Legal Aspects of Conservation Easements: A Primer for Transportation Agencies (2013)

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24 Land trusts and other conservation professionals are often located in the communities where the land trans- action will take place and typically are accessible and interested in projects that will facilitate their mission. Because the conservation easement creation process involves considerable interaction with landowners and unique issues may arise for each property, government agencies may prefer to contract with third-party or- ganizations for transactional services. Professional ser- vices may also be the most thorough and efficient means to assess the baseline conditions of the property, such as the existence of wetlands and protected species, and to provide ongoing monitoring of these resources. V. ELEMENTS OF A CONSERVATION EASEMENT Inevitably, the written terms of the easement will be the first considered if a dispute arises among the par- ties subsequent to the easement’s execution or when the property is transferred. Transportation agency person- nel working in land acquisition and project implemen- tation should be familiar with the elements of the easement document in order to be able to assist in both drafting and interpretation. Conservation easements generally take one of two forms, either an indenture, i.e., a contract governing land use, or a deed, i.e., the traditional mode of creating and transferring a real property interest.161 The specific legal form to be used should be determined on a case- by-case basis, while, as always, ensuring compliance with state property law generally and the state conser- vation easement enabling legislation specifically. For the purpose of this section, the term “conservation easement” means the document itself, not the rights and obligations created. According to “The Conservation Easement Drafting Guide” contained in The Conservation Easement Hand- book, a widely recognized authority, there are several essential elements to a conservation easement.162 They are as follows: 1. Form of Conveyance. 2. Purpose and Recitals. 3. Land Use Provisions: Restrictions, Reserved Rights, and Holder’s Affirmative Rights. 4. Administrative Provisions and Legal Boilerplate. 5. Signatures of Necessary Parties. 6. Exhibits. Each of these elements is discussed below. In some situations, additional elements may be necessary for one reason or another; however, those listed above are the most common and fundamental, and they provide for a good understanding of how conservation ease- rocky-pee-dee-farms/. 161 BYERS & PONTE, supra note 4, at 290. 162 BYERS & PONTE, supra note 4. This section incorporates this reference extensively. Please consult the Handbook directly for specific drafting needs. ments work. A model conservation easement with the specific elements highlighted is included for refer- ence.163 While many land trusts and conservation pro- grams have standard conservation easement templates, each transaction should be considered separate and unique and the easement should be adapted as needed. A. Form of Conveyance The Form of Conveyance element includes several distinct, important, legal requirements, including iden- tification of the parties and property, title covenants, and words of conveyance. Almost always, the landowner (or grantor) and the holder (or grantee) are the princi- pal parties, but third parties, including those with en- forcement rights like co-holders or back-up holders, should be made parties to the conservation easement as the circumstances dictate. Additionally, any party with an ownership interest in the property that has not been extinguished or subordinated to the conservation ease- ment may appropriately be a party to the agreement. These parties may include, for example, co-tenants or mortgagees. Where appropriate, the qualifications of the holder as an appropriate entity for tax purposes should be expressed. Elsewhere in the document it will be noted that any subsequent holder must also be a qualified organization.164 In the example below, the Maryland Environmental Trust is a grantee, but space is provided in the document to name additional grant- ees. Example: The Parties This deed of conservation easement (“Conservation Easement”) made this ____ day of _____ 20__, by and between _____ and _______, having an address at ___________ (collectively, “Grantors”) and the MARYLAND ENVIRONMENTAL TRUST, having an address at 100 Community Place, First Floor, Crownsville, Maryland 21032 (“MET”) and __________, a Maryland Nonprofit Corporation, ____________ (collectively, “Grantees”). Aside from identifying the parties, the conservation easement should include a clear, detailed description of the property over which the conservation easement is created. Often the legal description of the property is made by an exhibit and cross referenced early in the conservation easement itself (as in the example below). Should a conservation easement be created on only part 163 The Model Easement used is from the Maryland Environmental Trust, which is a statewide conservation program. More information can be found at http://www.dnr.state.md.us/met/resources.asp. This model is used to illustrate the key provisions of most conservations easements and is not representative of what lawfully is required in any given circumstance. 164 I.R.C. § 170(h)(3); Treas. Reg. § 1.170A-14 (26 C.F.R. 1.170A-14(c)(1), (2)).

25 of the property, or with respect only to certain build- ings, the legal description should be carefully drafted to that effect. This may include referencing and including as exhibits surveys performed specifically for delimiting the scope of the conservation easement. Example: The Property Grantors own in fee simple ____ acres, more or less, of certain real property in _____ County Maryland, and more particularly described in Exhibit A attached hereto, which was conveyed to the Grantors by ______ by Deed dated ______ and recorded among the Land Records of _____ County, Maryland in Liber ___, Folio (the “Property”). The address of the Property is ______ . The Property is identified on tax map ____, parcel ____. The property consists of ____acres of [agricultural land, woodlands, open fields, etc….]; a portion of the [stream or river]; shoreline on the Chesapeake Bay, …. Having established the parties and property, the conservation easement must also express title cove- nants and words of conveyance. This language will spe- cifically describe the quality of the interest being trans- ferred and who bears the risk for any errors in title. Warranty deeds and quit claim deeds are two examples of title covenants with different risk-shifting character- istics. As for words of conveyance, this describes the reason for the conveyance to the holder—whether it is being sold, donated, or granted as a condition of devel- opment approval. Additionally, the terms of the trans- action, for example, the price or the duration, will be set forth in this part of the conservation easement. As demonstrated throughout this section and the di- gest, how a conservation easement is used triggers various substantive and procedural requirements im- posed by law that must be included in the conservation easement. As a result, it is common for conservation easements to expressly mention and cross reference the legal basis for the conservation easement transaction, be it for federal income tax deduction purposes allowed by Internal Revenue Code (IRC) Section 170(h) or oth- erwise. Example: What Is Being Granted and to Whom In recognition of the Conservation Attributes defined below, Grantors intend hereby to grant a perpetual Conservation Easement over the Property, thereby restricting and limiting the use of the Property as provided in this Conservation Easement for the purposes set forth below. Grantors thus intend to make a charitable gift of a qualified conversion contribution in the form of this Conservation Easement with respect to the Property to further the preservation and conservation of the Property and the goals of Grantees. Grantees intend hereby to accept this Conservation Easement and to hold such Conservation Easement exclusively for conservation purposes, as defined in Section 170(h)(4)(A) of the IRC. Grantees are able to monitor and enforce such conservation easement. B. Purpose and Recitals Well-drafted conservation easements include pur- pose statements and recital clauses (commonly referred to as “whereas clauses”) to establish and emphasize legal sufficiency and the intent of the parties to the un- derlying transaction. As in the example below, it is common for the purpose statement to summarize the general effect of the conservation easement by laying out the prohibited and permitted uses of the property. Particularly important issues from the perspective of the parties may be included here as well, for example, monitoring and enforcement mechanisms important to the holder. These restrictions and rights are more clearly set forth in subsequent elements of the conser- vation easement, but the purpose statement provides a convenient orientation for those examining or interpret- ing the conservation easement at a later date. Many conservation easements may contain several recital clauses, whereas the Maryland example contains only the single paragraph. The easement template provides a note to remind the drafter to adapt the purpose statement for the specific transaction.

26 Example: Conservation Purpose Declaration ARTICLE II. CONSERVATION PURPOSE Pursuant to and in compliance with the requirements of Section 170(h)(4)(A) of the IRC and Section 1.170A-14(d) of the Treasury Regulations, the conservation of the Property will protect the following conservation attributes, as further set forth in Exhibit B: (1) the preservation of land areas for outdoor recreation by or the education of the general public; (2) the protection of relatively natural habitat of fish, wildlife or plants, or similar ecosystems; (3) the preservation of open space for the scenic enjoyment of the general public and which yields a significant benefit, or pursuant to a clearly delineated Federal, State, or local governmental conservation policy and which yields a significant public benefit; and (4) the preservation of historically important land areas or certified historic structures (“Conservation Attributes”). The recitals tend to provide more specific back- ground on the conservation easement and may include a cross reference to the state’s conservation easement enabling legislation along with an account of how it complies with those requirements. For example, in a state like Massachusetts, which requires conservation easements held by local governments to be approved by the state’s Secretary of Environmental Affairs, satisfac- tion of this requirement may be indicated in the recit- als.165 As in the example above, the recitals allow the drafter to clearly demonstrate how applicable tax regu- lations are satisfied. C. Land-Use Provisions: Restrictions, Reserved Rights, and Holder’s Affirmative Rights This element represents the heart of a conservation easement because it establishes the land-use restric- tions on the property and specifies the rights reserved to the grantor. How these provisions are drafted and enforced depends on a variety of factors, including state enabling legislation requirements, other legal require- ments (such as tax law), and negotiations between the grantor, grantee, and third parties during the predraft- ing phase. It is not uncommon for this part of a conser- vation easement to receive the most focus as the docu- ment circulates between parties. In this section some common issues are presented, but the discussion is by no means exhaustive. Each transaction presents its own unique issues. “The Conservation Easement Drafting Guide” contained in The Conservation Easement Hand- book identifies several potential prohibitions: 1. Alteration of the land surface. 2. Alterations to existing or historic buildings. 3. Commercial or industrial uses. 4. Mineral development. 5. New and existing buildings, structures, roads, and other improvements. 165 MASS GEN. LAWS ch. 184, § 32. 6. Ponds and streams. 7. Soil and water. 8. Subdivision and development. 9. Trees, shrubs, and other vegetation. 10. Waste dumps. 11. Wetlands. 12. Wildlife and wildlife habitat.166 While most of these restrictions apply to activities within the easement area, such as no clearing, building, or mining, restrictions may extend to other activities not readily foreseeable as interfering with a conserva- tion easement. For example, the easement language may prevent subdivision of the easement (see the ex- ample “Prohibition of Subdivision”). The practical pur- pose of this is to manage the burdens of access and oversight upon the holder. For the landowner, this re- striction may inhibit future development of any remain- ing property outside of the easement area but contigu- ous to it. Similarly, the easement language may extinguish development rights within the protected area. This may prohibit the current or future owner of the burdened property from taking part in local gov- ernment programs with regard to density and develop- ment. It is important that the parties understand these restrictions and are comfortable with their application. Example: Prohibition of Subdivision H. Subdivision. The division, partition, subdivision, or boundary line adjustment of the Property, including the lease of any portion less than one hundred percent (100%) of the Property for a term in excess of twenty (20) years (“Subdivision,” or “Subdivided” as the case may be), is prohibited. Grantees, however, may approve the Subdivision of the Property for reasons which Grantees determine, in their sole discretion, are sufficiently extraordinary to justify an exception to the prohibition, in accordance with the provisions of Article V below. To accomplish the restrictions intended by the par- ties, which also form the basis of the negotiated agree- ment, it is important to draft the conservation easement with careful attention to detail. Certain drafting tech- niques are helpful when it comes to clearly defining restricted uses. Including all restrictions on activity in one section of the agreement is useful. Beginning with the most general and moving to the most specific is also helpful. For example, with regard to a conservation easement placed on a historic home, a general restric- tion may be that no changes shall be made to the exist- ing appearance. Then, more specifically, it may be stated that no paint color other than white may be used on the exterior. Where certain restrictions apply in some areas of the property but not others, the conserva- tion easement should establish distinct areas with dif- ferent requirements made applicable to each. A map 166 BYERS & PONTE, supra note 4, at 294.

27 incorporated as an exhibit to the agreement would be helpful in clarifying such provisions. While the restrictions placed upon land by the con- servation easement may be extensive, it is important to note that most easements contain a provision that any uses not specifically prohibited are allowable so long as they do not interfere with the conservation purpose. A reserved uses clause is shown below. Additionally, the grantor may retain certain compatible uses even within lands subject to the easement, such as the maintenance of existing structures and continuation of hunting, fish- ing, and agricultural activities. Exhibits such as maps showing existing structures and land-use practices, as well as the baseline documentation, are useful to estab- lish the grantor’s reserved uses. Example: Reserved Rights P. Reserved Rights Exercised to Minimize Damage. All rights reserved by Grantors or activities not prohibited by the Conservation Attributes identified above and water quality, air quality, land/soil stability and productivity, wildlife habitat, scenic and cultural values, and the natural topographic and open space character of the Property. Notification provisions are helpful in maintaining the relationship between the grantor and grantee (or holder). One such provision with regard to permitted uses may require the grantor to notify the holder of all subsequent development activities on the properties even if they are permitted by the conservation ease- ment. This notification is required for conservation easements used for federal income tax deductions,167 but also may be included more generally at the insis- tence of the holder, especially if the holder is a non- profit land trust. Oversight of the restrictions and reserved rights es- tablished by a conservation easement is necessary to maintain the value of the transaction. Thus, the ease- ment should contain provisions allowing and describing monitoring, maintenance, and enforcement. As with the discussion of restrictions and reserved rights, the na- ture and extent of the monitoring and enforcement pro- visions to be included depend on a variety of case- specific factors. However, some of the most important and common issues and techniques to be spelled out in the conservation easement are discussed next. In order to carry out its role, the holder must have access to the property and the express right to carry out monitoring activities. Monitoring is required for conser- vation easements used for federal income tax deduc- tions168 and by some enabling statutes.169 These provi- 167 Treas. Reg. § 1.170A-14 (g)(5), 26 C.F.R. § 1.170A-14. 168 Id. 169 See, e.g., ME. REV. STAT. ANN. tit. 33, § 477-A(3), (4) (requiring holders to monitor at least every 3 years and prepare reports). sions often specify reasonable times and means of ac- cessing the property, as well as for providing notice to the grantor that the holder will be entering the prop- erty. For conservation easements involving complicated, sensitive, environmental management issues, the moni- toring processes outlined or referenced in the conserva- tion easement can be quite detailed and extensive. For example, for conservation easements predicated on habitat and wildlife conservation, monitoring may take place over the course of several days or even entire sea- sons and include very specific quantitative measure- ments of flora and fauna. Example: Access Provision A. Grantees and their employees and agents shall have the right to enter the Property at reasonable times for the purpose of inspecting and surveying the Property to determine whether Grantors are complying with the Provisions of this Conservation Easement. Grantees shall provide prior notice to Grantors at their last known address, unless Grantees determine that immediate entry is required to prevent, terminate, or mitigate a suspected or actual violation of this Conservation Easement which poses a serious or potentially permanent threat to Conservation Attributes, in which latter case prior reasonable notice is not required. The example above allows the grantee to enter the property without notice where an exigent threat to the conservation easement is evident. Enforcement terms should be included in the conser- vation easement. Some agreements include only very general enforcement provisions such as enabling the holder to enforce the conservation easement in a court of law or equity and may express a preference for spe- cific performance as the preferred remedy for breach of the agreement. Other documents may detail a process for the resolution of disputes prior to enforcement ac- tion being taken. Such an approach may include the holder’s obligation to notify the property owner of al- leged violations and allow for a period to cure or chal- lenge these claims. Also, forms of alternative dispute resolution such as mediation or arbitration may be specified. Finally, the conservation easement may be structured to allow for the recovery of costs should the holder find it necessary to pursue judicial remedies. The language from the Maryland agreement is a good ex- ample of a comprehensive enforcement provision.

28 Example: Grantors’ Rights of Enforcement B. Upon any breach of a Provision of this Conservation Easement by Grantors, Grantees may institute suit to enjoin any such breach or enforce any Provision by temporary, ex parte and/or permanent injunction, either prohibitive or mandatory, including a temporary restraining order, whether by in rem, quasi in rem or in personam jurisdiction; and require that the Property be restored promptly to the condition required by this Conservation Easement at the expense of Grantors. Before instituting such suit, Grantees shall give notice to Grantors and provide a reasonable time for cure; provided, however, that Grantees need not provide such notice and cure period if Grantees determine that immediate action is required to prevent, terminate or mitigate a suspected or actual breach of the Conservation Easement. Grantees’ remedies shall be cumulative and shall be in addtion to all appropriate legal proceedings and any other rights and remedies available to Grantees at law or equity. If Grantors are found to have breached any of Grantors’ obligations under this Conservation Easement, Grantors shall reimburse Grantees for any costs or expenses incurred by Grantees, including court costs and reasonable attorney’s fees. One area of frequent misunderstanding in the nego- tiation and drafting of conservation easements is the issue of public access. In most instances where an easement is being placed on private property, public access to the property will not be allowed. On the other hand, large parklands purchased with transportation enhancement money, for example, may be required to have public access and use. In either situation, the con- servation easement should specifically address the is- sue. Lastly, another provision that is helpful is to ex- pressly state which party is responsible for paying the property taxes and other expenses usually associated with property ownership not affected by the conserva- tion easement. Ordinarily, this responsibility will re- main with the grantor. The Maryland easement con- tains a general clause that addresses taxes. Examples: Grantor Remains Responsible for Owner Obligations C. Real Property Taxes. Except to the extent provided for by State or local law, nothing in this Conservation Easement shall relieve Grantors of the obligation to pay taxes in connection with the ownership or transfer of the Property. D. Administrative Items—Regulatory Compliance and Changed Circumstances A conservation easement should be drafted to effec- tuate its intended purpose and avoid, to the greatest extent possible, future misunderstandings and conflicts. This means, first, specifically addressing the legal re- quirements under state, federal, and sometimes even local law in addition to including provisions common to contracts and real property transactions in general. Second, this calls for establishing administrative mechanisms to handle changed and unforeseen circum- stances down the road. Some notable examples from both of these categories are presented here. As for legal requirements, compliance with state enabling legislation comes first and foremost. Though conservation easements are often used to secure a fed- eral benefit (e.g., income and estate tax reductions) or requirement (e.g., wetlands mitigation under the CLA), fundamentally, conservation easements are a product of state law and must meet all pertinent threshold re- quirements. A well-drafted conservation easement includes pro- visions that expressly reference the state’s enabling statute and all necessary provisions to indicate compli- ance therewith. For example, Montana requires all con- servation easements to be sent to the Department of Revenue and Department of Administration for publica- tion;170 therefore, a conservation easement created in Montana would likely indicate compliance with this provision, and all other state statutory requirements. Finally, in addition to the requirements pertaining to conservation easements in particular, those state re- quirements and techniques applicable to creation and transfer of real property interests in general need to be considered and included in the conservation easement as necessary. Examples of these boilerplate provisions often include severability clauses and formalities re- garding holder acceptance and recordation. The language necessary to comply with the regula- tory programs that give rise to a particular conserva- tion easement may also be addressed. For example, to qualify for tax benefits, federal regulations require the holder must be a “qualified organization,”171 so the con- servation easement used for these purposes needs to address how these requirements are satisfied. The Maryland Environmental Trust easement used as an example contains explicit language addressing the pro- gram that is acquiring the easement as well as the tax status of the land trust. 170 MONT. CODE. ANN. § 76-6-212. 171 I.R.C. § 170(h)(3); Treas. Reg. § 1.170A-14 (26 C.F.R. 1.170A-14(c)(1), (2)).

29 Example: Specific Regulatory Purpose Language Maryland Environmental Trust, created pursuant to Subtitle 2 of Title 3 of the Natural Resources Article, Annotated Code of Maryland, is charitable in nature. It was established to conserve, improve, stimulate, and perpetuate the aesthetic, natural, health and welfare, scenic and cultural qualities of the environment, including, but not limited to, land, water, air, wildlife, scenic qualities, open spaces, buildings or any interest therein, and other appurtenances pertaining in any way to the State. MET is a “qualified organization” within the meaning of Section 170(h)(3) of the United States Internal Revenue Code (“IRC”). _____________Land Trust, Inc. is a nonprofit tax exempt organization within the meaning of Section 501(c)(3) of the (IRC), established for _____________, and is a “qualified organization” within the meaning of Section 170(h)(3) of the IRC. Regulatory oversight agencies for conservation easements protecting compensatory mitigation pro- jects—for both aquatic resources and protected habi- tat—generally have very strict template language. In fact the template conservation easement for California projects includes the following statement at the top of the first page:172 Please Note: The following Conservation Easement Deed is provided by the multi-agency Project Delivery Team as a standardized template document for Mitigation and Conservation Banks in California. Any modifications to this template shall be identified using tracked changes or other electronic comparison and explained in a memorandum. (Template Version Date: March 2010) The same California document includes three sepa- rate recital clauses in the template in order to identify and describe the regulatory agencies and appropriate laws governing the conservation and aquatic resources property—the California Department of Fish and Game, the U.S. Fish and Wildlife Service, the EPA, and the ACOE (see below). These provisions provide the legal backbone for the conservation easement’s purpose in providing compensatory mitigation, which is for both endangered species (paragraphs C and D) and aquatic resources (paragraph E). 172 This easement was found in the U.S. Army Corps of Engineers Regulatory In lieu fee and Bank Information Tracking System (RIBITS) database, which provides extensive information on both project development resources and project tracking in each of the 38 USACE districts throughout the country. http://www.lrc.usace.army.mil/Missions/Regulatory/RIBITS. aspx (Accessed May 27, 2012). C. The California Department of Fish and Game (“CDFG”) has jurisdiction over the conservation, protection, and management of fish, wildlife, native plants and the habitat necessary for biologically sustainable populations of these species pursuant to California Fish and Game Code Section 1802. CDFG is authorized to hold easements for these purposes pursuant to California Civil Code Section 815.3, Fish and Game Code Section 1348, and other provisions of California law. D. The United States Fish and Wildlife Service (the “USFWS”), an agency within the United States Department of Interior, has jurisdiction over the conservation, protection, restoration and management of fish, wildlife, native plants, and the habitat necessary for biologically sustainable populations of these species within the United States pursuant to the federal Endangered Species Act, 16 U.S.C. Section 1531, et seq., the Fish and Wildlife Coordination Act, 16 U.S.C. Sections 661-66c, the Fish and Wildlife Act of 1956, 16 U.S.C. section 742(f), et seq., and other provisions of federal law. E. [Remove/modify this recital as appropriate when USEPA or USACE is not a signatory to the BEI or CBEI] The U.S. Environmental Protection Agency (“USEPA”) and U.S. Army Corps of Engineers (“USACE”) have jurisdiction over waters of the United States pursuant to the federal Clean Water Act, 33 U.S.C. Section 1251, et seq. Aside from compliance with all applicable laws, a challenge in drafting conservation easements is ac- counting for the long-term (often intended to be perpet- ual) nature of the agreements. Beyond the current par- ties, the drafter must consider the potential for transfer to future entities (by any and all parties) and changed circumstances of the landscape. For example, consider a conservation easement created decades ago to preserve hundreds of acres of farmland. Today, transportation planners have identified that a part of the property may be in the intended right-of-way for the preferred route for a new highway. Short of condemning the property and the conservation easement, can the conservation easement be amended to accommodate the changed land use? Assuming that the conservation easement currently prohibits highways (or transportation infra- structure more generally), it may be amendable to fa- cilitate the use, provided the drafters included language allowing for such changes. The California easement contains the following, relatively straightforward, amendment provision:

30 13. Amendment. This conservation easement may be amended only by mutual written agreement of Grantor and Grantee and written approval of the Signatory Agencies, which approval shall not be unreasonably withheld or deleted. Any such amendment shall be consistent with the purposes of this Conservation Easement and California law governing conservation easements, and shall not affect its perpetual duration. Any such amendment shall be recorded in the official records of the county in which the Bank Property is located, and Grantee shall promptly provide a conformed copy of the recorded amendment to the Grantor and the Signatory Agencies. Conservation easements are commonly drafted to al- low for amendments, subject to various conditions and requirements. Amendments are typically tied to unanimous, discretionary consent amongst the holder, grantor, and applicable third parties. In other cases, conservation easements are drafted to limit the discretion over whether or not consent may be given. Commonly, conservation easements include a provision acknowledging that mere economic hardship, for example, unforeseen economic opportunities, may not be the basis for amendment. Also, a conservation easement created for federal income tax purposes may contain a provision prohibiting any amendment frus- trating the qualifying conservation purpose. Such a limitation may forestall changes to the easement to accommodate the highway example above if one of the conservation purposes is viewshed preservation and, for example, the planned highway would be visible from a nearby protected park. To help resolve these conflicts, when an amendment is sought, the drafter may state specific conditions within the easement document that would violate the conservation purpose, thus prohibit- ing amendment. However, given the variety of conceiv- able grounds for amendment, it is hard to address every situation that arises. As a result, whether authority exists to amend the conservation easement often comes down to party agreement. Another aspect of administration concerns termina- tion. As has been discussed, conservation easements may be terminated in a number of ways, including emi- nent domain and purchase in lieu of condemnation.173 The conservation easement can be structured to clarify the rights and obligations of the parties should the need for termination arise. For example, with respect to the just compensation proceeds, the conservation easement can specify the manner in which these funds will be apportioned amongst the parties in the event the prop- erty and easement are subsequently condemned. In 173 E.g. S.C. CODE ANN. § 27-8-80 (“A person or entity empowered to condemn may condemn a conservation easement for other public purposes pursuant to applicable provisions of the 1976 Code or federal law.”). fact, for conservation easements used for federal tax purposes, the holder must have the right to receive pro- ceeds in proportion to its interest.174 The following pro- visions from the Maryland easement provide an exam- ple of both condemnation (paragraph B) and valuation language (paragraph C): B. Condemnation. This Conservation Easement may be terminated through condemnation proceedings if condemnation of a part or all of the Property by a public authority renders it impossible or impractical to fulfill the Conservation Purpose. Grantees may, at their option, join in the negotiations or proceedings at any time to object to the taking and to recover the full value of the interests in the property subject to the taking and all incidental or direct damages resulting from the taking. All expenses reasonably incurred by the parties to this Conservation Easement in connection with such taking shall be paid out of the recovered proceeds. C. Proceeds. The granting of this Conservation Easement gives rise to a property right, immediately vested in Grantees, with a fair market value at least equal to the ratio of the value of this Conservation Easement on the effective date of this grant to the value of the Property without deduction for the value of the Conservation Easement on the effective date of this grant. If this Conservation Easement is terminated in whole or in part, whether by judicial extinguishment or condemnation, Grantees shall be entitled to a percentage of the gross sale proceeds or condemnation award equal to the greater of: (i) the percentage required pursuant to Treasury Regulation § 1.170A- 14(g)(6); or (ii) the proportion that the value of this Conservation Easement at the time of extinguishment or condemnation bears to the then value of the Property Easement at the time of extinguishment or condemnation bears to the then value of the Property as a whole. Such proceeds received by Grantees shall be used by Grantees in a manner consistent with the Conservation Purpose of the original contribution. This paragraph is subject to any applicable Maryland or Federal statues, including but not limited to Section 12-104(g) of Real Property Article, Ann. Code of Maryland. This example allows for the easement to be termi- nated by condemnation and specifies how the property will be valued and how the proceeds will be allocated. Including such language in the agreement is helpful to avoid conflict in the event the easement is terminated. E. Signatures of Necessary Parties As discussed in the Forms of Conveyance subsection, a number of entities may be made party to a conserva- tion easement. As such, depending on the requirements of state law, some or all of these entities will be re- quired to memorialize by signature their acceptance of the conservation easement’s terms. It is helpful to keep this requirement in mind as a separate element during the drafting process to ensure that all necessary and 174 Treas. Reg. § 1.170A-14(g)(6)(ii); 26 C.F.R. § 1.170A- 14(g)(6)(ii).

31 preferred parties are included in the drafting process and the ultimate agreement. As noted previously, the conservation easement process is a real property trans- action governed by state laws. The form of signature and necessary notary blocks should follow the form of the jurisdiction where the property is located. The con- servation easement should then be recorded in the normal manner for land transactions in the jurisdiction. F. Exhibits As noted, some components of the agreement cannot be fully described within the conservation easement document itself and will be incorporated by reference as exhibits. Such exhibits may include legal descriptions of the property, descriptions of the property for the pur- poses of illustrating the terms of the conservation easement, baseline documentation for monitoring and enforcement, and mortgage subordination. A legal description identifies with certainty the boundaries of the subject area as determined by a land survey and may take the form of a metes and bounds description or reference a drawing with land coordi- nates labeled. In many instances a recent survey of the property may be available and sufficient for the trans- action. More often, the property’s existing surveys are old or outdated and the parties should consider com- missioning a new survey to ensure accuracy. All sur- veys should clearly indicate any existing easements and rights-of-way on the property, including if any are granted to the holder in virtue of the conservation easement. Clear property descriptions are a good way to avoid future conflicts. In addition to formal surveys, conservation ease- ments frequently include one or more sketch maps to help illustrate the restrictions and rights created by the conservation easement. Sketch maps often indicate no- table features on the property, such as wetlands or en- dangered species habitat, while showing the location of existing structures and activities permitted as reserved rights. Also, where the conservation easement estab- lishes different restrictions for different parts of the property (see Section V.C, Land Use Provisions: Re- strictions, Reserved Rights, and Holder’s Affirmative Rights), the sketch map can be used to show where these different regions are located. If the legal descrip- tion is included as a survey rather than a recitation of metes and bounds, these items may be included on the survey. Providing for clear and accurate sketch maps helps all parties and successors in interest have a clear understanding of the conservation easement’s effect on the property and avoid conflicting interpretations after execution. As previously discussed, conservation easement holders must monitor and enforce the easement terms. Baseline documentation tailored to each property pro- vides the framework for these activities. Baseline documentation is required by federal tax regulations,175 175 Treas. Reg. § 1.170A-14(g)(5)(i); 26 C.F.R. § 1.170A- 14(g)(5)(i). As part of a 2006 state-wide review of conservation and even easements not used for tax purposes fre- quently incorporate this requirement. These reports describe, in both quantitative and qualitative terms, the condition of the property when the conservation ease- ment was created. Holders rely on the baseline documentation to illus- trate the various obligations and restrictions created by the conservation easement. These detailed provisions not only help guide the day-to-day activities of property owners, but also the long-term monitoring and en- forcement actions of holders. As for monitoring, the baseline documentation provides direction as to what conditions of the property need to be periodically ob- served and documented. Easement violations will be shown by comparing the observed condition of or activi- ties on the property to the provisions of the easement. For an idea of what is included in a baseline docu- ment, the Land Trust Alliance’s Baseline Policy Tem- plate, designed to meet federal tax regulations, includes the following elements: 1. Cover Page; 2. Table of contents. 3. Acknowledgement/Certification. 4. Background information. 5. Physical and ecological features. 6. Documentation necessary to address conservation purposes test and public benefit. 7. Photographs. 8. Legal information. 9. References. 10. Optional information.176 To fulfill its intended purpose, the baseline docu- mentation should be specific and measurable. The unique facts and circumstances of each property and the terms of the transaction will guide these descrip- tions. The scope of the baseline documentation should reflect the conservation easement’s stated purpose. For example, with conservation easements predicated on habitat and wildlife preservation, baseline documenta- tion would describe key habitat areas and nesting sites. Finally, as to who prepares the baseline documentation, federal tax regulations place the responsibility on the property owner, but frequently, given the need to work with this document over the long term, holders and other conservation professionals provide assistance and may, in fact, lead the effort. In such situations it is im- portant that the landowner understand the purpose and contents of the document. The last type of exhibit to be discussed is documenta- tion of mortgages or other lien subordination materials. easements in Colorado, the IRS requested copies of the baseline documentation from 250 conservation easements. JANE ELLEN HAMILTON, CONSERVATION EASEMENT DRAFTING AND DOCUMENTATION 214 (Land Trust Alliance 2008), herein- after cited as “HAMILTON.” http://www.eli.org/pdfs/landtrusthandbook/6.pdf. 176 HAMILTON, supra note 175, 243–47.