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Conservation Easements as Ecological Gifts


									                         Conservation Options
Monarch, John Mitchell

                         Conservation Easements as
                         Ecological Gifts
                         An ecological gift of a conservation easement allows                                 Canada, allowing corporate or     bodies for conservation,
                                                                                                              individual donors to obtain       maintenance, restoration or
                         landowners to protect the ecologically sensitive                                     an official donation receipt       enhancement of the land or
                                                                                                              and claim an enhanced tax         of the wildlife on the land,
                         features of their property in perpetuity, retain title,                              benefit.                           or for access to the land
                                                                                                                  A conservation easement       for these purposes. Many
                         and be eligible for enhanced income tax benefits.                                     donated as an ecological gift     refer to these agreements as
                                                                                                              must be publicly recorded,        conservation easements.
                                                                                                              attached to the title of the          • The Ontario Heritage
                                                      Conservation easements                                  property, and must be made        Act provides for the Ontario
                                                   are legally binding                                        in perpetuity. As a result,       Heritage Foundation to hold
                                                   instruments whereby the                                    all future landowners are         easements and covenants
                                                   landowner transfers specific                                bound to its terms. Current       for a variety of purposes
                                                   rights, such as the ability                                and subsequent landowners         relating to Ontario’s heritage,
                                                   to create building lots or                                 are free to sell or otherwise     including natural heritage.
                                                   cut trees, to an easement                                  transfer title to the land. Yet
                                                   holder (usually a nature                                   the conservation easement is
                                                   conservation organization or                               still held by the conservation     Monitoring and
                                                   agency). Depending on the                                  organization and the land          Stewardship
                                                   terms of the conservation                                  continues to be subject to the
                                                   easement agreement, the                                                                       It is important that
                                                                                                              conditions of the conservation
                                                   easement holder has the right                              easement.                          conservation easements are
                                                   and responsibility to inspect                                  For ecological gifts,
                                                   the property and ensure the                                                                   monitored. For example,
                                                                                                              unauthorized dispositions of
                                                   terms of the conservation                                  title by the holder (including     the Ontario Region of the
                                                   easement are being respected.                              re-assignment of easements)
                                                      An easement donated                                                                        Nature Conservancy of
                                                                                                              or changes in land use
                                                   on a voluntary basis may                                   may subject the holder             Canada (NCC) ensures that
                                                   qualify as an ecological gift                              to a substantial tax. Only
                                                   under the Income Tax Act of                                                                   its easement lands are
                                                                                                              the federal Minister of the
                                                                                                              Environment (Environment           visited at least once a year.
                                                                                                              Canada) may approve such
                                                                                                                                                 In some cases NCC actively
                                                                                                              changes or dispositions.
                                                                                                                  All ecological gift            works with the landholder
                                                                                                              conservation easement
                                                                                                                                                 to manage the property,
                                                                                                              donations to date in Ontario
                                                                                                              have been written under one        such as the savanna
                                                                                                              of two provincial statutes.
                                                                                                                                                 restoration it undertook
                                                                                                                  • Ontario’s Conservation
                                                                                                              Land Act provides for              with the Savannah Links
                                                                                                              landowners to enter into
                                                                                                                                                 Golf Course in Cambridge.
                                                                                                              agreements which grant
                                                                                                              easements and specify
                                                                                                              covenants with conservation
                                                                                   Wood Ducks, Eric Dresser

                                                                                                                                                                   March 2007
                            Conservation Options - Conservation Easements

                                                                                                                            Land Value
                                                                                                                            When the uses associated
                                                                                                                            with a property are
                                                                                                                            restricted, its fair market
                                                                                                                            value usually declines. The
                                                                                          Important Components              amount that the land’s value
                                                                                          of a Conservation                 declines varies depending
                                                                                          Easement                          on factors such as the
                                                                                                                            development potential of
                                                                                          The Covenants                     the land and the nature of
                                                                                          The covenants address the         restrictions imposed by the
                                                                                          rights the landowner is giving    conservation easement. For
                                                                                          up. Covenants are usually         example, a conservation
                                                                                          negative – they do not allow      easement that does not allow
                                                                                          particular activities or land     creation of building lots will
                                                                                          uses that may impair natural      generally have a great impact
                                                                                          processes and attributes.         on the fair market value of a
                                                                                          Yet, covenants can also allow     residentially zoned property
                                                                                          activities such as responsible    adjacent to a major urban
                                                                                          forestry, usually according to    centre. The same easement
Canadian Wildlife Service

                                                                                          a named set of practices or a     may have less impact on the
                                                                                          management plan attached to       value of a rural or wilderness
                                                                                          the easement.                     property that is less likely
                                                                                                                            to be developed in the
                                                                                          The Easement                      foreseeable future.
                                                                                          The easement portion of
                                                                                          the agreement grants to the
                                                                                          holder, among other things,
                            Lorne and Rhoda Almack                                        access for the purpose of          Just outside of Toronto
                            Granting a conservation easement was the right decision for   inspecting the property and        granting conservation
                                                                                          the right to take action to
                            protecting the woods, meadows and streams on Lorne            remedy any deficiencies. It         easements on lands with
                            and Rhoda’s property on the Oak Ridges Moraine. “The          usually outlines terms such        high development potential
                                                                                          as giving notice of inspection
                            easement allowed me to do what I wanted in terms of           to the landowner. Under the        has resulted in substantial
                            allowed uses,” Lorne explains. “If someone else wants to      provincial Acts the easement       income tax benefits for
                                                                                          holder need not own adjacent
                            buy the property, they can keep some horses and pursue        land.                              many landowners. Donors
                            some farming but cannot develop the land – no housing,            Covenants are not              who restrict or eliminate
                                                                                          standardized under the
                            golf course or severances.”                                   Conservation Land Act.             development through
                                                                                          The intent is that they            easements have in many
                            The Almack’s easement is typical – other covenants            should conserve the
                                                                                          natural attributes of the          cases received donation
                            commonly used in easement agreements include no               property. With that in             receipts ranging from
                            drainage of wetlands, no cutting of trees or no aggregate     mind, the landowner and
                                                                                          potential easement holder          30 to 80 percent of the
                            extraction. The Almacks also received an income tax           can negotiate a variety of         unencumbered value of
                            benefit – ecological gift donations made on or after May 2,    covenants.
                                                                                              However, it is advisable to    their property.
                            2006 will no longer be subject to tax on any capital gains    include only covenants that
                            accruing in respect of the property.                          address major threats to the
                                                                                          natural integrity of the land
                                                                                          and which, realistically, can
                                                                                          be enforced and monitored.
as Ecological Gifts

                                                                    Red-shouldered Hawk, John Mitchell
       Generally, the difference
   in value of the property
   before and after a
   conservation easement is the
   value of the donation receipt
   to which the landowner                                                                                Brian and Jane Buckles
   is entitled. In some cases,
   the decline in value of the                                                                           In 2001 the Buckles donated a conservation easement
   land can result in a lowered
                                                                                                         on their 40 hectare property to the Toronto and Region
   municipal property tax
   assessment; but this is a                                                                             Conservation Authority (TRCA). At the Buckles’ request, the
   matter the donor must pursue
                                                                                                         covenants within the agreement severely restrict the Buckles,
   with property tax officials on
   an individual basis.                                                                                  and subsequent owners of the land, from activities that
                                                                                                         include creating building lots, constructing new buildings,
                                    A Great Opportunity,
    Ecological Gifts                A Great Responsibility                                               and water taking; while allowing uses such as selective tree
    Program                         Conservation easements allow
                                                                                                         cutting and maple sap collection. The easement allows TRCA
                                    landowners to continue to
    Donors of land, or an
                                    use their land and retain                                            to inspect the lands to ensure compliance and outlines how
    interest in land (such as       some control over it.
                                                                                                         instances of non-compliance are to be handled.
                                    Conservation easements allow
    conservation easements)
                                    conservation organizations
    that are certified as            to secure land that they                                             Brian and Jane can continue to live on their land and are
                                    may not be able to purchase                                          free to sell it, illustrating the advantage of conservation
    ecological gifts can receive
                                    or lands with multiple uses
    substantial income tax          that would not be suitable to                                        easements, which allow landowners to enter into an
                                    own and manage. However,                                             arrangement to ensure their land’s natural features are
    benefits. To certify a
                                    registering a conservation
    donation as an ecogift the      easement is only a beginning.                                        conserved without relinquishing full title to their property.
                                        The landowner must
    ecological sensitivity of the

                                                                                                                                                                         Courtesy of Brian and Jane Buckles
                                    abide by the terms of the
    land and the fair market        conservation easement and
                                    the holder must demonstrate
    value of the donation must
                                    annually their interest in
    be certified by the Minister     the land, monitor the land
                                    to ensure the landowner
    of the Environment
                                    is complying with the
    (Environment Canada).           covenants, communicate with
                                    subsequent landowners, and
    In the case of charities,
                                    must be prepared to take
    Environment Canada must         action in the event of non-
                                    compliance. A well-written
    also qualify them to receive
                                    conservation easement
    ecogifts.                       agreement should describe
                                    the steps to be taken to
    The Program works – the         remedy problems and define
                                    the roles of the easement
    majority of conservation        holder and landowner in
    easements in Ontario            mediation. Occasionally
                                    arbitration or legal action
    have been given as              may be required as a
    ecological gifts.               resolution when other means
                                    have failed.
                                                                                                                                                   Canadian Wildlife Service
                                    NOTE: ‘Gifts’ do not include
                                    conservation easements

    Not all easements and           granted in order to obtain
common law covenants                an approval, such as
qualify as ecological gifts. For
a donation of a conservation        granting an easement as
easement, common-law                a requirement of a plan of
covenant or full title to be an
ecogift Environment Canada          subdivision. Donors and
must certify that the land          recipients should consult
is ecologically sensitive and
certify the fair market value       their legal advisors or the
of the donation.                    Canada Revenue Agency for
    If the donation is made to
a charity, it must be eligible      the definition of a gift for
to accept ecological gifts          income tax purposes.
– not all bodies that can
hold conservation easements
under the Conservation Land
Act are eligible ecological        For more information on
gift recipients. Ecological gift   conservation easements,
recipients may include the         ecological gifts or
federal or provincial crown,       environmentally sensitive land
municipalities and eligible        donation in general contact:
charities. See the Ecological
Gifts Program Website for          Ecological Gifts Program
a list of charities that are       Canadian Wildlife Service – Ontario
already qualified.                  Environment Canada
    Donors are strongly            4905 Dufferin St.
encouraged to obtain               Toronto, ON
professional, independent          M3H 5T4
legal and tax advice
regarding all aspects of           Tel: (416) 739-4286
their donation.                    Fax: (416) 739-5845
                                                                                                                    Fowler’s Toad, John Mitchell

                                   Other References:
                                   Canada Revenue Agency.                To order call                 To view amendments to
                                   Gifts and Income Tax.                 1-800-959-2221 or visit the   the Province of Ontario,
                                   (Canada Revenue Agency,               CRA Website:                  Conservation Land Act, visit
                                   Publication 113, 23 pp.)      

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