I was disappointed that you perpetuated a common
falsehood about valuing conservation easements (HCN, 5/30/05:
Write-off on the Range).
The article defines an
easement’s value as “… the difference between what a parcel
of land would be worth if it were developed and what it is worth
when the development rights are voluntarily limited.” Wrong. I have
appraised conservation easements since 1991, and that definition
has never been true, even though many naive people, including all
too many who work for land trusts, still parrot it.
Since
1998, IRS regulations clearly define the value of the easement as
the difference between the market value of the land as it presently
is, and the market value of the land as encumbered by the specific
terms of the easement. The land as it presently is includes the
value of whatever legal work may have been done, including platted
subdivisions, but this market value is generally much less than the
aggregate value of those subdivision lots (which is what people
usually mean when they talk about the “value of the land as
developed”).
A conservation easement takes away a part of
the owner’s property rights, leaving him with less than he
had. Where we get high-valued sales of lands encumbered by
conservation easements, it is because the current limited supply of
easement-encumbered property has collided with a sudden increase in
demand for aesthetically pleasant properties. This has created an
opening for con men and swindlers to market easement-encumbered
parcels to well-meaning suckers at hyped prices. As the supply of
easement-encumbered property increases, this market will get
saturated. Buyers will gradually realize they are being duped and
their land values will settle down to something much more
reflective of the reality of what they actually own.
Peter Sartucci
Lafayette, Colorado
This article appeared in the print edition of the magazine with the headline Setting the record straight on easement values.
Republish our articles for free, online or in print, under a Creative Commons license.
