Q&A: Conservation Easement

Q What is a conservation easement? Can a condo or HOA vote to place an easement? What are the tax advantages of such a move?

—Inquiring Unit Owner

A “A conservation easement is an agreement to restrict development of property upon mutually agreeable terms,” writes Ronald L. Perl of the law firm of Hill Wallack LLP in Princeton. “The easement generally prohibits the construction of improvements on the property subject to the easement. The agreement may be entered into between the landowner and a private or public entity. The purpose of such an easement is to ensure property will not be developed, thereby protecting and preserving its natural condition. If a portion of the agreement is broken, the entity holding the easement may seek court intervention for enforcement of the restrictions.

“Traditionally, conservation easements are created by the developers of community associations and at times may be a condition precedent for municipal approval to create a development. While developers ordinarily create conservation easements, associations may also have the power to do so if provided for in their governing documents. A homeowner association may have an easier time giving an easement, as it directly owns the property upon which the easement is placed. In contrast, a condominium association does not own any land. Instead, each unit owner has a proportional interest in the common property. In this context, an association’s master deed or bylaws may be more restrictive as to powers the association has with respect to the common property. Nonetheless, in either case, should the association not currently have the power to grant an easement, it can attempt to amend its governing documents to provide for such a power.

“The issue of tax benefits, if any, should be addressed on an individual basis with the particular association’s accountant or other tax advisor. The association’s specific tax status is relevant to this discussion, as is the value of the conservation easement and the circumstances of its creation. In addition, the association should explore the issue of a property tax reduction for the easement. If an association actually pays real estate taxes with regard to the property subject to the easement, the argument can be made that the property burdened by the easement will no longer be as valuable. Again, however, the issue of taxation is very much fact dependent and should be discussed with the association’s tax advisor.”

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