise conservation easements. The Ecological Gifts Program maintains a list of credentials that an appraiser must have for their appraisal to be accepted by the Appraisal Review Board, as well as a list of information that the appraisal itself must contain.
A conservation easement is fundamentally a private contract between two entities: the grantor and the grantee. However, the provincial government plays a number of critical roles at both the regulatory and operational levels.
First, conservation easements are enabled under the Alberta Land Stewardship Act (ALSA). As well as prescribing how the tool is applied in Alberta, this legislation identifies the provincial agencies that must be notified and gives the Minister the ability to terminate a conservation easement if it is in the public interest.
Second, provincial government agencies are “qualified organizations,” meaning they can receive and hold a grant of a conservation easement from a landowner.
With regard to conservation easements, local governments have a very limited regulatory role to play, but have increasingly become a significant player at the implementation level.
Landowners and non-municipal qualified organizations are required to notify the relevant municipality of their intent to register a conservation easement. This is for information purposes; the municipality has no authority to review or refuse the CE. More significantly, municipalities have the ability to vary the assessment or taxation rates of lands subject to conservation easements.
However, municipalities have an arguably greater potential role through the more- direct use of conservation easements. Municipal councils are qualified organizations,hat are eligible to negotiate and hold CEs. Some have done so virtually since the introduction of conservation easements to Alberta in 1996. Municipal conservation programs and tools, such as Transfer of Development Credits, can use conservation easements as their core conservation device. (See Are there Creative Ways to Use CEs?) Several municipalities have also worked with land trusts in Alberta by directly supporting them, taking board positions or coordinating conservation programs.
Finally, it is important to remember that conservation easements do not supersede a local government’s land use zoning and permitting authority. For example, if a conservation easement disallows the building of houses on most of the subject property, but allows a single building envelope, that does not constitute an “approval.” Permission to build that house is still subject to municipal land zoning and the normal building permit process.
Conservation easements are enabled under provincial legislation, so fall primarily under provincial jurisdiction. However, the federal government plays a significant role with regard to the tax implications of conservation easements.
A key consideration for many conservation easement grantors is the beneficial tax treatment donations are eligible for. These provisions are enabled through the federal Income Tax Act and through the Ecological Gifts Program, managed by Environment Canada.
For example, one category of qualified organizations under the Alberta Land Stewardship Act is non-government conservation organizations, which are required to be charities as defined under the federal Income Tax Act.
The most beneficial tax considerations exist when the donation of a conservation easement is registered as an Ecological Gift. Through the registration process, two critical things happen. First, the property is certified by Environment Canada as being of significant ecological value. Second, the appraisal is certified by Environment Canada’s Appraisal Review Board. In this way, Environment Canada confirms the value of the appraisal and protects it from a challenge in future years by the Canada Revenue Agency.