Chapter Four • Purchasing Land
Practice 9J. Purchasing Land
If a land trust buys land, easements or other real property, it obtains a qualified independent
appraisal to justify the purchase price. However, the land trust may choose to obtain a letter of
opinion (see definitions) from a qualified real estate professional in the limited circumstances
when a property has a very low economic value or a full appraisal is not feasible before a public
auction. In limited circumstances, where acquiring above the appraised value is warranted, the
land trust documents the justification for the purchase price and that there is no private inure-
ment or impermissible private benefit. If negotiating for a purchase below the appraised value,
the land trust ensures that its communications with the landowner are honest and forthright.
A land trust must be able to justify the price paid for land and easements for several reasons:
to show fiscal responsibility; to avoid private inurement or excess private benefit; to substan-
tiate prices paid in a changing market; to avoid inflating market value; to avoid losing money
on resale; and to be prepared in the event of a condemnation action. The surest way to justify
the acquisition price is to obtain a qualified independent appraisal. However, there are some
limited circumstances when a letter of opinion from an appraiser or real estate professional is
adequate: if the land trust is considering the purchase of land with low economic value (such as
a wetland or other property with extremely limited development potential); or if the land trust
is under the time pressure of having to bid at a public auction. In the very rare case of consider-
ing whether to pay more than the appraised value, the land trust should have good legal advice
and carefully weigh the public benefit, risk of private inurement or private benefit and risk to
its credibility. If the land trust does decide to proceed, it should thoroughly document the prop-
erty’s unique value, its worth to the land trust and the public interest the property serves. When
negotiating bargain sale transactions, a land trust should take care to be honest and forthright
in its communications with the landowner.
— From the Background to the 2004 revisions of Land Trust Standards and Practices
After studying this chapter you should be able to:
• Define fair market value and appraised value.
Letter of opinion: A written esti- • Determine when the land trust needs to obtain an appraisal.
mation of a property’s value that Conversely, determine when it is appropriate to use alternative
may be used instead of a qualified methods of establishing value. Understand the documentation
independent appraisal when the requirements for determining the value.
economic value of the property is • Understand the key elements of an appraisal and other meth-
so low as to negate concerns about
ods of valuing land.
private inurement or private benefit
• Determine whether an appraisal is useful (for example, for
or when a full appraisal is not feasi-
negotiations) or required (for justifying an expenditure).
ble before a public auction. A letter
of opinion is not sufficient in the • Explain the rare situations when a land trust may pay above the
case of transactions with insiders. appraised value. Know how to document the reason for paying
above fair market value.
• Describe the characteristics of a qualified independent
appraisal (as defined by Land Trust Standards and Practices).
• Understand methods of evaluation used by appraisers.
• Know how to find and contract with a qualified appraiser.
• Describe examples of the basic steps in the negotiation of a
purchase price for a conservation parcel (fee interest or conser-
• Understand principled negotiations and be able to utilize prin-
cipled negotiations in land trust transactions.
• Explain why it is important to be ethical with landowners
when engaged in negotiations.
• Understand the basic elements of a contract, particularly ones
related to the conveyance of real property, such as those used in
purchase agreements, options and rights of first refusal.
• Define purchase and sale agreement and option. Understand how
to work with attorneys to draft and review such agreements.
• Describe additional steps to take if the purchase involves an
“insider” to the organization.
• Identify the key differences between a transaction in which
land is sold and one in which land is donated.
Purchasing land or easements means spending hard-earned money. A
land trust must be able to justify the prices paid for land and conserva-
tion easements for several essential reasons:
220 Acquiring Land and Conservation Easements
• To show fiscal responsibility
• To avoid private inurement or private benefit
• To substantiate prices paid in a changing market
• To avoid inflating market value
• To avoid losing money on resale
• To help in bookkeeping and financial reporting (especially for
completing IRS Form 990)
Appraisals are the primary method for achieving these aims. Care
must be taken to ensure that the land trust hires an experienced,
independent appraiser to produce an appraisal that meets industry
standards. While common practice is to secure an appraisal prior
to purchasing land (or, conversely, selling an asset), there are some
circumstances when something less than an appraisal will suffice.
This chapter briefly discusses those few situations where a letter of
opinion, a summary report or other means of establishing value may
Rare, though not unheard of, are instances when a land trust might
consider paying more than appraised value. When faced with such
a decision, a land trust should have good legal advice and carefully
weigh the public benefit, risk of private inurement or excess private
benefit and risk to the organization’s credibility. If a land trust decides
to proceed with paying above fair market value, it should thoroughly
document the property’s unique conservation values, its importance
to the land trust and the public interest the property serves.
More commonly, land trusts are in a position of paying below fair
market value through a bargain sale transaction. That is, a landowner
agrees to sell land or an interest in land for substantially less than
fair market value to a land trust, making a charitable donation of
the difference between the sales price and fair market value. When
negotiating bargain sale transactions, a land trust should take care to
be honest and forthright in its communications with the landowner.
While this chapter is primarily focused on substantiating the
value of purchased land and easements, other related issues will be
discussed here as well, including the ethics of negotiations, elements
of a purchase agreement and the differences between purchases and
Purchasing Land and Easements 221
Evaluate Your Practices
Take a few minutes to evaluate your land trust’s transaction proce-
dures. Answer the following questions. Give yourself one point for
every “yes” answer. Scores are shown at the end.
1. Does your land trust appraise each parcel of land and every
conservation easement prior to purchase?
2. Does your land trust understand the definition of “fair
market value”? Are you knowledgeable about basic appraisal
3. Are you aware of USPAP and the federal Yellow Book
4. If your land trust paid more for a parcel of land or conserva-
tion easement than its appraised fair market value, did you
document your rationale?
5. Does your land trust understand the terms “qualified inde-
pendent appraisal” and “qualified appraiser”?
6. Has your land trust encouraged and provided opportunities
for negotiation training for staff or board members charged
with land or easement acquisition?
7. When negotiating, does your land trust look for and address
the interest of each party (as opposed to negotiating from “a
8. Does your land trust use objective criteria (in some cases,
paralleling your project selection criteria) when negotiating?
9. Does your land trust have a template for purchase agree-
ments, options or rights-of-first refusal?
10. Does your land trust coordinate its closing checklist to match
its contract documents?
If your organization scores:
10: Great. This course will fill in the gaps in knowledge, but your
organization is well on its way toward meeting Land Trust
Standards and Practices. Share your expertise by sending the
Land Trust Alliance samples of your work for posting on
The Learning Center (e-mail firstname.lastname@example.org).
7–9: Very good, but there is room for improvement. This course
will give you the knowledge you need to take your program
to the next level.
222 Acquiring Land and Conservation Easements
4–6: You are doing well, but need additional training to ensure
your organization’s land protection projects are conducted in
a professional manner.
0–3: It’s time to get serious about your land acquisition program.
This chapter will provide detail for educating your staff and
board to ensure that your land trust acts legally, ethically
and in good faith when acquiring land or easements. As you
will learn, changes may need to be made to meet Land Trust
Standards and Practices.
This chapter discusses substantiating the value of land for purchase,
in particular its “fair market value.” When a nonprofit land trust
purchases land in fee or a conservation easement, it must avoid
paying more than fair market value. But how is a land trust to know
what that value is? The US Treasury Department defines fair market
the price at which the property would change hands between
a willing buyer and a willing seller, neither being under any
compulsion to buy or sell and both having reasonable knowl-
edge of relevant facts [Treas. Reg. §1.170-1(c)(1)].
How Value Is Established and Guides Negotiations
Fair market value is most commonly established by an appraisal. An
appraisal is a professional appraiser’s opinion of value. The prepara-
tion of an appraisal involves research into appropriate market areas;
the assembly and analysis of information pertinent to a property; and
the knowledge, experience and professional judgment of the appraiser.
The role of the appraiser is to provide objective, impartial and unbiased
opinions about the value of real property. He or she provides assistance
to those who own, manage, sell, invest in or lend money on the security
of real estate, and purchase real estate.
Appraised value is not a guess, nor can it change depending on who Appraised value is not a guess,
the client is (there are no valid “made-to-order” appraisals). Appraised nor can it change depending on
value is an informed and objective opinion of fair market value. The who the client is (there are no
valid “made-to-order” appraisals).
three primary approaches to determining the value of real estate —
Appraised value is an informed
the sales comparison approach, the cost approach and the income
and objective opinion of fair
approach — are discussed in detail below. market value.
Purchasing Land and Easements 223
While appraisals are not the only means of determining value, apprais-
als are credible because licensed appraisers must follow standards
adopted by various professional appraisal organizations, funding agen-
cies, state licensing agencies and/or the federal government. The rules
and regulations on how an appraisal is to be prepared and what infor-
mation needs to be included are extensive and comprehensive. There is
an expectation of consistency and professionalism when valuing prop-
erty through the appraisal process.
While it is good business practice to always obtain an appraisal prior
to the purchase of real estate, and Land Trust Standards and Practices
requires land trusts to do so except in limited circumstances, there are
certain times when an appraisal is absolutely necessary. These situations
• When the parties contractually agree to rely on an appraisal to
set the purchase price.
• When a transaction includes a donation or bargain sale and
a landowner is required to secure a qualified appraisal (as
defined by the IRS) to justify the value of the donated portion
of the transaction. (The donor’s appraisal to substantiate a gift
is separate from the land trust’s appraisal to determine fair
market value. These are not two different types of appraisals;
rather, they differ because the client for whom the appraisal
is prepared is different — donor versus land trust — and the
stated purpose of the appraisal is different for each client.)
• When a land trust obtains grant funding for the acquisition
contingent upon an appraisal.
• When a buyer is financing the acquisition and his or her bank
requires an appraisal prior to approving the loan.
• When, as a matter of policy, a land trust requires an appraisal
as part of its normal acquisition activity.
A land trust policy to secure appraisals for projects should have some
flexibility in terms of timing. Appraisal reports, especially for conser-
vation easements, can be expensive. Thus, a land trust may want to
be flexible as to when it commissions appraisals. Complex or size-
able transactions may justify an early appraisal or consultation with
an appraiser to gather information critical to negotiations, but there
are certain limited situations (discussed in the next section) when a
land trust can dispense with an appraisal and estimate value by other
means. A land trust should also time an appraisal carefully to ensure
224 Acquiring Land and Conservation Easements
this large expenditure is not a waste of its resources, especially if the
project’s completion is uncertain.
Valuation in Lieu of an Appraisal
Although the majority of land and easement purchases by land trusts
warrant an appraisal, there are occasions where it is reasonable to
forego an appraisal. One such example is for land with little economic
value or for very small parcels where obtaining an appraisal would cost
more than the land itself. Another example: the land trust must act
quickly before a public auction and there is no time to complete a full
appraisal. In such scenarios, it is reasonable for the land trust to deter-
mine value by some other means, such as through a letter of opinion
from a qualified real estate professional, or an appraisal reported in a
restricted use or summary format. Similarly, in circumstances where
the seller has secured an appraisal to set the sales price, a land trust
could commission a review appraisal to confirm the value rather than
obtaining an entirely new appraisal.
When an Independent Appraisal is Unnecessary
In a recent land acquisition, Yew Dell Gardens, a nonprofit garden conser-
vancy in Kentucky, hired an appraiser to review the seller’s appraisal and
discovered that it was on the low end of a range of values for similarly zoned
property provided by the review appraiser. As a result, the conservancy
was satisfied that it could proceed with the transaction based on the seller’s
appraisal. Yew Dell Gardens was able to acquire a critical contiguous parcel
at the asking price without investing in a separate independent appraisal. In
addition, the conservancy was relieved from entering into protracted nego-
tiations over price.
In some instances, it may be appropriate for a land trust to rely upon
an appraisal commissioned by a public agency or another nonprofit
partner, so long as the land trust reviews the appraisal and deter-
mines it meets acceptable standards. If the land trust has questions
about an appraisal provided to it by a third party, the organization
should consider hiring a qualified appraiser to perform a review of the
appraisal and advise the land trust about its contents and methodol-
ogy. It may also be acceptable for a land trust to jointly commission
an appraisal with a landowner, provided that the land trust is one of
the clients for whom the appraisal is prepared and that it reviews and
approves a draft of the appraisal. In some instances, land trusts have
Purchasing Land and Easements 225
commissioned area-wide appraisals for uniform, low-value properties,
but this practice is questioned by some appraisers, who note that every
parcel of land is unique and thus an area-wide appraisal may not accu-
rately account for the differences among properties.
In those limited circumstances where obtaining an appraisal for a
purchase is not necessary or practical, the land trust must still estab-
lish value and justify its purchase price. There are several alternatives
that may be useful in early negotiations or in the limited circumstances
where a full appraisal report is not required, including reviewing prop-
erty tax assessments, reviewing comparable sales provided by a real
estate agent or using a qualified real estate professional to provide an
estimate of value.
In those limited circumstances
where obtaining an appraisal Researching the assessed value of a property in the local assessor’s office
for a purchase is not necessary is a useful place to start, provided, however, the researcher understands
or practical, the land trust must
how properties are assessed, how recent the assessment is and whether
still establish value and justify its
the assessed value is an accurate indicator of value. In many jurisdic-
tions, assessments have no real relationship to current fair market value
because the assessor has not updated assessment rolls in years or the
market is moving at such a rapid rate that it is impossible to keep up.
While tax assessments are no substitute for a qualified independent
appraisal, they can provide some indication of value that can be helpful
in determining whether and how to proceed with further negotiations.
Other alternatives to a complete appraisal report include:
• Value analysis. A qualified real estate professional performs
research to reach a value conclusion, but does not write a
complete appraisal report. Instead, he or she simply prepares a
brief summary of the findings and briefs the client.
• Letter of opinion (sometimes called “windshield” or “drive-by”
appraisal). This is a short written estimate of what a property
or interest in a property may be worth. It is often used for
fairly standard units of real estate, such as lots in a subdivi-
sion or certain types of timber acreage. It is usually solicited
from an experienced real estate professional who can create an
estimate from experience, background knowledge and recent
data already in hand without doing a great deal of research.
This kind of document is not much use for a property of any
• Preliminary report. This report lists some comparables and
226 Acquiring Land and Conservation Easements
sets forth a range of values for the property (as opposed to an
appraisal, which sets one opinion of value).
• Summary appraisal report. Uniform Standards of Professional
Appraisal Practice (USPAP) provides a detailed descrip-
tion and standards for a summary appraisal report. USPAP
Standard 2-3, which lists the specific elements that are to be
included in a summary appraisal report, is included on page
Uniform Standards of Professional
228. Many appraisals are issued as summary appraisal reports,
Appraisal Practice: Adopted in
which simply means that the appraiser created a complete file 1989 by the Appraisal Foundation,
for the work and completed the process required to deliver a USPAP is the generally accepted
full appraisal report, but did not include every possible compo- standards for professional appraisal
nent in the final report. practice in North America.
• Restricted use report. This type of report is similar to a summary
appraisal report, but its use is restricted to that of the client
only. Like a summary report, the restricted use report does
not contain all the data that would be found in a complete
appraisal report. A restricted use report, therefore, may be
appropriate for a commercial real estate developer, for example,
with a history of buying commercial properties in a particu-
lar area when the developer is considering a new purchase of
commercial land in the same area, but it would not be appro-
priate for a land trust making its first conservation purchase.
If an appraiser holds a state license or certification, however, that
appraiser is subject to USPAP (Uniform Standards of Professional
Appraisal Practice) at all times. This means that a licensed appraiser
may only provide an opinion of value or appraisal in one of three forms:
1. Restricted use report
2. Summary appraisal report
3. Complete appraisal
Many appraisers consider any opinion of value an appraisal. In most
states, a licensed or certified appraiser generally cannot render an opin-
ion of value (that is, perform an appraisal) in regard to a property
without relevant data to support that opinion of value. Producing an
opinion of value without the relevant and appropriate research can be
a violation of USPAP, as well as the ethical regulations of some of the
professional appraisal organizations.
Unacceptable Value Documentation
Certain types of documentation of value are clearly unacceptable for
Purchasing Land and Easements 227
USPAP Standard 2-3
Each written real property appraisal report must contain a signed certifi-
cation that is similar in content to the following form:
I certify that, to the best of my knowledge and belief:
— he statements of fact contained in this report are true and
— he reported analyses, opinions, and conclusions are limited only
by the reported assumptions and limiting conditions and are my
personal, impartial, and unbiased professional analyses, opinions,
— have no (or the specified) present or prospective interest in the
property that is the subject of this report and no (or the speci-
fied) personal interest with respect to the parties involved.
— have no bias with respect to the property that is the subject of
this report or to the parties involved with this assignment.
— y engagement in this assignment was not contingent upon
developing or reporting predetermined results.
— y compensation for completing this assignment is not contin-
gent upon the development or reporting of a predetermined
value or direction in value that favors the cause of the client,
the amount of the value opinion, the attainment of a stipulated
result, or the occurrence of a subsequent event directly related to
the intended use of this appraisal.
— y analyses, opinions, and conclusions were developed, and
this report has been prepared, in conformity with the Uniform
Standards of Professional Appraisal Practice.
— have (or have not) made a personal inspection of the property
that is the subject of this report. (If more than one person signs
this certification, the certification must clearly specify which
individuals did and which individuals did not make a personal
inspection of the appraised property.)
— o one provided significant real property appraisal assistance
to the person signing this certification. (If there are exceptions,
the name of each individual providing significant real property
appraisal assistance must be stated.)
land trusts to use in determining a purchase price for a conservation
property, because they lack substantiation by an expert with knowl-
edge of the real estate market. Relying on a price for land or an inter-
est in land set by the landowner or set by a public agency when not
228 Acquiring Land and Conservation Easements
derived from an appraisal is unacceptable because such prices may
bear no relation to the actual fair market value of the land. Reliance
upon an appraisal commissioned by a landowner is also unacceptable
because it may be based upon information that is incomplete or that
may be inaccurate, or the appraisal may not have been performed by a
suitably qualified appraiser.
Relying on an appraisal of an adjacent property to determine value is
also unacceptable because every parcel of land is unique, with different
physical and other characteristics and, therefore, cannot be compared
as if identical (except in very limited circumstances, such as with respect
to lots in a subdivision). Reliance upon tax assessments is also unac-
ceptable because tax assessors generally do not value properties every
year, and thus such assessments may be out of date with respect to
current fair market value. Finally, relying upon summaries of compa-
rable sales or experience with similar sales compiled by land trust staff,
volunteers or others are also unacceptable because these individuals
are not trained to properly value land and are thus not qualified to
appraise its value. The danger in using such unacceptable documenta-
tion of value is that a land trust may find that by paying a value deter-
mined by one not qualified to value real estate, the land trust may
violate federal laws by paying a price that may result in impermissible
private benefit or private inurement.
Using Appraisals to Guide Negotiations
If an appraisal is being used to guide price negotiations, it can substan-
tiate a land trust’s negotiated price or it may show that the price is not
within a range of reasonable variation. Most professional appraisers
acknowledge that a 5 to 10 percent variation higher or lower than the
appraised value is a reasonable range for negotiations.
As a nonprofit organization, a land trust must be fiscally responsible
with its funds. In addition, it is legally obligated to ensure its transac-
tions do not unduly inure to the benefit of any individual. Paying in
excess of fair market value can leave a land trust vulnerable to charges
of conferring impermissible private benefit or private inurement upon
the seller. Although analysis may not be easy, careful deliberation is
key when choosing to pay more than fair market value. Sound analysis
includes obtaining qualified legal advice and carefully reviewing the
costs and benefits of the transaction. While paying a premium of 5 to
10 percent may be acceptable, paying much more than that makes the
transaction more suspect, may not be in the best interest of the mission
Purchasing Land and Easements 229
of the land trust, and may be harder to justify to land trust supporters,
the general public and the government. Paying more than fair market
value, especially on a regular basis, can threaten a land trust’s 501(c)(3)
charitable status. Thus, careful documentation of the public benefit and
the property’s unique value is paramount to justifying such an unusual
expenditure. Documentation may include:
Paying in excess of fair market • Appraisals by those capable of quantifying the premium price
value can leave a land trust (for example, appraisers with specific expertise in the type of
vulnerable to charges of confer- property under consideration)
ring impermissible private benefit • Expert opinions of biologists, architects or other experts
or private inurement and threaten • Well-documented deliberations by the land trust’s board vali-
its 501(c)(3) charitable status. dating its willingness to pay a premium because of the prop-
erty’s special attributes
• Documentation of negotiations and the land trust’s inability to
obtain a lower price
• Documentation of a land trust’s policy/practice on paying more
than fair market value and documentation of the extraordinary
nature of this particular transaction
For further discussion of private benefit and inurement, see Standard 4
and the Land Trust Alliance course “Avoiding Conflicts of Interest and
Running an Ethical Land Trust.”
A Midwestern land trust identified protecting land along a local scenic byway
as one of its focus areas. The land trust knew that it needed to start its protec-
tion efforts by acquiring the cornerstone property of the initiative — a parcel
of land across from already conserved land and mere feet from the Great
Lakes. The elderly landowners had decided for themselves exactly how much
their land was worth and were unwilling to negotiate or consider the land
trust’s appraisal of the fair market value of their land. They didn’t need to sell,
didn’t need the money and wouldn’t budge on price. Although the land trust’s
appraisal for the land was somewhat lower (approximately 15 percent lower)
than the price the landowners would accept, the land trust documented its
reasoning that the property was so unique from a conservation perspective
that it justified paying more than the appraised amount. Today, the land trust
believes its acquisition was fully warranted; subsequent to this initial acquisi-
tion, several miles and hundreds of acres of land along this scenic byway have
been protected, in part because the cornerstone property was conserved first
and spurred attention and support for additional protection along the byway.
230 Acquiring Land and Conservation Easements
In most cases, a land trust attempts to purchase land or easements
below fair market value. Many landowners choose to sell their land
or an easement to a land trust in a bargain sale transaction where the
landowner agrees to sell below fair market value, donating the differ-
ence between the property’s appraised fair market value and its sale
price. The landowner may be eligible for an income tax deduction
based on the value donated. The landowner must secure an appraisal
to establish the value of the donation and substantiate the charitable In most bargain sale transac-
gift. In most bargain sale transactions, a land trust commissions an tions, a land trust commissions
appraisal to justify its purchase price, while the landowner commis- an appraisal to justify its purchase
sions his or her own appraisal to substantiate the donation. In some price, while the landowner
cases, the appraisal is jointly commissioned by the land trust and the commissions a second appraisal
landowner, or the land trust may obtain a review appraisal of the land- to substantiate the donation.
For more information on the tax implications of bargain sale transac-
tions, see the Land Trust Alliance course “Tax Benefits and Appraisals
of Conservation Projects.”
A note concerning appraisals and their use in negotiations: While
many government agencies are required to offer the landowner fair
market value for a property, land trusts are under no legal obligation
to do so. While a land trust is not required to share an appraisal that it
has commissioned, nevertheless it should not mislead or be untruth-
ful in its negotiations. Policies to guide ethical standards for staff and
board members will help ensure that the land trust treats all landown-
ers fairly. Some land trusts choose to share their appraisals as part of
the negotiating process; other land trusts make a decision on a case-
While many government agen-
by-case basis, while still others do not share their appraisals. There
cies are required to offer the
is no right or wrong answer to whether a land trust should share its
landowner fair market value for a
appraisal; however, land trusts should not mislead the landowner about property, land trusts are under no
a property’s value nor take advantage of any individual landowner’s legal obligation to do so.
desperate or impoverished circumstances.
Land trusts should not mislead
Appraisals the landowner about a property’s
value nor take advantage of any
In most cases when a land trust purchases land or a conservation individual landowner’s desperate
easement, fair market value is established by an appraisal. The art of or impoverished circumstances.
appraising conservation land can be complicated, and a land trust must
make sure the appraiser is qualified to conduct this kind of appraisal.
Practice 9J requires a “qualified independent appraisal” for most
purchases of land or conservation easements.
Purchasing Land and Easements 231
Qualified Independent Appraisal
The Pension Protection Act of 2006 defines a “qualified appraisal” for
purposes of substantiating charitable gifts of appreciated property in
excess of $5,000 as an appraisal completed pursuant to the regula-
tions of the Secretary of the Treasury and conducted by “a qualified
appraiser in accordance with generally accepted appraising standards”
and subject to other guidance of the Secretary. A “qualified appraisal,”
as defined in Treasury Reg. §1.170A-13(c)(3), is an appraisal that:
• Is made not earlier than 60 days prior to the date of
• Includes certain detailed information
• Is prepared, signed and dated by a qualified appraiser
• Does not involve a prohibited appraisal fee, such as a fee based
on the percentage of the valuation
Remember that the responsibility for obtaining an appraisal to
The responsibility for obtaining
substantiate the value of a charitable gift rests with the landowner-
an appraisal to substantiate
donor, not the land trust.
the value of a charitable gift
rests with the landowner-donor,
not the land trust. A “qualified independent appraisal” for the purpose of purchasing land
or conservation easements will contain most of the same elements,
but is defined by Land Trust Standards and Practices as “an indepen-
dent appraisal prepared in compliance with the Uniform Standards
of Professional Appraisal Practice by a state-licensed or state-certified
appraiser who has verifiable conservation easement or conservation
real estate experience.”
A qualified appraisal must be prepared by a “qualified appraiser.” Both
the Pension Act and the Treasury Regulations define a “qualified
appraiser.” Among other requirements, he or she cannot be the donor,
the donee, a party to the transaction in which the donor acquired the
property, an employee of or related to any of the forgoing persons, or
any person whose relationship to the taxpayer would cause a reasonable
person to question the appraiser’s independence. An appraiser who is
regularly retained by any of the above and who does not perform a
majority of his or her yearly appraisals for others is not a qualified
appraiser. In addition, a qualified appraiser must also have “earned an
appraisal designation from a recognized professional appraiser organi-
zation or who [have] otherwise met minimum education and experi-
ence requirements set forth in regulations prescribed by the Secretary.”
232 Acquiring Land and Conservation Easements
As of early 2009, the IRS has a pending rule change with respect to
the definition of a qualified appraiser, so readers should check with
the IRS or the Land Trust Alliance for updated information on this
issue. For a thorough discussion of the IRS requirements for quali-
fied appraisals and appraisers, see the Land Trust Alliance course “Tax
Benefits and Appraisals of Conservation Projects.”
In addition to these federal requirements, a land trust should under-
stand whether there are licensing or certification requirements for
appraisers in the state in which the land trust is located.
There are generally three sets of appraisal standards that are followed
by appraisers depending on the purpose of the acquisition and whether
federal funds are involved:
• Treasury Regulations relating to easement valuation and
substantiation (Treasury Reg. §1.170A-13) for donations or
bargain sale purchases of conservation easements
• Uniform Standards of Professional Appraisal Practice
• Uniform Appraisal Standards for Federal Land Acquisitions
(UAS or Yellow Book)
Standards for the appraisal profession are set forth in the Uniform
Standards of Professional Appraisal Practice (USPAP) developed by
the Appraisal Standards Board of the Appraisal Foundation. USPAP
specifies procedures for appraisers to follow in developing and commu-
nicating an appraisal and the ethical rules for appraisal practice. As
defined by USPAP, “an appraisal is the act or process of developing
an opinion of value. The valuation process is a systematic procedure
the appraiser follows to answer a client’s question about real property
value.” While neither the Internal Revenue Service nor the tax code
currently recognizes USPAP, it has been the acknowledged corner-
stone of accepted appraisal standards throughout the country. Since
1992, the Office of Management and Budget requires federal land
acquisition and direct lending agencies to use appraisals in confor-
mance with USPAP standards.
Most land trusts and public agencies acquiring easements with federal
funds must adhere to the Yellow Book, which is updated periodically
by the Interagency Land Acquisition Conference. While the Yellow
Purchasing Land and Easements 233
Book and USPAP are complementary, the Yellow Book was specifi-
cally developed for the valuation of federal land acquisitions. There are
areas where the Yellow Book conflicts with the Treasury Regulations
and USPAP, so appraisers must be attentive to the intended uses of
the appraisal. As with USPAP, neither the Internal Revenue Service
nor the tax code recognizes the Yellow Book. For more information on
these standards, see the Land Trust Alliance’s course “Tax Benefits and
Appraisals of Conservation Projects.”
While appraising land in fee is relatively straightforward, the meth-
odology for appraising conservation easements involves an additional
step. Most conservation easement appraisals are based on the “before-
and-after” method. In the before-and-after approach, an appraiser
determines the value of the easement property before the easement is
in place and after the easement is in place. The difference between the
two valuations is the estimated fair market value of the conservation
Approaches to Value
The three most common approaches to appraising real estate are
the sales comparison approach, the income approach and the cost
Sales Comparison Approach. The sales comparison approach involves
determining value by analyzing prices of similar property recently sold
in the same or a similar market and comparing them to the property in
question. This approach is challenging, because no two pieces of land
are exactly alike; thus, an appraiser chooses recent sales of comparable
properties and then makes professional judgments about how to adjust
these “comps” by factoring in how various elements of each parcel of
land might affect their value. Thus an appraiser might consider the
physical characteristics of the land, its location, its access, any condi-
tions of the sale (was it made under duress) and other factors that
might affect its value.
Although this method may work well for purchases of fee interests in
property, in most parts of the country there is not sufficient market data
for sales of conservation easements; therefore, the value of a conser-
vation easement is often determined by the before-and-after method.
The sales comparison approach to appraising property assumes the
buyer and seller are prudent and knowledgeable and is considered to be
reliable when there is an active market for the type of property being
234 Acquiring Land and Conservation Easements
appraised. See page 269 for an outline of an appraisal adapted from
the Conservation Easement Appraisal Guide published by the Colorado
Coalition of Land Trusts. Except for those elements that are specific
to a conservation easement appraisal report, it is a good outline of the
elements of an appraisal completed for land in fee. Certain items are
repeated in the outline, but they often are repeated in the appraisal
report and may be arranged differently depending on the style and
practice of a given appraiser. The elements in the outline are based on
the Yellow Book standards. You can obtain a copy of the full appraisal
outline on The Learning Center’s library (http://learningcenter.lta.org/
library; search “Conservation Easement Appraisal Guide”).
Income Approach. The income approach to appraising land derives its
value by converting the property’s anticipated future income stream
into one lump sum according to a specific formula. In order for this
approach to apply, the land in question must generate income, so it is
rarely used for undeveloped land, unless there is revenue derived from
the sale of timber or minerals on the property. The income approach
determines value by dividing the annual net income from the property
by a capitalization rate to arrive at a capitalized value for the property.
The “cap rate” is a reflection of how much return it is reasonable to
expect on the investment of a fixed sum and is derived mathematically
by analyzing similar properties, or it can be provided by local experts
in real estate analysis.
Cost Approach. The cost approach is based on the fair market value
of the land plus the depreciated replacement costs of any improve-
ments located on the land. Because of the difficulty in estimating the
replacement costs of the improvements, this method is rarely used as
the primary means of evaluating the fair market value of a property,
but may be used to help justify the value derived by one of the other
two common approaches.
A final method that is sometimes used is discounted cash-flow analysis.
This method should result in a price a developer would be willing to
pay for a particular property given a potential profit in the future and
is similar to the income approach. This analysis examines the poten-
tial future development value of a property minus the costs of devel-
opment. Appraised value set using this method should be carefully
scrutinized to ensure that the assumptions underlying this method
(likelihood of development approvals, market uptake and cost of
development) are reasonable.
Purchasing Land and Easements 235
An appraiser should value properties using all three methods when
appropriate and should discuss why a particular method was omitted.
After valuing the land using as many of these methods as are relevant
to the property, the appraiser will compare the values and make a final
conclusion of value. For more information, see the Land Trust Alliance
course “Tax Benefits and Appraisals of Conservation Projects.”
Hiring an Appraiser
One of the first steps in securing a sound appraisal is to hire a knowl-
edgeable and competent appraiser. For conservation easement trans-
actions, it is wise to consult other appraisers, lawyers involved in
conservation easement work and land trust professionals for the names
of experienced conservation easement appraisers. When hiring an
appraiser for acquisitions of land in fee, the options are a little broader.
It is useful to contact professional appraiser organizations for referrals
and to check credentials with the state licensing board. Before retain-
ing an appraiser, it is a good idea to engage potential candidates in a
wide-ranging discussion about their work experience and professional
Appraisers will usually provide a written agreement detailing the scope
of their services and their cost to the party paying for the appraisal.
For bargain sales, if appropriate, be sure to address the timing of the
appraisal report to comply with reporting requirements under the tax
code. If you are unfamiliar with the appraiser’s work, include a request
for a draft appraisal first so that the appraiser can address any ques-
tions regarding methodology or comparable sales. It is worthwhile to
have the engagement agreement reviewed by legal counsel.
Appraisers offer many other services that may be of interest to your
land trust. In addition to full appraisals, they can provide an array of
valuation-related services, including:
• Restricted reports/summary reports
• Review of an appraisal
• Information on trends
• Tracking resale of conservation easement protected properties
Working with Appraisers
Before commissioning an appraisal, a land trust should be clear about
why it needs one and how it will be used. To begin, your land trust
should inspect the land and obtain title work for the property and any
236 Acquiring Land and Conservation Easements
Pertinent Questions to Ask an Appraiser
• Do you hold a current appraisal license from the state in which the prop-
erty is located?
• Do you have any other special designations, such as the Appraisal
Institute’s RM or MAI or the American Society of Farm Managers and
Rural Appraisers ARA?
• Have you appraised property in this county recently? (The answer to
this question will indicate familiarity with the market and may indicate
whether there will be additional expense for the cost of updating market
• Have you appraised property similar to this property recently (for example,
development land, ranchland, farmland)?
• How long have you been an appraiser? (Time in the business does not
necessarily equate to competency, but it provides you with a general under-
standing of the appraiser’s experience.)
• How many appraisals of this type have you completed, and who have been
your clients (for example, private landowners, government agencies, land
• Are you qualified to write an appraisal for the purpose of substantiating a
charitable contribution for federal income tax purposes? Can you write an
appraisal to USPAP standards? Federal Yellow Book standards?
• Do you have experience with the IRS in defending any of your apprais-
als? (An appraiser who was required to defend an appraisal should not
necessarily be discounted, because donations can be flagged by the IRS for
review for a number of issues. However, you should be interested in the
circumstances and results of such a defense.)
• If applicable, please explain how you propose to address water rights.
(In some areas, water rights represent substantial value. However, not all
appraisers are familiar with valuing water rights.)
• If applicable, please explain how you will address the timber value.
• What do you need from the land trust to complete the appraisal (docu-
ments, other materials)?
• What are the fees and timeline to complete the appraisal?
• Please provide three references from past clients.
Questions specifically related to the valuation of conservation easements:
• Have you received a Certificate of Completion from the Appraisal
Institute for the successful completion of the “Valuation of Conservation
Easement” program curriculum and program exam?
• Are you familiar with the before-and-after approach to appraising conser-
• Are you familiar with the requirements to meet the “qualified appraisal”
standard? Are you a “qualified appraiser”?
• If you have not yet written a conservation easement appraisal, what steps
will you take to familiarize yourself with this type of appraisal? Would you
consider affiliating with a more experienced appraiser?
Purchasing Land and Easements 237
surveys or other documents related to the land that may be important
to determining its value, and deliver those to the appraiser. Then you
should spend time working out and defining the details of the project
(what is your land trust purchasing — acreage, mineral rights, timber
rights, conservation easement), relating any title problems or issues
associated with access to the property to the appraiser and establishing
a mutually acceptable work plan.
Appraisal timing can be tricky; thus, a good rule of thumb for purchase
transactions is to start the appraisal process as soon as reasonably
possible. It is important that a land trust communicate any deadlines
to an appraiser early in the discussions and that you follow up regularly
with the appraiser. If the deadlines are nonnegotiable, it is particularly
important to impress them upon the appraiser, preferably in writing,
or you may find yourself facing a grant or contract deadline only to
learn that your appraiser is vacationing in Hawaii, as one unfortunate
Colorado land trust found to its great disappointment. In addition to
a discussion of deadlines, you should fully communicate the details of
the project and any complications to the appraiser and apprise him or
her about any issues or concerns your land trust might have about the
acquisition; you must, however, be careful not to try to influence the
outcome of the appraisal. Be sure to request a draft of the appraisal
for review prior to the final document, so that you can address any
concerns about methodology or assumptions before the final appraisal
Request a draft of the Reviewing an Appraisal
appraisal to review prior to the Reviewing the appraisal report before purchasing land or a conserva-
final document to address any tion easement is critical. Review the draft appraisal to ensure that it:
concerns about methodology
or assumptions before the final • Correctly describes the property and any conservation restric-
appraisal is delivered. tions (in the case of a conservation easement appraisal using
the before-and-after method of valuation)
• Correctly identifies the landowner
• Correctly identifies the client
• Correctly identifies the appraisal problem (the purpose of the
• Cites the appraiser’s qualifications
• Addresses access to the land
• Addresses all three forms of approach to valuation
238 Acquiring Land and Conservation Easements
In addition, a land trust should review the limiting conditions (the
conditions that define the parameters of an appraiser’s work) to deter-
• You both have the same understanding of the conditions
• Conditions have not been added to make the appraisal suspect
• The appraiser has not made an unrealistic assumption that
negatively impacts the appraisal
For example, an appraiser could state in the conditions that he or she
presumed legal access to the property. If access was an exception to title
(that is, there was no legal or physical access), the appraisal outcome
would be incorrect with the stated condition that access is presumed.
Finally, a land trust should review the final value determination to
make sure it is clear how the appraiser arrived at his or her conclusions.
When communicating any changes to an appraiser, a land trust must
be careful not to act as an editor of the appraisal (whether ordered by
When an appraisal is delivered to
the land trust or the landowner) in order to avoid creating the impres-
a land trust, it is important that
sion that with such edits the land trust has approved the appraisal as
the person in charge of due dili-
accurate and valid. It is also important to remember the strong caution gence reads the appraisal in full,
against taking any actions that may be interpreted as the land trust not just the page that states the
providing legal or financial advice. As discussed earlier, it is fine for a value.
land trust to provide information to landowners and their advisors, but
it cannot provide specific legal advice.
Whenever a land trust acquires an interest in property, whether a
donation or a purchase, it negotiates. Many people have a negative
reaction to the term “negotiating.” If our negotiation experiences in life
— getting our curfew pushed back when we were teenagers, shopping
for a car or buying our first house — were not good ones, negotiations
may have left us with bad feelings, even when we got what we wanted.
(“I only paid $20,000 for that car, but they gave in a little too easily.
Maybe I could have paid less?”)
The high ethical standards to which we hold ourselves as nonprofit land
trusts demand that we find a better way to negotiate. The first step is to
make sure that your organization supports ethical negotiations. Second,
the land trust should be clear about who has authority to negotiate, and
Purchasing Land and Easements 239
how much autonomy that person possesses. Last, the land trust repre-
sentative leading a project should obtain training in negotiations.
The Harvard Negotiation Project, begun in 1979, is dedicated to
developing better ways to negotiate and solve conflicts. According to
the project, the traditional method of negotiation follows these steps:
Step 1: Each party states his or her initial positions
Step 2: Exchange of concessions
Step 3: Parties meet somewhere in the middle
Sound familiar? Now, each party, having played out this negotiating
stance many times before, begins the negotiation at an extreme posi-
tion, figuring everyone will meet in the middle. In this case, from the
first step, the process is more about jockeying for position rather than
negotiating for what each party really wants. The traditional method of
negotiating focuses on positions — not the underlying goals.
The problem with the traditional method of negotiating is that neither
The traditional method of side feels completely satisfied when negotiations conclude. Each side
negotiating is detrimental to is left wondering if it got the best deal or if it could have gotten more.
developing an ongoing positive The traditional method of negotiating is detrimental to developing an
relationship between the land ongoing positive relationship between the land trust and a landowner.
trust and a landowner.
The Harvard Negotiation Project developed a theory of principled
negotiations. This way of negotiating takes adversarial positioning out
of the equation and focuses on everyone achieving his or her goals
and feeling good about the negotiations. This method works well for
conservation real estate for two reasons. First, it creates an ongoing,
positive relationship with the landowner. Second, land conservation is
nearly unique in that both parties are often negotiating for the same
outcome: to protect the land.
Using principled negotiations ensures that the land trust’s dealings are
Principled negotiations create transparent, it lets landowners know that a land trust will work hard to
an ongoing, positive relationship satisfy their needs, it acknowledges that land trusts and landowners are
with the landowner.
working for the same goal, it enables creative problem solving, and it
leaves both sides feeling good about the transaction. Principled nego-
tiations separate people from the problem, focus on interests (not positions),
insist on using objective criteria, and invent options for mutual gain.
240 Acquiring Land and Conservation Easements
Separate the people from the problem. An elderly landowner who had
inherited a wide expanse of Great Lakes shoreline contacted his
local land trust to talk about protecting his land. Within the first 10
minutes, the landowner gently referred to the land trust representa-
tive, in the same sentence, as a conservationist and a communist. This
gentleman did not like conservation groups, but he knew his children
could not afford to inherit the land and pay the estate taxes, because
the value had risen by a factor of 100 in his lifetime. After an afternoon
of conversation during which past misconceptions were dispelled by
discovering mutual areas of interest, this same gentleman said, with
tears in his eyes, that he and his wife were blessed that they were able
to enjoy the property and never had to consider the monetary value of
their land, and it broke his heart that his children were forced to do so.
The landowner and the land trust moved beyond their preconceived
notions and prejudices and, in that moment, defined the problem.
Focus on interests, not positions. In negotiating the terms of a conserva-
tion easement, the couple who own the land might begin by saying
they want to reserve the right to subdivide and build four houses
(assume that they have four children), construct a pond, conduct agri-
culture where there is no such use currently, manage the forest, create
trails and so on. Landowners may begin with everything, not wanting
to make a decision about what to eliminate. In a traditional negotia-
tion, the land trust may counter the landowners’ position with its own
position on reserved rights (for example, only two home sites, no pond,
trails are acceptable). This method of negotiating does not allow for
getting past positions to discuss the landowners’ and land trust’s inter-
ests. The landowners and land trust do not need to begin their discus-
sion focusing on reserved rights. They can begin by talking about why
the landowners want to protect their land, what they are trying to
accomplish or what they are afraid might happen if they do not protect
their land. Only when two parties begin with an understanding of
their interests can they craft solutions.
Insist on using objective criteria. Using objective criteria can help ensure
fairness, and sharing information can assure all parties that they are
being treated fairly. Negotiators will feel better about their decisions if Only when we focus on the
they feel they are making informed choices. For example, using objec- interests of the parties, can we
tive criteria may take the form of negotiating based on appraised value. effectively craft good conserva-
An independent appraisal can give both sides information about the tion solutions and outcomes.
true value of the land and establish a fair basis for negotiating. Another
objective way to achieve fairness is by establishing criteria for focus
Purchasing Land and Easements 241
areas. A land trust with a goal to protect a certain portion of its service
area could prioritize parcels and set limits for the amount it is willing
to pay based on a parcel’s priority (for example: highest priority, full
fair market value; second-tier priority, 50 percent of fair market value
and so on).
Invent options for mutual gain. A good negotiator must be able to put
him- or herself in the other party’s shoes and understand what that
party wants. The conservation business is voluntary — no landowner
is forced to work with a land trust. Therefore, land trusts must strive to
determine where the parties’ interests meet. When the parties arrive at
this point, the land trust and landowner can craft a solution on behalf
of the land, which meets both the landowner’s and the land trust’s
goals. Without an understanding of what the other side wants, it is
nearly impossible to effectively design a deal.
Several years ago, The Conservation Fund’s western regional office worked
with the US Forest Service in Wyoming to purchase a parcel of land that
included the early 20th-century town of Kirwin, which was owned by a mining
company. The Fund was negotiating to purchase the property and, through
the generosity of the Richard King Mellon Foundation, planned to donate the
property to the Forest Service.
Although the property (which includes seven miles of frontage and wetlands
along the Wood River) was the Shoshone National Forest’s highest prior-
ity for acquisition, it also extended beyond the established Forest Service
boundaries, which precluded the Forest Service from acquiring the entire
parcel. The Fund attempted to negotiate a purchase of only a portion of the
property, but the seller was only interested in selling all of his land holdings.
Just when the project appeared to stall, an idea was crafted to bring in a
fourth party, the Wyoming Game and Fish Department. The state agency was
interested in acquiring the 4,459-acre Sunshine Ranch portion of the prop-
erty, which serves as vital winter range for elk. In addition, the wetlands,
meadows and forests on the ranch provide habitat for moose, pronghorn
antelope, waterfowl and other wildlife.
With the agencies in agreement to accept the properties, The Conservation
Fund was able to purchase the property at below fair market value, because
the seller understood the difficulty of selling both parcels in one transac-
242 Acquiring Land and Conservation Easements
tion and agreed to lower his price. The negotiators for The Conservation Fund
could have given up, but instead found a creative solution that benefited not
only all of the parties involved but, most importantly, the land, water and
The decision to protect one’s land, whether by donation or sale, is often
an emotional one. It is important to respect a landowner’s motivations
and to document them as part of the negotiation process. If heirs or
community members claim a land trust used heavy-handed tactics to
acquire property, it is the land trust’s responsibility to show that the
seller (or donor) was a willing participant and that it was his or her
choice to protect the land. The land trust should be prepared to say
that it truthfully informed the landowner of his or her choices. Such
openness and its documentation are paramount to maintaining the
reputation of a land trust and ensuring the permanent protection of
Every land trust is encouraged to negotiate ethically and to support
its staff ’s or volunteers’ ability to do so. Training opportunities exist
both inside and outside of the conservation community. Every person
charged with negotiations should read Getting to YES: Negotiating
Agreement without Giving In, by Roger Fisher, Bill Ury and Bruce
Patton. First published in 1981, it was revised and expanded in a
tenth anniversary edition in 1991, and includes information on the
Harvard Negotiating Project (www.pon.harvard.edu/hnp). For addi-
tional thoughts on negotiating conservation transactions, see the
Land Trust Alliance course “Conservation Easement Drafting and
The Four Elements of Principled Negotiations
• Objective Criteria
Purchasing Land and Easements 243
PUTTING IT INTO PRACTICE
This exercise is suitable for a training or board or staff workshop. If engaged in self-
study, read the scenarios and note where the elements of principled negotiations can be
used to manage the exchange.
Divide into groups of three and read the negotiation scenarios below. One partici-
pant will assume the role of a land protection specialist and use the elements of
principled negotiation. The second participant will be a landowner who has never
heard of principled negotiations and takes a traditional view of negotiations. The
third person will observe the exchange and offer suggestions. After the role play,
discuss what you learned.
You are a land protection specialist with a land trust that accepts easements on
working agricultural and ranch lands. Your land trust has recently acquired a work-
ing farm on which you are running an educational program focusing on pioneer
life. A major landowner in the area has approached you about selling a portion of
his property that abuts your farm — a project high on your strategic conservation
plan. The landowner has never been particularly conservation-minded, and you
suspect making money, not conservation, is his goal. Nevertheless, you proceed
with the project and have reached the point where you need to set a price for the
property. The landowner wants slightly more than the appraised value (it’s really
great land!), but your land trust can only afford to pay 80 percent of the appraised
value (times are tough). How can you use principled negotiation in this situation?
You are a board member of an all-volunteer land trust that focuses on protect-
ing scenic lands and natural areas. You are in the process of negotiating easement
terms with a landowner who also happens to be a former board member and major
donor. The landowner wants to reserve four home sites for her four children while
still enjoying a healthy tax break and protecting the land she loves. After looking
at the proposed home sites, you realize that they will impinge on the scenic view
from the highway and jeopardize the conservation purposes of the easement. What
do you do?
244 Acquiring Land and Conservation Easements
You are the executive director of a large land trust that holds easements and nature
preserves across five counties. An elderly, very conservation-minded landowner
wants to protect his land from development and fears his daughter will sell the
property once he dies. He needs money to supplement his retirement income, so
he cannot afford to donate an easement outright, nor can he sell the property
below fair market value. He is toying with the idea of leaving you the land when
he dies. He approaches your land trust for advice on what he can do to protect his
land. Your land trust has been eying this property for many years but has had other
more pressing projects. Now it appears the time is right to take action, but you are
concerned about the costs of the project.
Were you able to find common ground in your shared love for the land? Did the
land protection specialist avoid telling the landowner what he “should” care about?
Did you consider what financial incentives you could offer, for example, pointing
out the financial savings of selling to the land trust through a bargain sale versus
paying a real estate broker a big commission to list the property? Or that you are
a cash buyer (if that’s the case) versus a typical individual buyer who needs to find
Negotiating in this situation may prove tricky, because the landowner does not
appear to share a common conservation vision for the property. You may have to
search for interests that you both share to come to agreement on terms. In deal-
ing with this landowner, you have to ensure that his lack of interest in conservation
does not affect how you treat him. Be creative with solutions. Remind him of the
potential tax advantages of a bargain sale while being careful not to offer tax advice
on his particular situation.
Was the land protection person able to get the landowner to talk about the real
issues and desires — her vision for the land? Were you able to craft creative solu-
tions? Perhaps a family compound — clustered buildings with undivided land and
ownership? Were you able to point to your land protection criteria —an objective
metric — for guidance?
Purchasing Land and Easements 245
PUTTING IT INTO PRACTICE
In this situation, you must be extremely careful because you are negotiat-
ing with an insider to the organization. It is critical that you follow your
conflict of interest policy and clearly document your actions. You must
separate the person from the problem so as not to give preferential treat-
ment to a former colleague. You could point out to her that the location of
the home sites will jeopardize the conservation purposes of the easement
and may not meet the requirements for tax deductibility. You might remind
her of conservation projects with similar concerns that were discussed when
she was on the land trust board. Recommend that she discuss the tax code
requirements with her attorney so she understands that it is not you stand-
ing in her children’s way. Emphasize the value to subsequent generations if
she protects the land without the home sites in view of the highway. Look
creatively at the land to identify building envelopes that are hidden from
the road — find a way to meet her needs as well as the land trust’s goals.
Did you discuss the vision the landowner has for the land? Were you able
to get him away from the nuts and bolts to the bigger picture? Did you talk
about needs and interests and vision? Did any creative ideas emerge (for
example, a bargain sale purchase with a charitable remainder trust, which
would provide income for the landowner during his lifetime)?
In this situation, you must be careful to ensure that the landowner has legal
counsel so as to avoid potential accusations of improper influence from the
heir. Here, you both share the same goals but arrive with different needs.
The landowner wants his land protected but also needs income and a place
to live. You really want this property before it’s too late but the cost is a
potential problem. It’s time for some creative problem-solving. One option
might be to purchase an easement from the landowner, which will require
an appraisal to determine the easement’s value. If you want to acquire the
land outright, you could offer the landowner a life estate on the property
with appropriate safeguards on his use of the land. An appraisal would
also be necessary to determine the purchase price less the value of the life
estate. Either approach will give the landowner much-needed income while
ensuring that the land is protected.
246 Acquiring Land and Conservation Easements
Real Estate Agreements
Agreements related to the transfer of real property must meet the basic
requirements of a contract to be enforceable. They must include:
• An offer and an acceptance by parties who are competent
• Consideration (for example, money given in exchange for the
• Mutual assent (meaning the parties understand and agree to
the essential terms)
A contract must also not be voidable (a contract with a minor, for
instance, is usually voidable). Furthermore, all contracts for the convey- Statute of frauds: State laws that
require certain instruments, such
ance of real property must be enforceable and satisfy the statute of
as deeds, real estate contracts and
frauds for the state in which the property is located.
certain leases, to be in writing to be
The statute of frauds provides that to be enforceable, certain types of
contracts, including those involving real estate, must be in writing. To
comply with the statute, a written contract need not be elaborate, it
need only provide enough evidence that the parties agreed — that they
had a “meeting of the minds.” At a minimum, it needs to identify the
parties, the property interest to be conveyed and the consideration for
the property. In practice, contracts for the purchase of real estate tend
to be much more complicated, but even a collection of communications
could be construed as a purchase contract if the essential elements of
a contract are present. As Tom Masland, a New Hampshire attorney,
points out: “This is why it’s crucial to be very careful when negotiating
the terms of an agreement for real estate conveyance in writing — and
that includes electronic communication. A string of e-mail messages
can be enforced as a contract to buy or sell land.”
The most common types of real estate contracts land trusts encounter
are purchase agreements, option agreements and rights of first refusal.
A purchase agreement is a contract regarding the conveyance of prop-
erty by which an owner agrees to sell his or her property to a buyer. If
the conveyance is a donation instead of a sale, the parties might enter
into a gift agreement, which is similar to a purchase agreement, but
not as elaborate. Such an agreement might be necessary if the land
Purchasing Land and Easements 247
trust plans to fundraise for the stewardship or to expend significant
funds on due diligence matters and cannot risk a landowner changing
his or her mind about the gift at the last moment. Provisions included
in an agreement for the conveyance of a conservation interest are simi-
lar to those found in standard purchase and sale agreements, but many
can and should be modified to address the particulars of the conserva-
tion transaction. The basic elements of a purchase agreement include:
Identification of parties. The grantor or seller should be identified as
the person or persons holding record title to the property. All parties
required to join in the conveyance of the property should be named as
“Grantor” or “Seller” and should sign the agreement. Failure to have
Failure to have the correct the correct party named in the contract might render it unenforceable.
party named as the seller in
the contract might render Property description. The agreement should include a detailed legal
it unenforceable. description of the property interest to be conveyed. Such information
may be obtained from the owner’s deed(s), from a survey of the prop-
erty or from a title company or a county tax assessor’s records. The
property description should also include any appurtenant easements
that might benefit the property and if any of the land or any of its
improvements is to be excluded from the conveyance.
Good faith deposit. Most real estate contracts will include a good faith
deposit or a certain amount of money given by the purchaser to signify
that he or she is serious about the contract and is acting in good faith.
This deposit, sometimes known as earnest money, is usually held by
the title company in escrow pending closing (or another agreed-upon
time). In most cases, but not all, the contract will specify that a deposit
is refundable if, during the inspection of a property, the purchaser deter-
mines there are flaws that will cause the termination of the contract.
There is typically an end date to an inspection period after which the
deposit is nonrefundable. The contract will also spell out whether the
deposit is applied to the purchase price. Most land trusts negotiate
that their deposit will be applied to the purchase price at closing.
Consideration. A key part of any contract, affecting whether the
contract is enforceable, is consideration. According to Black’s Law
Dictionary, consideration is “[s]omething of value (such as an act, a
forbearance, or a return promise) received by a promisor from a prom-
ise.” This section of the agreement identifies whether consideration
will be monetary, nominal or something else. The consideration section
indicates whether the contemplated transaction is by donation, sale or
248 Acquiring Land and Conservation Easements
bargain sale. Usually purchase agreements indicate a sales price if it is a
sale or bargain sale transaction. However, in some circumstances, final
consideration may be determined by an appraisal that is in process. For
bargain sale transactions, the agreement should acknowledge that the
consideration is not the fair market value of the fee or easement, but
that the difference between the purchase price and the appraised value
shall be deemed a gift by the parties.
Grant and general description of terms. The agreement should discuss
the manner in which the property deed or conservation easement
will be drafted and, for a conservation easement, generally outline the
terms of the easement. The level of detail will vary from deal to deal,
depending on where the parties are in negotiating the easement’s
terms. For example, it may be worthwhile to attach the land trust’s
standard easement as an exhibit with a statement that the final terms
will be substantially similar to those reflected in the exhibit, subject to
further negotiation. Alternatively, the parties can identify a list of key
restrictions and key conservation values to be protected by the final
The agreement should specify the types of seller’s warranty cove-
nants (that is, the type of deed the seller will execute, whether general
warranty, special or quitclaim) and, in the case of a fee purchase, any
restrictions or easements retained by the seller.
Closing. In the absence of a specified closing date, time of performance
is generally what is reasonable under the circumstances. If the docu-
ment states that “time is of the essence,” failure to meet the particular
timelines is a material breach; if a firm closing date is important, “time
is of the essence” language should be included. If something prevents
or precludes sticking to the timelines set in the purchase agreement,
the parties should agree to an extension in writing.
Responsibility for transaction costs. A well-drafted agreement often
assigns responsibility for appraisal, title insurance and survey costs.
Title. Although ordering title is often the owner’s obligation, all agree-
ments should give the land trust the right to conduct a title search
of the property. In addition, the agreement should make consumma-
tion of the deal contingent either upon a determination that the title
is acceptable, or upon the seller’s timely correction of unacceptable
encumbrances. The parties might agree that to the extent the land trust
Purchasing Land and Easements 249
has to expend funds to address title problems, the purchase price will
Tests and inspections. A purchase agreement should spell out the inspec-
tions a land trust will undertake in advance of closing, with satisfactory
results of the inspections being a contingency to closing. The agree-
ment should set a specific time period in which to complete all tests
and inspections, and indicate that results will be provided to the land-
owner. The agreement should indicate what will occur if problems are
revealed during an inspection — whether the land trust can cancel the
contract, waive the problems and proceed with the transaction, or seek
to have the seller correct the problems. Some landowners might not
want to expend large amounts of money to remediate an environmen-
tal problem, but they may be willing to reduce the purchase price if the
land trust undertakes the clean up.
Responsibility for recording costs, transfer taxes and property taxes. As a
general rule, transfer taxes are the responsibility of the seller. Transfer
taxes are state and/or local taxes that are assessed on real property when
ownership of the property is transferred. Recording costs are typi-
cally the responsibility of the buyer. Purchase agreements frequently
state this arrangement, or state that the payment of such costs will
be according to local custom or local law. If the contract is silent, the
responsibility for costs and taxes will be according to local custom or
law. Property taxes are often prorated between the parties as of the
date of closing, but keep in mind that taxing authorities do not charge
real property taxes on a per diem basis. The parties must estimate this
amount. Some contracts will provide for a recalculation after the end
of the tax year if the actual tax charge changes substantially from the
estimated proration. If the jurisdiction recognizes tax exemption for
nonprofits, make a note to apply for the property tax exemption for
fee properties after closing, if appropriate and according to land trust
Warranties. Warranties made by the seller should include statements
regarding the environmental status of the property. The seller should
• No hazardous chemicals were stored on the property (or, if
they were, that they were stored in compliance with all appli-
cable laws and in the ordinary course of business)
• There are no underground storage tanks or wells, or that they
250 Acquiring Land and Conservation Easements
have been properly removed or, in the case of unneeded or dry
• The seller has the authority to sell (if an entity) and authority
and capacity to enter into the contract
The seller should also indemnify the land trust for environmental issues Indemnify: To make payment for a
that developed prior to the land trust taking title. It is also appropri- loss.
ate for the seller to warranty the status of title and access, as well as
whether there are any liens on the property (in addition to any mort-
gage financing that is to be released at closing).
Other contingencies. In addition to contingencies related to title review,
inspections and the resolution of potential problems, other contin-
gencies that frequently appear in purchase contracts include a fund-
ing or financing contingency, as well as project approval by the land
trust’s board of directors. Even land trusts with some purchase money
in-hand may need additional funding from a grant source to complete
the transaction. In a conservation easement transaction, subordination
of an existing mortgage may need to be a contingency. Another contin-
gency might involve agency approval, for instance, when a government
entity is involved.
Seller’s covenants. Land trusts acquiring land for its conservation values
(as opposed to a trade land it might resell) should insist that the
seller promise that while the agreement is in effect, the grantor will
not permit or cause any material change to the property that would
adversely affect its conservation values. If acquiring a conservation
easement, the land trust should also secure a promise from the seller
that he or she will not convey the underlying fee while the agreement Land trusts acquiring land for its
is in effect (the seller will not sell or give the property away). Any conservation values should insist
adverse material change or breach of the promise not to sell should that the seller promise that while
allow the land trust, at its option, the ability to terminate the agree- the agreement is in effect, the
ment with a refund of any good faith deposit it paid. grantor will not permit or cause
any material change to the prop-
Eminent domain or casualty. A land trust may require a provision that erty that would adversely affect its
the agreement can be terminated at its option if all or part of the conservation values.
property is condemned or taken by eminent domain and if in the land
trust’s opinion the property’s conservation values or the conservation
purposes of the intended easement would be substantially diminished
by the taking. If the land trust is still interested in closing, the contract
should provide for a renegotiation of the purchase price to account
for any effect of the taking. In addition, the land trust might want to
Purchasing Land and Easements 251
address what happens upon casualty (fire, flood, earthquake) during
the contract period before closing. For example, some contracts will
permit the buyer to cancel the contract in the event of destruction of
improvements or conservation resources by casualty or assign casualty
Potential Purchase Agreement Provisions
(Items designated with an asterisk are essential elements of an enforceable
1. Parties — the seller/landowner/grantor and the buyer/land trust/
2. Legal description of the property*
3. Good faith deposit
4. Purchase price, and how it is to be paid (whether good faith deposit is
applied to purchase price, paid in full at closing, by promissory note or
combination of cash and note)*
5. Closing particulars (when and where)
6. Contingency or inspection period; original period and extension
(a) Financing/fundraising contingency
(b) Contingency covenants and agreements (how issues are to be
resolved and by whom)
(c) Conditions precedent to closing
(d) Environmental site assessment
7. Title matters
(a) Whether a vendor’s lien (purchase money mortgage) will be retained
(b) Whether seller’s mortgage will be assumed
(c) Warranty of title (general, special, none)
(d) Buyer’s right to examine title, and who is to pay for title
(e) Buyer’s right to obtain a survey
(f) Title commitment
(g) Title review period
8. How to address an unsatisfied contingency (who is responsible for cure,
can buyer waive and close anyway)
9. Real property taxes (how they are to be prorated between buyer and
seller, or if to be paid in full by either party)
252 Acquiring Land and Conservation Easements
Default. The contract should spell out what happens if a transaction
goes sour. In many cases, if a purchaser defaults, the seller’s only remedy
should be the right to retain the good faith deposit; rarely will a court
enforce a contract that would force someone to purchase a property.
Purchasers, on the other hand, may want to include a right of specific
10. Special assessments, transfer taxes
11. Real estate commission (to whom is it owed, or statement that none is
12. Seller’s warranty
13. Or property “as is”
14. Seller representation as to structures, if applicable
15. Items to be delivered at closing
16. Default by seller
17. Default by purchaser
18. Whether one or both parties have right of specific performance
19. Possession issues (address presence of any tenants)
20. Eminent domain
21. Seller financing
22. Assignment of contract
23. Time is of essence
24. Agreement binding
25. Survival of certain provisions after closing
26. Zoning (whether zoning meets buyer’s purposes for property and
whether a zoning change or other approvals is a contingency to closing)
27. Attorneys’ fees
29. Notice provisions
30. Environmental matters — indemnification provisions
31. Issues related to 1031 exchange transactions
32. Casualty matters
33. Signature of parties*
Purchasing Land and Easements 253
performance, compelling a seller to convey the property interest that
was the subject of the contract. According to Black’s Law Dictionary,
specific performance is a “court-ordered remedy that requires precise
fulfillment of legal or contractual obligations when monetary damages
are inappropriate or inadequate, as when the sale of real estate . . . is
involved.” For example, if a land trust spent a great deal of time and
expense conducting its due diligence (ordering title work, an appraisal
and a survey, for instance), prepared grant applications to help fund
the property’s purchase and counted on buying the subject property
to complete its efforts to conserve a particular multi-property natural
resource, a court might enforce a specific performance clause against
a defaulting seller by finding that the land trust not only relied to its
detriment on the contract but also that the particular piece of land
or property interest was so unique it could not be replaced elsewhere.
Because land is unique, courts are often more likely to order specific
performance in suits to enforce purchase contracts, because refunding
money or being able to spend the money on other land is not a perfect
remedy. If a land trust wants to maintain good relations in the commu-
nity, however, the best default provision may provide that all parties
walk away in the same position that they were in when they entered
negotiations because a land trust forcing a landowner to sell his or her
property may not be well received by the community.
Assignment. Whether the agreement is assignable to a third party is
an important consideration, and the agreement should state whether
assignment is allowed or prohibited, or allowed only with the writ-
ten consent of the other party. Any assignment must be in writing.
Otherwise, the ability to assign the contract is governed by state law.
Binding on successors. The agreement may state that the obligations
of the parties are binding on their “heirs, executors, administrators,
successors and assigns.” This provision may be particularly important
if the landowner is elderly.
The box on pages 252–3 contains an outline of the main elements
in a purchase agreement. Some of these points will be more or less
appropriate, depending on the type of property, the relationship of
the parties and the purpose for which the land trust is acquiring the
land. Although very few elements are required to create an enforceable
contract (note the starred provisions), a good contract that protects
the rights of the parties will always have more than just the essen-
tial provisions. Take care that written communications with a land-
254 Acquiring Land and Conservation Easements
owner, including e-mail exchanges, do not rise to the level of creating
an enforceable contract unless you intend this result! See sample terms
for purchase and sale agreements on pages 287–300.
In contrast to a purchase agreement, an option is a contract by which
a landowner agrees with a potential purchaser to sell the property at a
specified price within a specified or reasonable time, without obligating
the potential purchaser to buy the property. An option can be useful
for several reasons. First, it may provide the time a land trust needs
to raise the funds necessary to meet the purchase price and can be an
effective fundraising tool (it creates a very real urgency). It also gives
the land trust some comfort that the landowner is not going to sell, or
be able to sell during the specified period, without the land trust either
exercising its option or releasing the option.
The landowner might sell, but the option, if recorded, would cloud
the title and should be drafted in such a way that it runs with the land
and applies to whomever takes ownership (during the option period).
Not many purchasers would be likely to buy a piece of property know-
ing that an outstanding option awaits exercise. It is important that
an option be in recordable form, so that if need be, the land trust can
record the document and put all interested parties on notice that it has
the right to purchase the property. In many instances, it is preferable
to record a Memorandum of Option (or a similar document), giving
notice that the option exists, but not including specific terms that the
parties might want to keep private. Options need to be nearly as
detailed as purchase agree-
Options need to be nearly as detailed as purchase agreements and provide ments and provide for all the
for all the major elements of a transaction, including contingencies and major elements of a transaction,
inspections. Sometimes the potential purchaser has completed most of including contingencies and
its due diligence and is nearly ready to close on the property, except for inspections.
raising the necessary funds. Depending on how long a transaction takes,
some due diligence items may need to updated, such as a Phase I envi-
ronmental assessment. In a situation where most due diligence items
have been satisfied, the option can be somewhat simpler than a purchase
agreement, with the right of the purchaser to update its due diligence
to the time of closing. For example, if a land trust undertakes a survey,
obtains a title report and performs a hazardous materials inspection
while an option is negotiated, or during the period in which the option
is in place, the land trust may be ready to exercise the option and close
quickly, subject to updating the title and environmental reports.
Purchasing Land and Easements 255
As with a purchase and sale agreement, the purchaser typically puts
money down (an option payment) at the signing of the contract. Unlike
a good faith deposit, an option payment is typically nonrefundable.
The rationale behind this practice is that purchaser is really paying the
seller for the time the property is not on the market. If the purchaser is
unable to purchase the property, the seller is then compensated for the
time he or she lost. An option payment can be applied to the purchase
price, but the option must clearly state this provision. Because options
are often in place for a longer period of time than a typical purchase
agreement, it may be particularly important to detail actions a land-
owner cannot take on the land during the option period (oil and gas
leasing, timber harvesting). See page 301 for a sample option agree-
ment. Before a land trust enters into a contract, local legal counsel
should review the agreement.
A Creative Solution Using a Purchase Option
A Rocky Mountain land trust identified a 5,000-acre ranch with agricultural
resources, wildlife habitat and public recreation opportunities. The ranch’s
owners wanted to conserve the land by selling a conservation easement, and
the parties were able to reach agreement on price and terms. The ranch was
owned by a C corporation, however, and the shareholders were unwilling to
accept the tax consequences of selling the easement while owning the land
through the corporation (the proceeds would have been taxed twice — once
at the corporate level and then again at the shareholder level, dramatically
reducing the value of the sale to the land rich/cash poor ranchers). The corpo-
ration was converted to an S corporation, which solved the double taxation
issue, but raised a different problem: the new corporation could not sell an
easement on the land until 10 years after its creation, due to tax law complica-
tions. Therefore, the parties entered into a 10-year option agreement whereby
the landowners agreed to abide by the conservation easement attached as
an exhibit to the option and the land trust and its public funders placed the
purchase money in escrow. The entire project closed in 2008 and was cele-
brated by all parties to the transaction as well as the ranchland’s community.
Rights of First Refusal
A right of first refusal is a contractual agreement by which a potential
buyer has the right to match the terms and conditions of an agreement
to purchase offered by a third party. If a land trust negotiates a right
of first refusal with a landowner, when the landowner receives an offer
for the purchase of the land, he or she has a contractual obligation to
256 Acquiring Land and Conservation Easements
share the terms of the offer with the land trust and allow it to match
Rights of first refusal may be stand-alone contracts, or they may be
incorporated in other contractual agreements, most frequently leases
and sometimes conservation easements. Like an option agreement, it
is important that a right of first refusal be recorded so that the land When a land trust acquires a
trust puts all parties on notice of its rights. conservation easement, it is
important to review any leases on
the property in which tenants are
When a land trust acquires a conservation easement, it is important to
given rights of first refusal.
review any leases on the property in which tenants are given rights of
first refusal (for example, a farm lease). A land trust may need to require
the owner of that right to subordinate his or her interests to the terms
of the conservation easement, so that the tenant’s right to purchase the
property is subject to the terms of the conservation easement. Without
the subordination, the tenant may have a right to purchase the prop-
erty unencumbered by the easement, which may mean the easement is
void. A sample of right of first refusal is included on page 307.
Exercising a Right of First Refusal
In 1984, the Nantucket Conservation Foundation exercised its right of first
refusal to acquire a significant parcel on the island. According to Executive
Director Jim Lentowski, the three-acre property was a “hole in the donut” —
completely surrounded by Foundation-protected properties. With command-
ing views of the ocean and desirable adjacent open space, the property was
attractive to many buyers. Luckily the Foundation had earlier negotiated a
right of first refusal, which enabled it to intervene, meet the seller’s terms and
purchase the property. According to Lentowski, rights of first refusal can be
both useful and tricky because the land trust has to match the seller’s terms
exactly to exercise that right. Lentowski also suggests that recurring rights of
first refusal can be helpful because they give a land trust multiple chances
to respond — usually with the price going up with time. So if the land trust
doesn’t have the funds to respond on the first go around, the next time the
property comes up for sale, perhaps it will be better positioned to buy the
Working with Attorneys to Draft Contracts
The degree to which a land trust involves an attorney in the acquisition
process can vary, but it is absolutely necessary that an attorney review
Purchasing Land and Easements 257
every contract, conservation easement or written agreement with a
landowner. Depending on the training and knowledge of a land trust’s
land protection personnel, an attorney may be brought into the process
early to negotiate on behalf of the land trust and draft documents, or
used later in the process to review documents. Local and state laws
The degree to which a land trust vary widely, so it is essential that a land trust have local, knowledge-
involves an attorney in the acqui- able legal counsel.
sition process can vary, but it
is absolutely necessary that an
It will be useful for a land trust to create template conservation ease-
attorney review every contract,
ments and contracts specific to its work. A template is a starting point
conservation easement or written
and will be modified for every transaction. A land trust’s staff and board
agreement with a landowner.
should work with an attorney knowledgeable about conservation and
real estate law to create these templates. Once they have been created,
land protection personnel, if trained properly, can make changes to
the templates on a case-by-case basis, using the attorney to review
the changes. Asking the attorney to review only the changes to the
standard agreement saves time, staff resources and money. Alternately,
many smaller land trusts rely more heavily on their legal counsel to
participate in every step of the transaction.
It is critical for the negotiator, whether a staff person or board member,
to clearly understand the legal issues at stake and be able to present
them succinctly to an attorney. Doing so will ensure that no issues are
overlooked. The land protection person and attorney should work as
a team, using each other’s strengths. Knowing which items need legal
advice is paramount to an effective land protection program. An attor-
ney’s legal advice can be used to help a land trust make business deci-
sions about a project. Work with your attorney to determine the best
protocol for reviewing contracts.
An Encomium on Brevity
Ronald Reagan insisted that all memos given to him have a single-page
summary. He wanted every issue boiled down to four paragraphs:
Summary of the issue at hand
List of the problems that exist
Points to be discussed
Recommended course of action
Concise memos forced his staff to be disciplined and focused, which let him
concentrate on the problems and the appropriate decisions. When he was
258 Acquiring Land and Conservation Easements
told that a matter required a longer memo, President Reagan was fond of
saying, “If you can’t reduce what you’re trying to say to one page, you may
not fully understand the problem.
When choosing an attorney for its land transactions, the land trust
should look for real estate expertise and experience. Ask the attorney if
he or she is familiar with land trusts, land conservation and conservation
easements. Of course a “yes” is preferable; however, lack of knowledge
about conservation transactions should not eliminate a person from
a potential pool of attorneys. Though land conservation work is very
specialized, a good real estate attorney can learn to complete conserva-
tion transactions, even if he or she needs particular advice to do so.
As a charitable organization, it may be more important to find an
attorney who understands and supports the mission of the land trust.
If you develop a solid, long-term working relationship with an attor-
ney, he or she will learn what your land trust wants and the quirky rules
and regulations specific to this work; in time he or she can even antici-
pate and prevent problems. Your land trust should attempt to develop
a relationship with both real estate attorneys and litigators long before
it begins transactions. It is important to educate your attorney about
how your land trust functions, because certain elements of conserva-
tion work (particularly with respect to conservation easements, such as
stewardship requirements) are fairly unique and may not be familiar to
your attorney. Once he or she understands the land trust’s obligations
and needs, an attorney can assist a land trust in evaluating transactions
to ensure that they do not exceed the land trust’s capacity to complete.
Many land trusts ask a local attorney to sit on their board and provide
legal expertise pro bono. While technically possible to also hire this
board member on a case-by-case basis (he or she would declare the
conflict and recuse himself or herself from discussion and decision-
making), it is best if you can avoid using board members as your
attorneys. If a land trust chooses to have an attorney on its board, it
should hire a different attorney when the need arises. It is difficult for
a person to wear two hats; one’s responsibilities as a board member
may conflict with one’s legal responsibilities to provide advice on a
project. For more information on finding and hiring legal counsel, see
chapter 2. For more information on conflicts of interest, see the Land
Trust Alliance course “Avoiding Conflicts of Interest and Running an
Ethical Land Trust.”
Purchasing Land and Easements 259
Projects with Insiders
Many land trusts have been faced with a project that involves an insider
to the organization (a board member, major donor or someone with
the ability to influence decision-making). Some land trusts steer away
from projects with insiders, while others want to engage these parties
in transactions related to their mission. Practice 4C provides guidance
to land trusts contemplating transactions with insiders.
Practice 4C: Transactions with Insiders. When engaging in
land and easement transactions with insiders (see definitions),
the land trust: follows its conflict of interest policy; docu-
ments that the project meets the land trust’s mission; follows
all transaction policies and procedures; and ensures that there
is no private inurement or impermissible private benefit. For
purchases and sales of property to insiders, the land trust
obtains a qualified independent appraisal prepared in compli-
ance with the Uniform Standards of Professional Appraisal
Practice by a state-licensed or state-certified appraiser who
has verifiable conservation easement or conservation real
estate experience. When selling property to insiders, the land
trust widely markets the property in a manner sufficient to
ensure that the property is sold at or above fair market value
and to avoid the reality or perception that the sale inappropri-
ately benefited an insider.
For purchases of land or a conservation easement from an insider, the
land trust must obtain an independent appraisal to determine fair
market value. If the insider is a board member, he or she must leave
the room during discussions and decisions regarding the transaction.
The land trust should follow its conflict of interest policy and regu-
lar transaction procedures. Recordkeeping should be diligent to prove
that there is no private inurement. The process must be transparent so
as to avoid the perception of impropriety.
Note that some states (New Hampshire, for example) prohibit
nonprofit organizations from engaging in purchase or sale transactions
with current board members. For a detailed discussion of transactions
with insiders, see the Land Trust Alliance course “Avoiding Conflicts
of Interest and Running an Ethical Land Trust.”
260 Acquiring Land and Conservation Easements
The Perils of Donor Involvement in Land Management
A landowner donated several hundred acres of land to a well-established
land trust. He was already a major donor and an insider to the land trust. The
landowner also promised to donate a large sum to the land trust’s steward-
ship fund in the future. Soon after the transaction was completed, the donor,
who lived down the road from the property, started to take issue with the
way the land trust was managing the land. The donor had very different ideas
about how to deal with invasive species, roads, wildlife and visitors than the
experienced land trust staff. Staff was using a science-based approach and
following the legal documents governing the donation. The donor, however,
was emotionally attached to the property that he saw every day. When land
trust staff politely refused to follow his orders for the property, the donor
started to intervene. It was difficult to prove the donor’s actions were harm-
ful in each instance, but taken together as whole over time, they were very
damaging to the property’s natural resources.
When approached by the staff to rectify the situation, the land trust board
refused to intervene in support of the staff. They were reluctant to anger the
donor for fear that he would refuse to continue his financial support of the
The lesson to a land trust is that it must clearly spell out the land manage-
ment roles when taking a donation or purchasing land from an insider who is
going to remain involved with the land trust and has a very keen interest in
the land. Ideally, the land trust should draft a management agreement for the
land, detailing the land trust’s decision-making authority, and ask the donor
to sign it. Otherwise the donor may obtain a tax deduction or pocket the cash
for the transaction and still to some extent privately control the use of the
property under the guise of volunteering. Simply waiting out the donor is not
an adequate solution to the conflict of interest issue such a situation raises.
Also, no land trust should tolerate bad land management practices just to
appease an overzealous donor. If such a situation were to become widely
known, the land trust could face a public relations nightmare.
Purchase versus Donation
Acquisitions of real estate, whether purchase or donation, contain
common elements; however, there are a few key differences. By and
large, purchases of land or easements will occur by contract (either a
purchase and sale agreement or an option). Conversely, most donations
Purchasing Land and Easements 261
of land will not. The parties may enter into a gift agreement that has
some similar elements to a purchase agreement, such as an inspection
period or the right to conduct a survey or environmental assessment.
The agreement might also include restrictions that are to be set forth
in the deed of conveyance (for example, conservation restrictions or
use restrictions that relate to the organization’s purpose and mission, or
terms governing the use of any money that might be made on the resale
of the land). As with purchase agreements, an attorney should always
be consulted to draft gift agreements to ensure that the rules and regu-
lations about gifts are not violated.
Purchases of land may or may not involve a friendly seller. Alternatively,
donations usually come from caring landowners who are committed to
the protection of their land. In the case of an outright donation, a land
trust will most likely have an ongoing relationship with the donor and,
perhaps, the family, and the land trust should nurture this relationship.
The donor may want to name the proposed preserve or dedicate a trail.
The donor’s wishes should be well documented, as should any prom-
ises made by the land trust. For conservation easements, the land trust
will have an ongoing monitoring responsibility, so a good relationship
with the landowner is critical to uphold the terms of the easement.
Often in the case of a donation, a land trust may assume more of the
acquisition costs than in the case of a purchase. For example, a land
trust might offer to pay for title insurance for a landowner who is land
rich but cash poor. In some areas of the country, it is customary for the
donee (or buyer) to pay for title insurance.
A major consideration for a donation versus a purchase is the charitable
deduction for the donor. In the case of a donation, the land trust should
be careful to inform, not advise, the landowner of potential tax benefits.
In addition, the timing of the appraisal will be key to the timing of the
donation. Many landowners want to donate before the end of the year
for tax purposes, and land trusts should be prepared to act quickly, but
not irresponsibly, to accommodate donors arriving at the eleventh hour.
If a land trust does not believe it can adequately complete its due dili-
gence steps to close a conservation transaction late in a year, it should be
prepared to decline or delay the project. In order to avoid having these
issues arise late in the year, some land trusts establish a policy that sets a
date after which they will not accept new projects for the year. Keep in
mind that complicated projects or unanticipated problems may require
a project to carry over into the following year.
262 Acquiring Land and Conservation Easements
Bargain sales — where the property is sold to the land trust at a price
below fair market value — have elements of both a purchase and a
donation. The donor will need a qualified appraisal to substantiate the
charitable gift, and the land trust will need an appraisal to justify its
purchase price. In a bargain sale, many sellers and donors benefit from
the fact that some of their capital gain attributable to the sale portion
can be offset by the contribution.
Closing the Transaction
Closing a real estate purchase transaction should occur smoothly if a
land trust completes all of its due diligence steps in a timely and thor-
ough fashion, which will reduce the chance of unpleasant surprises. In
addition to those closing steps related to title insurance discussed on
page 193, some of the standard steps in a real estate closing include:
• Delivery of written closing or escrow instructions to the party
handling the closing
• Confirming the legal description in the conveyance document
(deed or conservation easement)
• Approving and executing a settlement or closing statement
apportioning payment of costs and fees
• Execution and notarization of the conveyance document
• Delivery of documents necessary for closing (resolution of
seller, certificate of good standing of seller, subordination
agreement or lien release, mechanic’s lien affidavit)
• Payment of funds to the seller
• Payment of closing fees and recording costs
• Recording documents in the public records
A real estate closing does not have to be handled by a title insur-
ance company, but some land trusts use its services to close, even if
not purchasing title insurance. A title company can provide valuable
assistance in collecting and recording documents in the proper order,
assuring any liens, mortgages or past-due taxes are paid at closing,
and collecting and disbursing funds through its escrow account. Many
funders require the use of an escrow agent so that they have a neutral
and trustworthy third party to whom they can wire funds for clos-
ing, and in such instances, use of a title company for closing can be a
good option. Generally title company closing fees are inexpensive (a
few hundred dollars) and who pays them is negotiable, although many
parties simply agree to split the fees. Title companies also assemble
Purchasing Land and Easements 263
copies of all documents and deliver a copy of each to the parties. If
closing without a title company you should contract with an experi-
enced real estate attorney to handle the closing to help ensure that all
matters are dealt with promptly and accurately.
After the actual closing it is time to thank the seller and celebrate the
conservation success represented by the transaction. For ideas about
how various land trusts address these issues, see chapter 1.
264 Acquiring Land and Conservation Easements
Avoiding the Battle for Battlefield Protection:
Using Principled Negotiations
The Shenandoah Valley Battlefields Foundation, a nonprofit battlefield preser-
vation organization that functions as a land trust, had been interested for more
than six years in a particular piece of pristine farmland on which an important
Civil War battle had been fought. However, the family that owned the land had
always insisted on a price exceeding fair market value and out of reach for the
land trust. The farmland, about 210 acres, was bounded on three sides by 300 acres
of battlefield property that had already been acquired for preservation, so its fate
was crucial. Three years prior to the Foundation’s attempts to purchase the land, a
commercial real estate developer acquired an option to purchase the property for
$5 million, contingent upon an upzoning of the land. When the local authorities
declined to upzone the property, the developer terminated the option. Naturally,
however, the landowners had fixed upon the $5 million option price as the “value”
of their property.
By 2008, the Foundation believed that the landowners’ desire to sell the land and
the fact that real estate values had recently declined might create an opportunity to
buy the land at a price the organization believed it could afford to pay, if its fundrais-
ing efforts were successful. The Foundation commissioned an appraisal at its own
expense from a local appraiser who was experienced in valuing battlefield proper-
ties. The professional appraisal valued the property at $2.46 million. Knowing that
the difference between the appraised value and the owners’ $5 million asking price
would present a challenging negotiation hurdle, the Foundation hired a highly
experienced conservation professional to handle the negotiations.
The contractor took two important steps that contributed to the negotiations’ ulti-
mate success. First, he introduced the appraiser to the landowners. Second, he
explained to the owners why nonprofit organizations are unable to pay more than
fair market value for land, except in exceptional circumstances. Difficult negoti-
ations continued, but finally a deal was struck in which the Foundation agreed
to pay slightly more than the appraised fair market value of the land, and the
landowners agreed to accept considerably less than the $5 million they originally
sought. Because the negotiating process was based on facts, not opinions, both the
buyers and the sellers are happy with the result.
Purchasing Land and Easements 265
1. How could the Foundation ultimately agree to pay more than the
appraised fair market value of the land?
2. Why do you think the negotiator took the step of introducing the
appraiser to the landowners?
1. There are extraordinary circumstances when a piece of land is so unique
that paying above appraised fair market value may be appropriate. In this
instance, no other property could complete the battlefield preservation
efforts of this particular battlefield. In addition, if not acquired for conser-
vation, the 210-acre farm could be sold for commercial and/or residential
uses, which would adversely impact the already conserved surrounding
lands. Where the circumstances are carefully documented, a nonprofit
organization may be justified in paying slightly more than appraised fair
market value if the subject land is so unique that it may be impossible to
substitute other lands and still accomplish an organization’s mission.
2. Choosing a good appraiser and using an appraisal for negotiating price
can help get difficult transactions closed. Because the Foundation
ordered and paid for the appraisal, it was under no obligation to share
the appraisal with the landowners or allow the landowners to interview
the appraiser about his methods and conclusions. The negotiator realized
that introducing the appraiser to the landowners would build trust in the
appraisal process by allowing the landowners to question the appraiser
and understand that the appraisal represented the best price a market
buyer was likely to pay. In this situation, it helped dispel concerns that
the land trust was making a low offer to the landowners and helped them
understand how values in the area had changed since the price they had
been offered by the commercial developer three years earlier. By focusing
on a professional appraisal instead of a price chosen by the Foundation,
the negotiations remained professional and were ultimately successful.
266 Acquiring Land and Conservation Easements
When a land trust purchases land or easements, it must demonstrate
fiscal responsibility and avoid transactions that confer private inure-
ment or excess private benefit. The best tool for determining value is
an independent appraisal conducted by a qualified appraiser, but not
every deal requires a full appraisal report. In certain limited circum-
stances, land trusts may forgo an appraisal in favor of a value analy-
sis, opinion letter, preliminary report, summary appraisal or restricted
use report. No matter what method the land trust chooses to deter-
mine value, it should think long and hard about paying more than fair
market value, particularly when the seller is a land trust insider. Such
cases may result in private inurement or impermissible private benefit,
which may, in turn, jeopardize a land trust’s tax-exempt status. In the
rare occasions when the land trust pays more than fair market value for
land or an easement, it should clearly document that the public benefit
and unique nature of the property justifies the premium.
Negotiation is a large part of any land deal, so land trust volunteers and
staff should be trained in successful negotiation, specifically principled
negotiation. Principled negotiations ensure that a land trust’s dealings
are transparent and that the relationship between the landowner and
land trust remains positive. The final benefit of such negotiations is
that it enables creative problem solving because both parties recognize
they have mutual goals.
Finally, a land trust should be very familiar with the different types of
contracts and agreements it may encounter during deals, the difference
between purchases and donations, and how to work effectively with an
attorney to complete the transaction.
Purchasing Land and Easements 267
These documents are provided for use by land trusts in developing
forms and procedures that will enhance their conservation work.
Please be sure to adapt each form to your land trust’s own unique
mission and community.
General Outline of Easement Appraisal Contents, Colorado
Coalition of Land Trusts (page 269)
This document is an excerpt from the Colorado Coalition of Land
Trust’s A Conservation Easement Appraisal Guide: A Brief Overview
of Easement Valuation in Colorado. Published in 2004, the guide was
written to help ensure sound conservation easement transactions by
introducing Colorado conservation practitioners and landowners
to the fundamentals of the appraisal process. The excerpt reprinted
here contains the minimum contents one should expect to find in an
appraisal of a conservation easement and can be of assistance when
reviewing an appraisal.
Example Terms for Purchase and Sale Agreements (page 287)
This document provides sample terms and provisions as a starting
point for structuring purchase and sale agreements for buying conser-
vation properties. It includes a number of sections that may or may not
be applicable to any given conservation acquisition. The document also
distinguishes between provisions that are “buyer friendly” and “seller
Sample Option Agreement (page 301)
This sample option agreement contains extensive terms addressing an
option on land with improvements and can be modified to address
unimproved land and state laws affecting options to purchase interests
in real property.
Sample Right of First Refusal Agreement (page 307)
This sample right of first refusal agreement gives the holder the right
to match an offer to purchase a property under certain conditions. It
can be modified to address state laws affecting rights of first refusal.
268 Acquiring Land and Conservation Easements
CCLT: General Outline of Easement Appraisal Contents
III. A GENERAL OUTLINE OF EASEMENT
Introduction to Outline
This outline summarizes the “Before and After” appraisal process as it pertains to
valuing conservation easements in gross. It is based generally on the very useful format
found in the Uniform Appraisal Standards for Federal Land Acquisition, or UAS (see
Section V: Suggested Reading & Reference Tools). It is intended to provide a detailed
overview of the components of a “qualified appraisal” for federal income tax purposes as
defined at Treasury Regulations 1.170A-13.
While the appraisal report formatting presented here is only a suggestion
(independent appraisers value their status and ability to present data and analysis in ways
of their own choosing), the appraisal contents outlined, unless noted, must be addressed
in a qualified appraisal.
Most of this material pertains to valuation of one or more types of open space or
wildlife habitat easements. These are the types of conservation easements most frequently
encountered in Colorado and can include easements permitting agricultural production,
protection of fish, wildlife or plant habitat, or simply preservation of open space. Each of
these types of easements can accommodate limited residential, agricultural and
recreational uses, as long as they are conveyed exclusively for conservation purposes and
offer significant public benefit.
There are some things not addressed here. One is the appraisal of historic façade
easements, a flavor of conservation easement not as common here as the more popular
conservation easement. This outline does not address in any detail the issues associated
with the appraisal of post mortem easements under Internal Revenue Code Section
2031(C). Also, it does not address in detail the issues associated with basis-limited gifts
of conservation easements, where the donor has owned the real property for less than 12
This Outline can be used in several ways. For appraisers, it can provide a brief
refresher on the content of conservation easement appraisals. For landowners and land
trusts hiring an appraiser, it can help familiarize them with the appraisal document and
point them to potential questions they may ask about the document itself. And for all
parties, the Outline is perhaps best used with a copy of an appraisal in hand to verify that
the various components of the conservation easement appraisal are indeed covered.
Purchasing Land and Easements 269
CCLT: General Outline of Easement Appraisal Contents
A Conservation Easement Appraisal Guide Page 16
Easement Appraisal Contents
A. LETTER OF TRANSMITTAL
1. May summarize value conclusion
2. States date of value
3. Identifies property and purpose of appraisal
4. Highlights any unusual assumptions or limiting conditions
5. States that appraisal is prepared for income tax purposes of the easement donor
6. Provides appraiser’s identifying number (SSN and/or EIN)
B. TABLE OF CONTENTS
a) Acknowledges assistance of others who made significant professional
contribution to development of the appraisal
b) Assures readers of the report that appraiser did (or did not) inspect the
c) Indicates that the appraisal report is in compliance with the Uniform
Standards of Professional Appraisal Practice (USPAP), the UAS
"Yellow Book" or any other supplemental standards set forth by a
particular funding source or private professional associations with
which the appraiser is affiliated
2. Summary of Salient Facts
a) Identifies Owner/Donor
b) States location, brief legal description and/or property address
c) Reviews the purpose and function of appraisal
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d) Establishes the date of value
e) Identifies the property rights appraised
(1) Fee simple before grant of easement, subject to exceptions to
title including pre-existing conservation restrictions
(2) Fee simple after grant of easement, subject to newly-created
perpetual restrictions and pre-existing restrictions or exceptions
(3) Value of the conservation easement
f) Includes a brief description of subject site and improvements,
including water rights and minerals estate
g) Includes as part of the subject all contiguous property owned by the
donor, the donor’s family, or "related persons", even if only a portion
of the property is encumbered by the easement (to reflect the
"enhancement" value described above).
h) Identifies any other property owned by donor or a related person,
whether or not such property is contiguous – may or may not require
an appraisal of this other property
i) Highlights any unusual or important assumptions made in appraisal
j) Summarizes the easement
(1) Consistent and inconsistent activities (sometimes called
restrictions and permissions)
(2) Conservation or historic preservation values
k) Summarizes conclusions of highest and best use
(1) Before grant of easement
(2) After grant of easement
l) Summarizes value estimates of all property owned by the donor and
the donor’s family, and possibly the value of other property owned by
the donor or a related person
(1) Before grant of easement
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(2) After grant of easement
m) States the market value of the conservation easement
3. Purpose and Function of Appraisal
a) Indicates that the appraisal is prepared for the federal and state income
tax purposes of the donor, for use by funding agencies in support of
grant-making decisions, etc. (it is acceptable to have multiple
b) Provides this value definition:
“. . . the price at which the property would change hands between a
willing buyer and a willing seller, neither being under any
compulsion to buy or sell and both having a reasonable knowledge
of the facts.” (Treas. Reg. § 1.170A-1(c)(2))
4. Property Rights Appraised
a) Defines fee simple and easement interests
b) Addresses water rights that may be associated with or appurtenant to
c) Addresses fractional interests, interests of tenants in possession and
d) Addresses mineral estate
5. Scope of Appraisal
a) Summarizes the steps taken in preparing the appraisal
b) States whether or not the appraisal has departed from USPAP’s
guidelines, thus invoking USPAP's Departure Provision (for example,
appraisals prepared for use by the State Board of the Great Outdoors
Colorado Trust Fund (GOCO) in support of funding decisions must be
Complete Appraisals, which means they must contain all of the
c) States the type of report format (Self-Contained or Summary; a
Restricted report by definition is not acceptable)
d) Restates any unusual or important assumptions made in appraisal
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6. Property Identification
Restates summary information about the property, possibly with greater detail.
7. Important Dates
a) States Date of Value – current or retrospective
b) Restates Date of Report
c) Identifies Date(s) of property inspection
8. Assessment and Taxation Data
a) Provides schedule and/or parcel number (if available)
b) Summarizes information available from county assessor and treasurer
c) Discusses assessment classification, likelihood of change, effect on
future tax burden
9. Property History
a) Summarizes and analyzes leases, sales within at least the past three
years, and current or recent listing agreements
b) Discusses history of use
c) The appraiser may request data pertaining to last sale of the property,
no matter how long ago it occurred
10. Contingent and Limiting Conditions
a) Limits reliance on or use of the appraisal report
b) Disclaims responsibility for issues, facts and studies outside the purview of
c) Restates prominently and in detail any unusual or important assumptions
made in the appraisal
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D. FACTUAL DATA BEFORE GRANT OF EASEMENT
1. Legal Description
a) Provides detailed description using metes and bounds, aliquot portions
and/or lots & blocks
b) May include map(s) or survey, overlain on USGS 7.5° quadrangle
maps, tax maps, recorded plats, etc. as appropriate
2. Area Data
Provides enough information about the immediate neighborhood and market
area for the property to create a context for subsequent sections of the report
discussing the property, its highest and best use and the valuation. Defines
market area through a determination of what other properties reasonably
compete with the subject in the market. Reports and analyzes local market
trends, such as historic and forecast population changes (up, down, or level),
any market for water rights separate from land, employment trends, etc.
3. Property Data
a) What should be appraised
(1) Appraisals being prepared for income tax purposes must
(a) contain a value estimate of all contiguous property
owned by the donor or the donor’s family
(b) address any increase or decrease in the value of any
other property owned by the donor or a related person
(2) When selecting what property to value, prudent appraisers will
follow accepted practice for eminent domain appraisals and
appraise the larger parcel (to be appraised before and after the
easement) defined by
(a) unity of title
(b) physical contiguity
(c) unity of use
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b) Site or Land - Describes in detail the property under study, beginning
with the site. Depending on property type, it will emphasize features
key to value and use. For example, the appraisal of a rural parcel
would address, at a minimum:
(2) Size and shape
(5) Minerals estate
(6) Environmental hazards / nuisances or hazards / endangered
(7) Floodplain and drainage
(8) Legal and physical access
(9) Existing easements or deed restrictions
(10) Status of public utilities
(11) Water rights, ditches, ditch and water companies, etc.
(12) Land use regulations
(13) Surrounding ownership and uses
(1) Many open space or scenic easements do not affect the use of
existing improvements; they were there before imposition of
the easement, and they will be there afterward.
(2) Improvements need be addressed in detail only when the
easement will have an effect on the utility, hence value, of
the structures. For example, many historic façade easements
require extraordinary upkeep, maintenance or renovation,
calling for archaic techniques or materials that may be very
costly. In cases like this, the improvements may turn out to
be extremely important, creating a burden on the land or site.
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(3) Depending on the circumstances, there may be little need to
do more than give passing mention to buildings in place at
the time of the grant of easement. However, once an
easement is in place, the buildings may take on more
significance. For example, in some areas, a large component
of the market value (or at least cost) of a property may be
attributable to the value of existing structures (often second
or third homes).
(4) Appraisals should not attribute (without market support) a
percentage loss in value to the whole property (land, water
and buildings), when typically only the value of the land, or
land and water components, is affected by the easement.
E. DATA ANALYSIS AND CONCLUSIONS OF PROPERTY VALUE
BEFORE GRANT OF EASEMENT
1. Highest and Best Use of the Property – this means the land and water
a) Site As Vacant
(1) Legal Uses - considers current zoning (and reasonable
probability of it changing), existing deed restrictions or
conservation easements, building codes and environmental
regulations. Specifically for water, appraisals consider the
landowner’s ability to put the water to a use different from the
current use (ditch company bylaws, water court involvement,
(2) Physically Possible Uses – considers physical factors, utilities
availability and site improvements. As to the water, can its
point of diversion be changed, or are there physical limitations
on what can be done with the specific shares appurtenant to a
specific property under a particular ditch or canal?
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(3) Financially Feasible Uses – market demand must be evaluated.
Just because state law permits a landowner to divide the
property into parcels 35 acres and larger does not mean it is
financially feasible to do so. Similarly, a board of county
commissioners may approve zoning or a plat that permits a
retirement home and a hospital – the appraiser must investigate
the financial feasibility of such a permitted use, as it could
contribute no value at all to a parcel. The same is true for the
water. This is an excellent place in an appraisal report to
highlight the disparity between the value of mutual ditch
company water for irrigation and the value of the same water
for municipal or industrial use, if the criteria of legal
permissibility and physical possibility are satisfied. For
example, if the landowner is seeking more than an in-place,
irrigated land value and there is not an immediate, functional
and transparent market for the specific rights, there may a need
for a substantially greater analyses of the various markets and
in any engineering and/or legal limitations to determine value.
(4) Maximally Productive Use – that use from those considered
that survives all these tests and produces the greatest financial
return to the land
b) Site As Improved
(1) Considers the same four tests itemized above
(2) Explains whether the improvements require demolition or
modification or if they are consistent with the highest and best
use of the site or land
c) Conclusion of Highest and Best Use of the Entire Property (Land,
Improvements and Water)
(1) Must be consistent with the four criteria outlined under E 1.a.
(2) Does not need to bear any relationship to the present use, but if
it does not, it must be a use that could reasonably be achieved
(and the appraisal needs to contain evidence that is sufficient to
support the claim of reasonableness)
(3) States the highest and best use of the property without
consideration of the proposed restrictions contained in the
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2. Approaches to Valuation
a) Introduces the concept of valuation, defines the three recognized
methods of valuation (Sales Comparison Approach, Cost Approach
and Income Approach), and sets forth the procedure to be used in the
report. For each method not used, the appraiser must explain why the
method was omitted.
b) Land or Site Valuation. In many open space or wildlife habitat
easement appraisals, most of the property value before and after the
easement derives from the "vacant" land itself (and not necessarily
from additional development potential, etc.) Thus in many easement
appraisals, this will be the principal valuation question to be solved. In
these cases, often the Sales Comparison approach is the most likely to
(1) There are six interrelated techniques for valuing land as vacant:
(a) Sales Comparison
(d) Subdivision Development NOTE – This technique
results in very misleading indications of property value
when it is not used extremely carefully. This technique
should not be used unless the highest and best use of a
property is for division and development within a
reasonably short period of time, when costs of
development can be accurately identified, when
potential sale prices of resulting parcels can be
estimated, and when realistic absorption rates can be
supported by market evidence.
(e) Land Residual
(f) Ground Rent Capitalization
(2) The Land or Site Valuation process can be incorporated into
the Sales Comparison approach when the subject property:
(a) is vacant,
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(b) is considered to have a highest and best use as if
(c) is minimally improved with the improvements being
addressed as items of contributory value.
(3) It can form the initial part of the Cost Approach when the
subject property’s improvements are being valued based on
their replacement or reproduction cost. However, as described
below, the Cost Approach alone is not relevant to vacant
property in which there are no substantial improvements.
(4) In valuing certain properties, other experts’ opinions (water
and minerals are the most common) may be valid. However, if
the opinions of other experts are relied on, the appraiser must
be aware of USPAP requirements regarding use of
consultant’s reports. Standards Rule 2-3, states as follows:
“When signing appraiser(s) has relied on work
done by others who do not sign the certification, the
signing appraiser is responsible for the decision to
rely on their work.
“The signing appraiser(s) is required to have a
reasonable basis for believing that those individuals
performing the work are competent and that their
work is credible.”
c) Cost Approach. This approach is not relevant to a vacant property, for
it is requires that the property have substantial improvements.
d) Income Approach. This approach may not be relevant to a vacant
property, for it is based on the income a particular property generates,
such as professionally operated guest ranches.
e) Correlation and Conclusion of Value. In this section, appraisers will
compare the values obtained using the three methods if appropriate
and determine a conclusion of value.
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F. FACTUAL DATA AFTER GRANT OF EASEMENT
1. The Conservation Easement
a) Describes in detail the restrictions and retained permissions contained
in the easement in adequate detail to set the stage for the analysis of
highest and best use.
b) When possible, the appraisal includes a recorded copy of the deed of
conservation easement as an exhibit to the report. If this is not
available, it should include a draft copy. If no easement document is
available, it should include a statement identifying the source of the
terms and conditions described above.
G. DATA ANALYSIS AND CONCLUSIONS OF PROPERTY VALUE
AFTER GRANT OF EASEMENT
1. Highest and Best Use
It may not be necessary to reanalyze highest and best use in detail. Normally, the
easement will be specific enough so that a statement or two will suffice. However,
it is good practice to re-consider the legally permissible, physically possible, and
financially feasible land uses in order to support the conclusion of what use(s) is
the maximally productive land use after grant of easement.
Introduces the concept of valuing a restricted parcel, sets forth and explains the
specific procedure(s) to be used in the report, such as:
a) An appraiser may consider valuing the easement itself by comparing it
with the sale of other conservation easements. This technique is
required by the Treasury Regulations “if there is a substantial record of
sales of easements comparable to the donated easement (such as
purchases pursuant to a governmental program), the fair market value
of the donated easement is based on the sales prices of such
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b) The Regulations also state “If no substantial record of marketplace
sales is available to use as a meaningful or valid comparison, as a
general rule (but not necessarily in all cases) the fair market value of a
perpetual conservation restriction is equal to the difference between
the fair market value of the property it encumbers before the granting
of the restriction and the fair market value of the encumbered property
after the granting of the restriction.” This suggests valuation of the
property subject to the easement using as many of the traditional
approaches to value as are applicable.
(1) Using the Sales Comparison technique, compare the property
under study to sales of other properties already subjected to
similar restrictions (due to easements, restrictive covenants,
physical or location considerations) at time of their sale. This
should result in an estimate of property value after easement
(a) an appraiser should reflect appropriates units of
comparison (such as per building site retained on the
encumbered parcel, per-acre, or perhaps others). This
requires knowledge of the details of the easements
affecting each sale considered and their affect on value,
(i) what Subdivision (as meant in Colorado, tracts
less than 35 acres), division or parceling
(ii) the number of houses and/or structures that can
be built, limitations on their size, height,
occupancy, and limitations on their ability to be
conveyed separately from the parent tract;
(iii)any restrictions on use of the protected land
(fencing, construction of outbuildings, grazing
practices, use of riparian areas, public access,
special land management requirements related
to weed control, modification of natural
drainage, prohibitions on commercial timber
harvesting, mining, sand and gravel extraction,
(iv)the effect of the easement on the land owner’s
ability to convey water separately from the
protected land or to change the use of that
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(a) identifies and analyzes the impact of any
requirement to keep the land in
irrigation, as some easements may
prohibit the separate conveyance of all
or some of the water;
(b) identifies and analyzes the impact of any
change in the highest and best use of the
water, even though water per se cannot
typically be encumbered by a
(v) rights of first refusal (often recorded in
conjunction with but separate from a
conservation easement) retained by the grantee.
(2) Appraisers may apply a “percentage loss in value” to the
subject property. This technique can be used effectively when a
subject property’s local market does not have sales of restricted
properties, necessitating analysis of the relationship of
encumbered and unencumbered (but otherwise comparable)
sales in other areas;
(a) An appraiser should not rely on real estate listings of
unencumbered but otherwise comparable properties
(b) Great care should be exercised when relying on other
appraisers’ opinions of value in such analyses.
(3) If using a Subdivision Development technique, appraisers
should consider the reduced number of units or parcels that can
be created on the subject property. NOTE: As in Before-
Easement valuation, the development technique is valid only
when some type of development is in fact the highest and best
use of the property, when that development is fairly imminent,
when costs of development can be identified accurately, and
when absorption rates can be supported by market evidence.
(4) Cost Approach (if applicable)
(a) Requires care, as the effect of the permanent
restrictions on the site must be considered.
(b) May not be useful in determining market value, as the
easement restrictions may make it virtually impossible
to account for obsolescence
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(5) Income Approach (if applicable)
(a) May be the best method for establishing baseline value
of restricted but still productive agricultural lands as
well as properties with income-producing
(b) Care should be taken in development of pro forma
effective gross and net operating income estimates, as
well as overall capitalization rates and discount rates
(c) Requires caution due to potential “premium value” that
many buyers may associate with scenic, recreational or
secluded ranches. Such factors suggest a greater
reliance on the Sales Comparison approach than on the
Income Approach during reconciliation of the different
values derived from the approaches.
c) Correlation and Conclusion of Value
(1) General considerations can include
(a) difficulty or increased expense of obtaining mortgage
(b) perception of future (or present) difficulty in dealing
with the easement-holding organization, sometimes
described as a loss of part of the right of ‘quiet
(c) potential for change in marketing time due to easement
(2) Appraisers should address increase or decrease in the value of
other contiguous property owned by donor or donor’s family;
(a) Required by IRS Regulations;
(b) If appropriate property was appraised, whatever
change in value may have occurred to the contiguous
property should already be included in the Before and
After difference, even if all the contiguous property was
not burdened by the easement;
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(3) Appraisers should address increase or decrease in value of
other non-contiguous property owned by donor or a related
(a) If there was no effect on either contiguous or
noncontiguous property, a logical explanation should
(b) If such property was affected, it may also need to be
appraised in order to conclude the effect on its value
(increase or decrease) resulting from the easement
H. ANALYSIS AND VALUATION OF THE EASEMENT
1. As more data become available, it is expected that valuation of easements by
Sales Comparison will become more prevalent. However, as described in H.2
below, because adequate market data do not exist in most areas of Colorado,
the most common approach remains the Before and After method.
a) Use of the Sales Comparison approach to value easements is mandated
by the Treasury Regulations §1.170A-14(h)(3)(i) which provide that
“If there is a substantial record of sales of easements comparable to the
donated easement (such as purchases pursuant to a government
program), the fair market value of the easement is based on the sales
prices of such comparable easements.” While this statement may
offend many appraisers who would contend that purchases pursuant to
a government program would by definition not be reliable
comparables, the Treasury Regulations are clear and unambiguous.
Only in markets where such government programs are not established
(which is almost everywhere) does the “before and after” rule apply.
b) Appraisers must be cautious in analyzing sales of easement interests or
fee interests in easement-burdened properties, as any units of
comparison developed often would not reflect damages or benefits
imposed on unburdened remainders, contiguous or not. Also, as
illustrated recently in the Browning v. Commissioner Tax Court
ruling, analysts must be aware that many easement sales are intended
to be bargain sales, reflecting some donative intent on the part of both
grantor and grantee.
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2. As described above, the most common approach remains the Before and
Value Before the Easement
--Value After the Easement
Value of the Conservation Easement
1. A “Self-Contained” appraisal report should include those of the following
exhibits necessary to inform a reader who is not familiar with the subject
property area. Such exhibits are not required by the Treasury Regulations, and
may not appear in many Summary appraisal reports. These are the types of
exhibits required in some government agency and private concern appraisal
a) Maps: All maps shall be highly legible with properties clearly
identified, highlighted if necessary, and depicted in contrasting colors
(e.g., subject – red, blue, or green; comparable sales – purple, etc.).
Maps should be of sufficient detail, with legend, scale, north arrow,
geographic features and ground-control information, so properties may
be readily located on-the-ground.
(1) Area Map: Small-scale map showing general location of the subject
(2) Neighborhood Map: This map shall show the appraised property and
its immediate neighborhood.
(3) Tract or Plat Map: This shall be a large-scale (2-inches per mile or
larger) map clearly showing the appraised property and pertinent
physical features, such as roads, streams, improvements, etc. If
portions of the appraised property are assigned separate values,
these various areas shall be delineated on this map, or a separate
map may be prepared.
(4) Comparable Sales Location Map: This shall show the location of the
appraised property and the sales used in the appraisal. Scale shall
be a minimum of ¼-inch per mile. Where appropriate, the
Comparable Sales Map may be combined with the Area Map or
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b) Photographs: Each copy of the appraisal should contain color
photographs of the appraised property and all comparable sales relied
upon. Each photograph shall be identified as follows:
(1) Identify the scene – Appraisers should identify features shown and, if
applicable, the purpose of the photograph.
(2) Appraisers should identify location where photograph take, direction
of view, etc. This may be done on map.
c) Comparable Sale Data Sheet: For all sales used in the appraisal, it
should show detailed information concerning each transaction.
Photograph and map of each sale is required.
286 Acquiring Land and Conservation Easements
Example Terms for Purchase and Sale Agreements
Thomas F. Haensly
Attorney at Law
144 Railroad Avenue, Suite 217, Edmonds, WA 98020
Tel: (425) 775-4803 // Fax: (425) 775-9839
Toll Free: (800) 611-8100 // email@example.com
EXAMPLE TERMS FOR PURCHASE AND SALE AGREEMENTS 1
1 Introductory Statement of Agreement & Identification of Parties
REAL PROPERTY PURCHASE AND SALE AGREEMENT (“Agreement”) made and entered into by and between ________ and
________ , husband and wife, having an address of ______________________ (“Seller”), and the _____________, a
Washington nonprofit corporation, having an address of _______ (“Buyer”) (collectively “Parties”), on the date provided
Example of General Recitals:
Seller is the owner of that certain real property located in xxxxxx County, Washington, which is more particularly
described in Section xx below (“Property”).
Buyer desires to purchase the Property and Seller desires to sell the Property on the terms and conditions contained in this
Example for Option Contract:
Buyer desires to acquire from Seller an option to purchase the Property and Seller desires to grant to Buyer an option to
purchase the Property on the terms and conditions contained in this Agreement.
Example for Bargain Sale:
Seller believes that the Purchase Price for the Property is below the fair market value of the Property. Seller intends that
the difference between the Purchase Price and the fair market value shall be a charitable contribution to Buyer. Buyer,
however, makes no representation as to the tax consequences of the transaction contemplated by this Agreement. Seller
shall obtain independent tax counsel and be solely responsible for compliance with the gift value substantiation
requirements of the Internal Revenue Code of 1986, as amended (“Code”). To the extent that the Purchase Price is below
the fair market value, the Parties agree that it does not reflect the Parties’ knowledge of defects in the Property, for
example, environmental conditions requiring remediation, nor does it reflect any other consideration or benefit flowing
from Buyer or any other charitable, governmental, or quasi-governmental organization to Seller.
Buyer is a publicly supported, tax-exempt nonprofit organization, qualified under Sections 501(c)(3) and 170(h) of the
Internal Revenue Code of 1986, as amended (“Code”), and the regulations promulgated thereunder, and also qualified as a
nonprofit nature conservancy corporation under RCW 64.04.130 and 84.34.250, whose primary purpose is preservation of
land, open space, and natural resources in xxxxxx County, Washington. Buyer is included in the “Cumulative List of
Organizations described in Section 170(c) of the Internal Revenue Code” published by the Internal Revenue Service.
Example for Deal Financed Via Capital Campaign:
Seller acknowledges that Buyer is a nonprofit corporation and that Buyer may depend in this transaction on donations
from the general public, grants from public agencies, and contributions from individuals and other private organizations to
support its acquisition of the Property.
The example terms provided in this document are intended only as guides for drafting purchase
and sale agreements and other forms of real estate contracts. Each purchase and sale agreement must be
individually drafted to fit the facts and circumstances presented by a given transaction and the relevant local law.
Each purchase and sale agreement should also be either prepared by legal counsel or reviewed by legal counsel
Purchasing Land and Easements 287
Example Terms for Purchase and Sale Agreements
Example for Conservation Acquisition:
The Property is adjacent to other real property owned by Buyer and held for open space. The Property would contribute to
Buyer’s program for the protection of open space.
Example for Conservation Acquisition with Resale to Conservation Buyer:
Buyer acknowledges that Seller’s purchase of the Property and subsequent sale to Buyer will be made as part of Seller’s
conservation purchase/resale program and that Seller’s purchase of the Property would not occur but for Buyer’s
agreement to purchase the Property subject to the Conservation Easement (as defined in Section xx below).
Buyer acknowledges and agrees that Seller will by reservation retain certain rights in the Property, including but not
limited to, the ability to restrict certain development of the Property, for the purpose of protecting the Property’s
Example for Assignment to Take-Out Buyer:
Seller acknowledges that Buyer intends to assign this Agreement and Buyer’s interests under this Agreement, in whole or
in part, to a public agency or another nonprofit corporation (hereinafter “Buyer” shall mean Buyer and/or Buyer’s assigns,
as the case may be).
3 Statement Regarding Consideration for Agreement
NOW, THEREFORE, in consideration of the mutual covenants and conditions and promises contained in this Agreement, and
for other good and valuable consideration, the receipt and sufficiency of which is acknowledged, Seller and Buyer agree as
4 Identification of the Property
Example for General Acquisition:
Purchase and Sale. Seller agrees to sell and convey to Buyer, and Buyer agrees to purchase from Seller, subject to the
terms and conditions contained in this Agreement, the Property, which is legally described as follows: [legal description]
The Property/Improvements. The Property shall include (a) all buildings and other improvements on the Property; (b) all
standing and down timber; and (c) all rights, privileges, and easements appurtenant to the Property, including, without
limitation, (i) oil, gas, other hydrocarbon substances, metals, limestone, rock, sand, and gravel (“Minerals”); (ii) all
development rights, air rights, water, water rights, and water stock relating to the Property, and (iii) all easements, rights-
of-way, and other appurtenances used in connection with the beneficial use and enjoyment of the Property.
Personal Property. Seller represents and warrants that there is no personal property owned by Seller located on or in or
used in connection with the Property.
Example of Additional Terms for Acquisition that Includes Buildings & Other Improvements:
The Property. The Property shall also include all fixtures and fittings that are attached to the Property, including, but not
limited to, plumbing and light fixtures and bulbs, attached television antenna, installed satellite dishes and equipment, all
attached floor coverings, outdoor trees, plants, and shrubs, built-in appliances, shades, blinds, curtain rods, window
treatments, bathroom fixtures, awnings, attached heating and cooling systems, attached irrigation equipment, screens,
shutters, storm windows, screen doors, fireplace inserts, attached fireplace screens, electric garage door openers, water
heaters, all oil or other fuel on hand at Closing, and all appliances, including, but not limited to, washing machines, clothes
dryers, refrigerators, freezers, dish washers, garbage disposals, kitchen stoves, installed microwave ovens, and
Example for Sale to Conservation Buyer:
Agreement Relating to Development Rights and Conservation Easement. Seller shall by reservation retain certain rights in
the Property, including but not limited to the ability to restrict certain development of the Property (the “Conservation
Easement”). The Conservation Easement shall run with the land in perpetuity, and shall be binding upon Buyer’s personal
representatives, heirs, successors, and assigns. Seller intends, and Buyer agrees, that the Conservation Easement shall
confine the use of the Property to such activities as are consistent with the protection of the conservation values of the
288 Acquiring Land and Conservation Easements
Example Terms for Purchase and Sale Agreements
Property. The conservation values include, but are not limited to, the natural and open space attributes of the Property.
Seller Oriented term - Assignment. Buyer shall not assign this Agreement or any interest under this Agreement to any
person or entity without Seller’s prior written approval. Seller’s approval shall be in Seller’s sole and absolute discretion.
Seller hereby agrees that Buyer may assign this Agreement or any interest under this Agreement, in part or in whole, to
Buyer Oriented term -
Assignment. Seller hereby agrees that Buyer may assign this Agreement or any interest under this Agreement, in part or in
whole, to a public agency or another nonprofit corporation, and Buyer’s performance under this Agreement is conditioned
on Buyer’s ability to make such assignment.
Termination. If Buyer does not exercise this assignment or waive this assignment condition within xxx days after the
Effective Date of this Agreement, Seller may, at any time thereafter elect to terminate this Agreement by giving written
notice to Buyer. If within xxx (x) days of Seller’s notice, Buyer does not exercise this assignment or waive this
assignment condition, this Agreement shall terminate, and in which case any Earnest Money shall be returned to Buyer and
neither party hereto shall have any further rights or obligations under this Agreement.
Information on Assignee. If Buyer elects to exercise Buyer’s right to assign this Agreement, Buyer shall thereupon
provide to Seller proof of such entity’s legal existence, tax status under federal law, and a list of officers, directors, or
managers, if such entity is a nonprofit corporation.
Limitation on Assignment. Buyer shall not, except as provided in this Section xx, assign this Agreement or any interest
under this Agreement to any person or entity without Seller’s prior written approval, which shall not be unreasonably
6 Earnest Money
Earnest Money. Buyer shall deposit with the Escrow Holder, as defined in Section xx below, XXXXX THOUSAND DOLLARS
($xx,000.00) in the form of cash or a certified check as earnest money (“Earnest Money”) within xxxxx (xx) hours after
the Effective Date of this Agreement, as defined in Section xx below.
Credit Against Purchase Price and Down Payment. The Earnest Money shall be credited at Closing against the Purchase
Price, as such terms are defined in Sections xx and xx, respectively, of this Agreement.
7 Purchase Price & Payment
Example of Set Purchase Price:
Purchase Price. The purchase price for the Property (“Purchase Price”) shall be xxxxxxxx HUNDRED THOUSAND DOLLARS
Example of Cash Payment at Closing:
Payment. Buyer agrees to pay to Seller the Purchase Price at Closing.
Example of Seller Financing:
Payment. Buyer agrees to pay to Seller the Purchase Price and interest as follows:
Down Payment. XXXXXXX HUNDRED THOUSAND DOLLARS ($xxx,000.00) in the form of cash or a certified check, which
sum shall include the Earnest Money, at Closing (“Down Payment”);
Monthly Payments. Interest only in monthly installments in the amount of XXXXXXXXXXXXXXX DOLLARS ($x,xxx.xx), or
more at Buyer’s option, which sum shall be at a rate of XX PERCENT (xx%) computed on the outstanding diminishing
principal balances, on or before the first day of each month commencing with the first full month following Closing, with
interim interest to be adjusted in escrow until the principal balance and any remaining interest due has been paid in full
(“Monthly Payments”). The Monthly Payments were calculated on the basis of interest only on a principal of
Purchasing Land and Easements 289
Example Terms for Purchase and Sale Agreements
$xxxx,000.00 for a period of xxx (xx) years.
Balloon Payment. XXXXXXX HUNDRED THOUSAND DOLLARS ($xxxxx,000.00) on or before the xxxx anniversary of the
Closing under this Agreement (“Balloon Payment”).
Collection Account. The Monthly Payments shall be made to a true escrow account at xxxxxxx Contract Services,
xxxxxxxxxxxxxxxxxxxxxx WA xxxxx (Tel xxxxxxxx) and the costs to establish and maintain such account shall be split
equally between Buyer and Seller.
No Prepayment Penalty. Buyer may, in Buyer’s sole and absolute discretion, pay all or any portion of the principal
balance under the Note and any accrued interest at any time without any prepayment penalty or charge whatsoever.
Buyer Oriented term - Note and Deed of Trust. Buyer shall execute at Closing a note (“Note”) and a deed of trust (“Deed
of Trust”) in the form as shown in Exhibits x and x, respectively, which are attached to this Agreement and incorporated
here by this reference. Seller acknowledges that the Note and Deed of Trust limit Seller’s remedies for a default under the
Note and Deed of Trust to Seller retaking possession of the Property and that Seller shall not be entitled to a deficiency,
damages, or any other monetary award.
Seller Oriented term - Note and Deed of Trust. Buyer shall execute at Closing a note (“Note”) and a deed of trust (“Deed
of Trust”) in the form as shown in Exhibits x and x, respectively, which are attached to this Agreement and incorporated
here by this reference.
8 Option Payments
Option for Purchase and Sale. As of the effective date of this Agreement, as defined in Section xx below, Seller grants to
Buyer an irrevocable option to purchase the Property upon all of the terms, covenants, and conditions set forth in this
As consideration for the Option, Buyer shall, as provided in Section xx below, pay Seller the sum of XXXXX THOUSAND
DOLLARS ($xxx,000.00) (“First Option Payment”). If Buyer renews its Option, Buyer shall, as provided in Section xx
below, pay directly to Seller an additional XXXXX THOUSAND DOLLARS ($xxx,000.00) (“Second Option Payment”).
Collectively the payments referenced in this Section xx shall be referred to in this Agreement as the “Option Payment.”
Buyer shall deposit with the Escrow Holder, as defined in Section xx below, the First Option Payment in the form of cash
or a certified check within xxxxx (xx) hours after the effective date of this Agreement. The Second Option Payment shall
be paid directly to Seller within xxxxx (xx) hours after Buyer extends the Option Period. Escrow Holder shall hold the
First Option Payment in an interest bearing account. The interest earned on the First Option Payment shall accrue for the
benefit of Buyer. Seller shall have the right to keep any Option Payment paid except as otherwise provided in this
Option Period and Exercise of Option.
Buyer shall have xxx (x) months (computed using an average of 30 days per month) from the effective date of this
Agreement to exercise its Option (“Option Period”).
Buyer may, in its sole and absolute discretion and prior to the end of the initial xxx-month period, extend the Option
Period for xxx (x), additional xxxx-month period (computed using an average of 30 days per month) by paying the Second
Option Payment and giving Seller written notice of such extension.
Buyer shall provide written notice to Seller of its intention to exercise the Option. The Option Period may be extended
only by the mutual agreement of the Parties, except as allowed in Section xx above. If Buyer timely exercises its Option,
this Agreement shall be deemed to be and shall become a contract for the purchase of the Property on the terms and
conditions set forth in this Agreement.
Credit Against Purchase Price and Down Payment. The Option Payment shall be credited at Closing against the Purchase
Price and Down Payment, as such terms are defined in Sections xx, xx, and xx, respectively, of this Agreement.
Delivery of Option Payment. Except as provided in Sections xx and xx below, Escrow Holder shall deliver the First
290 Acquiring Land and Conservation Easements
Example Terms for Purchase and Sale Agreements
Option Payment to Seller upon written notice from Seller and Buyer and upon the approval of Buyer’s Inspection, as
provided in Section xx below.
Failure to Exercise Option. If Buyer fails to exercise the Option within the Option Period, the Option and this Agreement
shall be null and void and of no further force or effect. In such event, Buyer agrees to execute and deliver to Seller a
quitclaim deed or other evidence reasonably satisfactory to Seller, in recordable form, stating that Buyer’s Option has
Buyer Oriented term - Title & Conveyance. At Closing, Seller shall convey to Buyer marketable and insurable fee simple
title to the Property, by execution and delivery of a statutory warranty deed to the Property in a form acceptable to Buyer
and its counsel (“Deed”), free of liens, encumbrances, easements, restrictions, rights, and conditions, including, but not
limited to, any promissory note, mortgage, deed of trust, real estate contract, right of first refusal, or option to buy, other
than current property taxes and rights, reservations, covenants, easements, conditions, and restrictions of record as of the
effective date of this Agreement that do not materially affect the value of the Property or unduly interfere with Buyer’s
intended use of the Property, and those exceptions approved in writing by Buyer (“Permitted Exceptions”). Encumbrances
to be discharged by Seller shall be paid by Seller on or before Closing. Evidence of delivery of marketable and insurable
fee simple title shall be the issuance of the Title Policy as described in Section xx below.
Seller Oriented term - Title & Conveyance. At Closing, Seller shall convey to Buyer fee simple title to the Property by
execution and delivery of a statutory warranty deed to the Property (“Deed”), free of liens, encumbrances, easements,
restrictions, rights and conditions other than current property taxes or rights, reservations, covenants, easements,
conditions, and restrictions of record as of the date of execution of this Agreement, not materially affecting the value of the
Property, or unduly interfering with Buyer’s intended use of the Property. Buyer shall be conclusively deemed to have
accepted the condition of title unless Buyer notifies Seller of Buyer’s objections within xxxx (xx) days after the
preliminary commitment for title insurance is received by or made available to Buyer. Encumbrances to be discharged by
Seller shall be paid by Seller on or before Closing.
Preliminary Commitment. Escrow Agent shall, promptly after the effective date of this Agreement, order an extended
coverage preliminary commitment for title insurance. The extended coverage preliminary commitment for title insurance,
together with copies of all exceptions noted therein, shall constitute the “Title Report.”
Permitted Exceptions. Buyer shall notify Seller, within xxx (xx) days of Buyer’s receipt of the Title Report, either (a) that
Buyer has approved the Title Report and thereby intends to proceed with the purchase of the Property or (b) of those
exceptions that Buyer disapproves (any exceptions contained within the Title Report not so objected to shall thereafter be
Termination. If title is not marketable and insurable as required under Section xx above and cannot be made so marketable
and insurable prior to Closing, Buyer may elect to either waive such encumbrances or defects, or to terminate this
Agreement. If Buyer terminates this Agreement pursuant to this Section xx, neither party hereto shall have any further
rights or obligations under this Agreement and the Earnest Money shall be returned to Buyer.
Buyer Oriented term - Title Insurance. Seller shall, at Seller’s expense, purchase an ALTA extended coverage owner’s
policy of title insurance, to be issued by xxxxxxxxxxxxxxx, xxxxxxxxxxxxxxxx, WA xxxxx (xxxxxxxx) (“Title
Company”), with liability in an amount equal to the Purchase Price insuring fee simple title to the Property in Buyer,
subject only to the Permitted Exceptions and such endorsements as Buyer may request in its sole and absolute discretion
(“Title Policy”), provided that indemnification of the Title Company to induce it to insure over any otherwise unpermitted
exceptions to title shall not be allowed except with the prior written consent of Buyer in its sole and absolute discretion
after full disclosure to Buyer of the nature and substance of such exception and indemnity. The Title Policy shall provide
full coverage against mechanics’ and materialmen’s liens arising out of the construction, repair, or alteration of the
Property or improvements on the Property prior to the Closing Date.
Seller Oriented term - Title Insurance. Seller shall, at Seller’s expense, purchase a standard form owner’s policy of title
insurance, to be issued by xxxxxxxxxxxxxxxx Title Company. The title policy shall contain no exceptions other than
those contained in said standard form and those not inconsistent with this Agreement. If title is not so insurable and cannot
be made so insurable prior to Closing, Buyer may elect to either waive such encumbrances or defects, or to terminate this
Agreement. Buyer acknowledges that a standard form of title insurance does not insure the location of boundaries and that
an extended form on insurance is available at additional cost to Buyer.
Purchasing Land and Easements 291
Example Terms for Purchase and Sale Agreements
Example for Acquisition that Includes Commercial Building:
Assignment of Tenant Leases. At Closing Seller shall also deliver to Buyer an original counterpart of each Tenant Lease
then in effect and shall convey to Buyer the interest of Seller in and to each Tenant Lease by execution and delivery of an
Assignment and Assumption of Tenant Leases in the form of Exhibit xx attached to this Agreement and incorporated here
by this reference (“Assignment of Leases”).
9.2 Validation of purchase price.
Seller shall deliver to Buyer, at Seller’s sole cost and expense, an appraisal of the Property prepared by xxxxxxx
satisfactory to Buyer and its lender as to form, amount, and substance in their sole and absolute discretion.
9.3 Project Feasibility.
9.3.1 Seller’s production of documents.
Production of Documents. Seller shall provide or make available to Buyer for inspection and copying to the extent
available or within Seller’s possession or control, within xxx days after the effective date of this Agreement, copies of all
contracts, appraisals, environmental surveys or audits of the Property or the Improvements, including, but not limited to,
any materials relating to asbestos or lead-based paint on the Property, tenant leases, rent rolls, certificates of occupancy, a
certificate of land use and assessment issued by the City of xxxxxx Department of Construction and Land use, soils
reports, real property records, including copies of property tax assessments, LID proposals, agreements, leasing proposals,
and any other documents and information in the possession or control of Seller and pertaining to the Property, as well as
local zoning ordinances and building codes and all other items that Buyer deems reasonably necessary to conduct its
review of the Property.
9.3.2 Feasibility for buyer’s purposes.
Feasibility/Termination. Buyer shall have until 5:00 p.m. in xxxxxx, Washington, xxxx days after the effective date of this
Agreement (“Due Diligence Period”) in which to conduct its review of the Property (other than the environmental
condition of the Property which is governed by Section xxx of this Agreement). Said review may, in Buyer’s sole and
absolute discretion, include a physical inspection of the Property and documents, books, records, and information,
provided that such inspection shall be conducted during normal business hours or at such other time as is reasonable and
necessary to conduct the inspection. Buyer shall repair any damage to the Property caused by Buyer or its employees or
agents during such inspection. Buyer shall have the right to obtain xxx (x), xxxxx (xx) day extensions of the Due
Diligence Period upon written notice to Seller prior to expiration of the then applicable Due Diligence Period. Prior to the
end of the Due Diligence period, Buyer shall provide written notice to Seller that Buyer has either (a) approved the
condition of the Property, and intends to proceed with the purchase of the Property whereupon Buyer shall execute and
deliver the Note [earnest money] to Escrow Agent, or (b) it has elected to terminate this Agreement whereupon this
Agreement shall terminate and neither party hereto shall have any further rights or obligations under this Agreement.
Access. Buyer and Buyer’s contractors and agents shall have the right to enter the Property, at reasonable times, for the
purpose of conducting the Buyer’s Inspection.
9.3.3 Pollution and environmental problems.
Environmental Analysis. Buyer and Seller acknowledge and agree that Buyer will have an environmental report prepared
by an environmental consultant paid for by Seller (“Environmental Report”). Buyer shall notify Seller in writing
following receipt of the Environmental Report, of the concerns of Buyer, if any, relating to the Property as a result of the
information and data contained in the Environmental Report.
In the event Buyer obtains additional information or becomes aware of additional facts which indicate that the existence on
the Property of, or potential for, contamination of the Property by Hazardous Substances, Buyer shall have the right, but
not the obligation, through its own environmental consultant, to require further sampling and analysis of the Property.
9.3.4 Notice & Waiver of Contingency/Termination.
292 Acquiring Land and Conservation Easements
Example Terms for Purchase and Sale Agreements
Example for Standard Feasibility:
Approval/Termination. Buyer shall notify Seller prior to the expiration of the then applicable Buyer’s Inspection Period
that Buyer either (a) has approved Buyer’s Inspection, in Buyer’s sole and absolute discretion, and thereby intends to
proceed with the purchase of the Property, or (b) has elected to terminate this Agreement, in which case, neither party
hereto shall have any further rights or obligations under this Agreement and the Earnest Money shall be refunded to Buyer.
Example for Pollution and Environmental Problems:
Approval/Termination. In the event that the Environmental Report, any supplemental information provided by Buyer’s
environmental consultant or any other information disclosed by Seller in writing and delivered by Seller to Buyer reveals
the presence or potential presence of Hazardous Substances on or affecting the Property, and the same is not cured by
Seller to Buyer’s reasonable satisfaction pursuant to Section xxx above no later than five (5) days prior to Closing, Buyer
shall have the right, in addition to all other remedies available to Buyer pursuant to this Agreement or otherwise available
at law or in equity, to terminate this Agreement without any liability of Buyer to Seller, the Earnest Money (together with
investment interest accrued thereon, if any) shall be paid to Buyer, this Agreement shall terminate, and neither party hereto
shall have any further rights or obligations under this Agreement.
9.4 Establishing Purchase Price.
Purchase Price. The purchase price for the Property (“Purchase Price”) shall be determined as follows in this Section xx:
(a) Buyer shall, within xxxx (x) days of the effective date of this Agreement, select xxxxx (x), qualified appraisers and
provide the names of such appraisers to Seller. (b) Seller shall, within xxxx (x) days of Seller’s receipt of the names of the
appraisers referenced in Section xx above, select xxx (x) of the xxxxx appraisers to provide an appraisal of the Property
(“Appraiser” and “Appraisal”) and notify Buyer of Seller’s selection.
(c) Buyer shall promptly direct the Appraiser to provide the Appraisal. (d) The Appraiser shall be directed to provide the
Appraisal within xxxxx (xx) days of when ordered (“Appraisal Due Date”) and the market value determined by the
Appraiser, as set forth in the Appraisal, shall be the Purchase Price. The Appraiser shall provide an original of the
Appraisal simultaneously to Seller and Buyer.
Termination. If the market value, as determined by the Appraiser and as set forth in the Appraisal, is greater than XXX
HUNDRED THOUSAND DOLLARS ($xxx,xxx.xx), then Buyer may terminate this Agreement by notifying Seller within xxxx
(x) business days of Buyer’s receipt of the Appraisal, in which case neither party hereto shall have any further rights or
obligations under this Agreement and the Earnest Money shall be refunded to Buyer. If the market value, as determined
by the Appraiser and as set forth in the Appraisal, is less than xxxxxxxxxxxxxx DOLLARS ($xxxxxxxx), then Seller may
terminate this Agreement by notifying Buyer within xxxx (x) business days of Seller’s receipt of the Appraisal, in which
case, neither party hereto shall have any further rights or obligations under this Agreement and the Earnest Money shall be
refunded to Buyer.
Example for Financing Via Capital Campaign:
Financing Contingency. Buyer’s performance under this Agreement is subject to Buyer’s ability to obtain sufficient funds
to pay the Purchase Price. The manner in which Buyer obtains, or attempts to obtain, such funds and the source of such
funds shall be within the sole and absolute discretion of Buyer. Seller acknowledges that Buyer is a nonprofit corporation
and that Buyer may obtain, or attempt to obtain, all or a portion of such funds through solicitations to the general public,
grants from public agencies, and contributions from individuals and private organizations. Seller agrees that Buyer’s
inability to obtain the Purchase Price shall not be considered a breach of this Agreement.
Financing Period. Buyer shall have until xxxx (xx) days after the end of Buyer’s Inspection Period to obtain the Purchase
Price (“Buyer’s Financing Period”).
Approval/Termination. Buyer shall notify Seller prior to the expiration of the Buyer’s Financing Period that Buyer either
(a) has obtained the Purchase Price and therefore intends to proceed with the purchase of the Property, or (b) has elected to
terminate this Agreement, in which case, neither party hereto shall have any further rights or obligations under this
Agreement and the Earnest Money shall be returned to Buyer.
Purchasing Land and Easements 293
Example Terms for Purchase and Sale Agreements
Survey. Seller shall have an “as-built” survey of the Property (“Survey”) prepared at its sole cost and expense by a
licensed surveyor or civil engineer acceptable to Buyer, which survey shall be in form and substance satisfactory to Buyer
and its lender, in their sole and absolute discretion, and shall show the location of all easements and improvements
(including underground improvements), the square footage of the Property, and any and all other pertinent information
with respect to the Property. Seller shall deliver the Survey to Buyer within xxx days after the effective date of this
10 Representations & Warranties
Example of General Reps & Warranties:
In order to induce Buyer to enter into this Agreement and the transactions contemplated hereby, Seller makes the
representations and warranties in this Section xx as of the effective date of this Agreement and again as of the Closing
Date. Seller represents and warrants to Buyer as follows:
Title. At the Closing Date, Seller shall have good, marketable, and indefeasible title to the Property subject only to the
Permitted Exceptions, and Seller is aware of no other matters that adversely affect title to the Property.
Leases. There are no leases, licenses, or other agreements granting any person or persons the right to use or occupy the
Property or any portion thereof.
Options. Seller has not granted any options nor committed nor obligated itself in any manner whatsoever to sell the
Property or any portion thereof to any party other than Buyer.
Construction Liens. To the extent any improvements have been made or will be made to the Property prior to the Closing
Date that might form the basis of mechanics’ or materialmen’s liens, Seller agrees to keep the Property free from such
liens that might result and to indemnify, defend, and hold Buyer harmless from any and all such liens and all attorneys’
fees and other costs incurred by reason thereof.
Reports. All Reports, certificates, and other documents containing factual information delivered by Seller, or by Seller’s
agents in connection with this Agreement, are and shall be, to the best of Seller’s knowledge, true and complete and shall
not contain any untrue statement of material fact or omit to state any material fact, the disclosure of which is necessary to
make the statements contained therein and in this Agreement, in light of the circumstances under which they are made, not
Authority/Organization. Seller is a xxxxxxx duly organized, validly existing, and in good standing under the laws of the
State of Washington and this Agreement has been duly authorized, executed, and delivered by the xxxxxx of and on behalf
of Seller and, assuming it has been duly authorized, executed, and delivered by Buyer, this Agreement is a valid and
binding obligation of Seller. No other authorizations or approvals, whether of government bodies or otherwise will be
necessary for Seller to enter into this Agreement. Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated under this Agreement will (i) be in violation of Seller’s xxxxxx [organic
document], (ii) to the best of Seller’s knowledge, conflict with or result in the breach of any law, regulation, writ,
injunction or decree of any court or governmental instrumentality applicable to Seller, or (iii) constitute a breach of any
evidence of indebtedness or agreement to which Seller is a party or by which Seller is bound.
Representations/Warranties. All representations and warranties contained in this Agreement shall be true and correct as of
the date of execution of this Agreement and as of the Closing Date and shall survive Closing and execution of the Deed
and shall not be merged therein.
Example of Environmental Reps & Warranties:
Environmental Representations and Warranties. After reasonable investigation and to the best of Seller’s knowledge, and
except as expressly disclosed in writing to Buyer by Seller on or before the end of Buyer’s Inspection Period (without
regard to any extension thereof), Seller represents and warrants to Buyer as follows::
There are no apparent or latent defects in or on the Property;
Seller and the Property are in full compliance with all federal, state, and local laws, regulations, and requirements
applicable to the Property and its use, including, but not limited to, building codes and health, safety, environmental,
zoning, and land use laws;
294 Acquiring Land and Conservation Easements
Example Terms for Purchase and Sale Agreements
All buildings and other improvements on the Property, including, but not limited to, utilities, have been installed and
constructed in compliance with all applicable laws and pursuant to valid permits;
There has been no Release of Hazardous Substances, as defined in Section xx below, in, on, under, or from the Property
prior to the Closing Date;
There are not now any underground storage tanks located on the Property, whether presently in service or closed,
abandoned, or decommissioned, and no underground storage tanks have been removed from the Property in a manner not
in compliance with applicable federal, state, and local laws, regulations, and requirements;
There is no pending or threatened litigation affecting, involving, or relating to the Property or any portion thereof; and
No civil or criminal proceedings or investigations have been instigated at any time or are now pending, and no notices,
claims, demands, or orders have been received, arising out of any violation or alleged violation of, or failure to comply
with, any federal, state, or local law, regulation, or requirement applicable to the Property or its use, nor do there exist any
facts or circumstances that Seller might reasonably expect to form the basis for any such proceedings, investigations,
notices, claims, demands, or orders.
Hazardous Substances. For the purpose of this Agreement:
“Hazardous Substance” shall include pollutants or substances defined as “hazardous waste,” “hazardous substances,”
“hazardous materials,” “pollutants,” “contaminants,” or “toxic substances” in the Comprehensive Environmental Response
Compensation and Liability Act of 1980 (“CERCLA”), 42 U.S.C. Section 9601 et seq., as amended by the Superfund
Amendments and Reauthorization Act of 1986 (PL 99-499); the Hazardous Materials Transportation Act, 49 U.S.C.
Section 1801 et seq.; the Toxic Substance Control Act, 15 U.S.C. Section 2601 et seq.; the Resource Conservation and
Recovery Act of 1976, as amended, 42 U.S.C. Section 6901 et seq; the Clean Water Act, 33 U.S.C. Section 1251 et seq.,
the Washington State Environmental Policy Act, RCW 43.21 et seq.; the Water Pollution Control Act, RCW 90.48.010 et
seq.; the Hazardous Waste Management Statute, RCW 70.105 et seq.; the Toxic Substance Control Act, RCW 70.105B et
seq.; and the Model Toxics Control Act, RCW 70.105C et seq.; and in the rules or regulations adopted and guidelines
promulgated pursuant to said laws.
“Release” shall mean releasing, spilling, leaking, pumping, pouring, flooding, emitting, emptying, discharging, injecting,
escaping, leaching, disposing, or dumping.
11 Escrow & Closing
Deposit with Escrow Agent and Escrow Instructions. Upon execution of this Agreement by Buyer and Seller, Buyer shall
deposit an executed copy of this Agreement with xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx (xxx-xxx-xxxx) (“Escrow
Closing and Conditions Precedent to Closing.
The closing of the purchase and sale of the Property hereunder (“Closing”) shall be held, and delivery of all items to be
made at Closing under the terms of this Agreement shall be made, at the offices of Escrow Agent within xxxx (x) days
after the end of Buyer’s Financing Period (“Closing Date”).
The Closing Date shall not be modified without the written approval of Seller and Buyer.
Example for Deal Involving Only Land:
Delivery by Seller. Prior to the Closing Date and in a manner consistent with all other terms of this Agreement, Seller
shall deposit with Escrow Agent the following:
The Deed, duly executed and acknowledged by Seller in recordable form and ready for recordation on the Closing Date;
Affidavit executed by Seller that satisfies the requirements of Section 1445 of the U.S. Internal Revenue Code regarding
foreign investors (“FIRPTA Affidavit”); and
A duly executed real estate excise tax affidavit.
Delivery by Buyer. Prior to the Closing Date and in a manner consistent with all other terms of this Agreement, Buyer
shall deposit the Purchase Price with Escrow Agent.
Purchasing Land and Easements 295
Example Terms for Purchase and Sale Agreements
Example of Additional Terms for Deal Involving Commercial Building:
Delivery by Seller.
A certificate from the Department of Licensing of the State of Washington indicating that, as of a date not more than xx
(xx) business days prior to the Closing Date, there are no filings against Seller in the office of the Department of Licensing
under the Washington Uniform Commercial Code that would be a lien on any of the Property (other than such filings, if
any, as are being released at the time of Closing).
A duly executed and acknowledged Assignment of Leases in the form of Exhibit xx assigning to Buyer the Tenant Leases.
Seller hereby agrees to indemnify, defend, protect, and hold Buyer harmless from and against any and all losses,
liabilities, claims, or expenses, including costs and reasonable attorneys’ fees, that accrue or arise as a result of
circumstances or actions taken with respect to the Tenant Leases prior to the Closing Date.
All original warranties and guarantees that Seller has received in connection with any work or services performed with
respect to, or equipment installed in, the Property, together with a duly executed assignment of warranties and guaranties
in a form satisfactory to Buyer.
All security deposits, prepaid rentals or other deposits, if any, and keys to all entrance doors, equipment and utility rooms
located in, the Property, which keys shall be property tagged for identification.
12 Allocation of Taxes & Costs
Closing Costs and Expenses. Seller shall pay real estate excise taxes (if any are due) and the cost of recording the Deed.
Seller and Buyer shall each pay one-half (½) of Escrow Agent’s escrow fees.
Prorations. All revenues and all expenses of the Property, including but not limited to, real property taxes, special
assessments, water, sewer, utility charges, and other expenses normal to the ownership, use, operation, and maintenance of
the Property, shall be prorated as of the Closing Date. Seller and Buyer agree that if any of the prorations referred to
above cannot be calculated accurately on the Closing Date, then the same shall be calculated within thirty (30) days after
the Closing Date and either party owing the other party a sum of money based on such subsequent proration(s) shall
promptly pay said sum to the other party, together with interest thereon at the rate of ten percent (10%) per annum from
the Closing Date to the date of payment if payment is not made within ten (10) days after delivery of the bill therefor. The
Parties agree that, except for real property taxes and special assessments, proration and payment of the expenses described
in this section shall be made outside of escrow.
13 Condition of Property & Limits on Seller During Contract Term/Risk of Loss
Sale & Encumbrances. During the term of this Agreement, Seller shall not sell, transfer, convey, or alienate (“Sell”),
whether voluntarily or involuntarily, all or any portion of the Property. Seller shall, furthermore, not create or permit any
encumbrances of the Property except as may legally exist prior to the effective date of this Agreement. Seller shall not
market or otherwise attempt to Sell the Property, or any portion thereof, during the term of this Agreement.
Utilities/Maintenance. Seller shall keep in place until Closing all utilities and services presently benefitting the Property.
Condition of Property. Seller shall, at Seller’s sole cost and expense, keep the Property until Closing in good condition
and repair, and shall not permit or commit any waste, impairment, or deterioration thereof (other than ordinary wear and
tear) or commit, suffer, or permit any act upon or use of the Property in violation of any applicable law, order, permit, or
license of any governmental authority. Seller shall remove prior to Closing all of Seller’s personal property, trash, debris,
and all articles not agreed to be left at Closing.
Fixtures. Seller shall not remove any fixtures from the Property and shall not remove or demolish any improvement
thereon unless any such fixture or improvement shall be replaced by an item of equivalent value and similar purpose; and,
if reasonably possible, Seller shall give Buyer advance notice of any such contemplated removal or demolition and Buyer
shall have the right to require that replacement be made by an item of greater value so long as Buyer shall bear the potion
of the cost of such replacement that exceeds the cost of an item of equivalent value.
296 Acquiring Land and Conservation Easements
Example Terms for Purchase and Sale Agreements
Loss by Fire or Other Casualty. In the event that, prior to Closing, the Property is destroyed or materially damaged, or if
condemnation proceedings are threatened or commenced against the Property, Buyer shall have the right, exercisable by
giving notice of such decision to Seller within ten (10) days after receiving notice from Seller of such damage, destruction,
or condemnation proceedings, to terminate this Agreement, in which case, neither party hereto shall have any further rights
or obligations under this Agreement and the Earnest Money [Option Payment] shall be returned to Buyer. If Buyer elects
to accept the Property in its then condition, all proceeds of insurance or condemnation awards payable to Seller by reason
of such damage, destruction, or condemnation shall be paid or assigned to Buyer.
Casualty Insurance. Seller shall maintained until Closing adequate insurance against standard casualty losses for the
Property in amounts not less than the full replacement cost of the buildings and other improvements. Seller shall,
furthermore, cause to be maintained any other insurance as may be required by any mortgagee or beneficiary of any
mortgage or deed of trust encumbering the Property. Seller, at Buyer’s request, shall furnish evidence in form and
substance satisfactory to Buyer of all such insurance coverage. Standard casualty losses shall not include losses due to
Operations Pending Closing. At all times before Closing, Seller shall manage and operate the Property in a manner
consistent with Seller’s past practices. Seller agrees (a) to maintain all usual and necessary business records pertaining to
the Property, consistent with Seller’s past practices; (b) to maintain the Property in its current condition and state of repair
(normal wear and tear and casualty loss excepted); (c) to maintain its existing property and casualty insurance on the
Property; (d) to perform all of its material obligations under the Tenant Leases, any licenses and permits that may be
applicable to the Property, and any existing mortgages; (e) not lease, rent, or otherwise permit any person or persons to
occupy all or any portion of the Property without the prior written consent of Buyer; and (f) not construct any additional
improvements on the Property without the prior written consent of Buyer.
Indemnity. Seller shall indemnify, defend, and hold Buyer harmless from and against any and all losses, damages
(including natural resource damages), expenses, costs, obligations, penalties, fees, and liabilities, including, without
limitation, reasonable attorneys’ fees, that Buyer may suffer or incur in connection with:
Seller’s ownership of the Property resulting from any action or inaction of Seller, its agents or employees, occurring before
the Closing Date;
any breach of, falsity, or inaccuracy in the representations and warranties contained in this Agreement;
any misrepresentation in or omission of any material documents, items, or information to be submitted by Seller to Buyer
relating to the Property; or
any failure of Seller to perform any of its obligations under this Agreement (“Indemnity”).
Survival. The foregoing Indemnity shall survive the Closing and shall be in addition to, and not in derogation of, any
other rights Buyer may enjoy under this Agreement or under law for breach of any representation or warranty set forth in
Notice/Defense. Promptly after the receipt by Buyer of notice of any claim or the commencement of any action or
proceeding (“Action”) for which Seller has agreed to indemnify Buyer, Buyer shall give Seller written notice of such
Action and Seller shall thereafter vigorously defend on behalf of Buyer, at Seller’s sole cost and expense, any such Action
utilizing counsel satisfactory to Buyer. No settlement of any such Action shall be made without Buyer’s prior written
approval (unless Buyer has previously been discharged from all liability in connection with such Action).
15 Default & Remedies for Breach
Example of General Default terms:
Attorneys’ Fees. In the event either party to this Agreement finds it necessary to bring an action at law or other
proceeding against the other party to enforce any of the terms, covenants, or conditions of this Agreement or any
instrument executed pursuant to this Agreement, or by reason of any breach or default under this Agreement, the
prevailing party in any such action or proceeding shall be paid all costs and reasonable attorneys’ fees by the other party
and in such event any judgment as secured by such prevailing party shall include all such costs and attorneys’ fees. The
reasonableness of such costs and attorneys’ fees shall be determined by the court and not by a jury.
Purchasing Land and Easements 297
Example Terms for Purchase and Sale Agreements
Buyer’s Remedies. In the event Seller fails, without legal excuse, to complete the sale of the Property, Buyer shall have all
legal and equitable remedies against Seller, including, but not limited to, specific performance, injunction (mandatory and
prohibitive), and damages. If Buyer elects to terminate this Agreement in response to Seller’s breach hereof, Seller shall,
in addition to all other liabilities under this Agreement, pay all of Buyer’s costs incurred hereunder, including, but not
limited to any title and escrow charges, the cost of the Appraisal, and any costs associated with Buyer’s Inspection. Seller
agrees that, in the event of a breach or threatened breach of any of the provisions of this Agreement, damages at law may
be an inadequate remedy and, accordingly, Seller’s obligations under this Agreement shall be enforceable by an order of
specific performance or injunction as provided above.
Seller’s Remedies. In the event Buyer fails, without legal excuse, to complete the sale of the Property, Seller’s sole
remedy against Buyer shall be an action for damages. If Seller elects to terminate this Agreement in response to Buyer’s
breach hereof, Buyer shall, in addition to all other damages under this Agreement, pay all of Seller’s costs incurred
hereunder, including, but not limited to, any title and escrow charges.
Waiver. No delay in exercising a right or remedy shall constitute a waiver thereof, and no waiver by Seller or Buyer of the
breach of any term, covenant, or condition of this Agreement shall be construed as a waiver of any preceding or
succeeding breach of the same or any other term, covenant, or condition of this Agreement. Any waivers under this
Agreement must be in writing.
Specific Performance. In the event of a material breach or default in or of this Agreement or any of the terms, covenants,
conditions, or provisions hereof by Buyer, Seller shall have, in addition to a claim for damages for such breach or default,
in addition and without prejudice to any other right or remedy under this Agreement or at law or in equity, the right to
(a) demand and have specific performance of this Agreement; an injunction (mandatory and prohibitive); and (c) terminate
this Agreement upon written notice without liability to Buyer. Seller agrees that, in the event of a breach or threatened
breach of any of the provisions of this Agreement, damages at law may be an inadequate remedy and, accordingly, Seller’s
obligations under this Agreement shall be enforceable by an order of specific performance or injunction as provided above.
Example of Additional Terms for Option Contract:
Exercise of Option. Seller agrees that Buyer’s exercise of the Option shall not constitute a waiver of, or otherwise have
the effect of terminating any rights Buyer may have as a result of any breach of any covenant, warranty, or representation
made by Seller in this Agreement or any other failure on the part of Seller to perform any obligation contained in this
Agreement. Notwithstanding that Buyer has (or has not) exercised the Option, Buyer shall retain the right to seek damages
against Seller arising out of, or as a consequence of, any such breach or failure by Seller.
Possession. Buyer shall be entitled to possession of the Property upon Closing.
17 Realtors/Brokers & Their Commissions
Example with No Realtor Involved: Realtors/Brokers. Seller and Buyer each represent and warrant for themselves that
they are not represented in the purchase and sale of the Property under this Agreement by any realtor, broker, or other
person who can claim a right to a commission or finder’s fee as a procuring cause of the sale contemplated in this
Indemnification. In the event of a claim for broker’s fee, finder’s fee, commission, or other similar compensation in
connection with the transaction that is the subject matter of this Agreement, Seller, if such claim is based upon any
agreement alleged to have been made by Seller, hereby agrees to indemnify, defend, and hold Buyer harmless against any
and all damages, liabilities, costs, expenses, and losses (including, without limitation, reasonable attorneys’ fees and costs)
that Buyer may sustain or incur by reason of such claim. In the event of a claim for broker’s fee, finder’s fee, commission,
or other similar compensation in connection herewith other than as set forth above, Buyer, if such claim is based upon any
agreement alleged to have been made by Buyer, hereby agrees to indemnify, defend, and hold Seller harmless against any
and all damages, liabilities, costs, expenses, and losses (including, without limitation, reasonable attorneys’ fees and costs)
that Seller may sustain or incur by reason of such claim.
Example with Realtor Involved: - Realtors/Brokers. Buyer represents and warrants that it is not represented in the
purchase and sale of the Property under this Agreement by any realtor, broker, or other person who can claim a right to a
commission or finder’s fee as a procuring cause of the sale contemplated in this Agreement. At the signing of this
Agreement, xxxxxxxxxxxxxxxxxxx, of xxxxxxxxxx Realty Company solely represented Seller (“Seller’s Brokers”).
Seller shall be solely responsible for compensating Seller’s Brokers, the terms of such compensation to be set forth
separately from this Agreement.
298 Acquiring Land and Conservation Easements
Example Terms for Purchase and Sale Agreements
Indemnification. [see above]
Bankruptcy. If at any time prior to the Closing Date, and the same is not discharged or dismissed more than seven (7) days
prior to the Closing Date, (a) there is filed with respect to Seller in any court or with any governmental body pursuant to
any statute either of the United States or of any state, a petition in bankruptcy or insolvency or a petition seeking the
appointment of a receiver; (b) a receiver, conservator, or liquidating agent or similar person is appointed for all or a
substantial portion of Seller’s property; (c) Seller gives notice to any person or governmental body of insolvency or
suspension or pending suspension of Seller’s operations; or (d) Seller makes an assignment for the benefit of creditors or
takes any other similar action for the protection or benefit of creditors, then and in any of such events, Buyer shall have the
right, at Buyer’s option, and in addition to all other remedies available to Buyer pursuant to this Agreement or at law or in
equity, to cancel and terminate any and all further obligations of Buyer under this Agreement, and upon the giving of such
notice by Buyer to Seller and effective as of the date of the giving of such notice, this Agreement may be canceled and
terminated, and neither party shall have any further rights or obligations under this Agreement and the Earnest Money
shall be returned to Buyer. Seller shall promptly notify Buyer of any and all such events described in this section
regardless of whether the same are discharged or dismissed prior to the Closing Date. This condition is intended solely for
the benefit of Buyer. If the foregoing condition is not satisfied, Buyer shall have the right at its sole election to waive the
condition and proceed with the sale or, in the alternative, to terminate this Agreement.
19 Miscellaneous Terms
19.1 Entire Agreement.
Entire Agreement. This Agreement constitutes the entire agreement of the Buyer and Seller with respect to the purchase
and sale of the Property, and this Agreement supersedes all prior and contemporaneous agreements and understandings
between them, written or oral.
Authority. Each undersigned representative of the Parties certifies that he or she is fully authorized to enter into the terms
and conditions of this Agreement and to legally execute, and bind such party to, this Agreement.
19.3 Survival of Terms.
Survival of Terms. All provisions of this Agreement which involve obligations, duties, or rights which have not been
determined or ascertained as of the Closing Date or the recording of the Deed, including, but not limited to, provisions for
attorneys’ fees and costs, shall survive the Closing and recording of the Deed and shall not be merged therein.
Time. Time is of the essence of this Agreement.
Computation of Time. Unless otherwise expressly specified in this Agreement, any period of time specified in this
Agreement shall expire at 5:00 p.m. on the last calendar day of the specified period, unless the last day is Saturday,
Sunday, or a legal holiday, as prescribed in RCW 1.16.050, in which event the specified period shall expire at 5:00 p.m. on
the next business day.
19.5 Governing Law/Jurisdiction & Venue.
Governing Law. This Agreement and the rights of the Parties shall be governed by and construed in accordance with the
laws of the State of Washington.
Venue. Venue for any action to enforce this Agreement shall be xxxxx County, Washington.
19.6 Recording of Memorandum.
Purchasing Land and Easements 299
Example Terms for Purchase and Sale Agreements
Memorandum of Option. Seller and Buyer agree that this Agreement shall not be recorded in the official records of
xxxxxxx County. Seller and Buyer further agree that, upon execution of this Agreement, a memorandum hereof, in the
form attached to this Agreement as Exhibit x, which is incorporated here by this reference, may be recorded in the official
records of xxxxxx County.
19.7 Section 1031 Exchange
Tax-Deferred Exchange. Buyer acknowledges that Seller will be transferring the Property in anticipation of
consummating a tax-deferred exchange of property pursuant to the provisions of Section 1031 of the Internal Revenue
Code of 1986, as amended. Buyer agrees to cooperate with Seller but Buyer shall not be required to participate in any
earnest money agreements, exchange agreements, or other documents, nor required to take title to any exchange property
nor shall Buyer incur any costs, expenses, or liabilities in connection with any such tax-deferred exchange. Seller shall
indemnify, defend, protect, and hold Buyer harmless from and against any and all damages, liabilities, state or federal tax
assessments, costs, expenses, losses (including attorneys’ fees and costs) that might be asserted against Buyer by any
person including any governmental agency as a result of any such exchange or attempted exchange.
300 Acquiring Land and Conservation Easements
Sample Option Agreement
[IDENTIFICATION OF PROJECT OR SITE]
[CONTEMPLATES SOME IMPROVEMENTS, NOT STRICTLY OPEN-SPACE]
FOR CONSIDERATION PAID, [____________], with an address of [___________] (the “Seller”),
for himself, his successors, heirs and assigns, hereby grants to Generic Open Space Land Trust,
Inc., a Massachusetts nonprofit corporation, with an address of Boston,
Massachusetts 02116, its successors and assigns (the “Buyer”) the right and option to purchase
the premises described below all upon the terms and conditions which follow:
1. Subject of Agreement. This Option Agreement relates to the following parcel(s) of
land [and buildings located thereon], hereinafter described as the “Premises” together with the
benefit of all easements and rights of way appurtenant thereto: [insert full description, including
title reference]. The Premises are [shown on the plan][more fully described] in Exhibit A
2. Grant of Option. In consideration of the sum of [____________ and 00/100 Dollars
($______)] paid by Buyer to Seller, and for other good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, Seller does hereby grant to Buyer the right and
option (the “Option”) to purchase the Premises upon the terms and conditions set forth in this
3. Term of Option; Extension. This Option Agreement shall commence on the date
hereof and shall continue in full force and effect for one year from the date hereof, subject to the
provisions of this Option Agreement. The initial term specified in the above paragraph shall be
extended for up to _______ additional periods of _________ [months] [one year] each upon
delivery (prior to the expiration of the then-current term of this Option Agreement) to Seller from
Buyer of a written notice of the extension, together with an additional sum of [____________ and
00/100 Dollars ($______)] for each such extension period. Upon the expiration of any valid
option period, this Option Agreement shall terminate and be null and void and without recourse to
the parties hereto, and all option payments shall be retained by Seller. Time is of the essence of
this Option Agreement.
4. Purchase Price. The purchase price of the Premises shall be [____________ and
00/100 Dollars ($______)], payable as follows:
[____________ and 00/100 Dollars ($______)], less payments made pursuant to Section
2 and 3 above, due and payable by certified or bank check or federal funds wire transfer at the
Closing (hereinafter defined).
5. Exercise of Option. Buyer may exercise its rights under this Option Agreement
by giving Seller written notice to that effect, such notice to specify a date (the “Closing Date”)
not sooner than seven (7) days and not later than sixty (60) days thereafter on which Seller is to
deliver its deed. In the event that Buyer so exercises its option hereunder, Seller agrees to sell
and Buyer agrees to buy the Premises upon the terms and conditions set forth in this Option
6. Title; Deed. The Premises shall be conveyed by delivery of a good and sufficient
general warranty deed, running to Buyer or its nominee, which deed shall convey a good and
clear, record and marketable title to the Premises free and clear of all tenants, leases, liens,
Purchasing Land and Easements 301
Sample Option Agreement
assessments, easements, restrictive covenants, restrictions and encumbrances of any nature or
description whatsoever, except:
a) Provisions of existing building and zoning laws of the State or
Commonwealth in which the Premises are located; and
b) Such real estate taxes, applicable to the Premises, for the then current
year as are not due and payable on the date of the delivery of the deed.
7. Closing. The closing resulting from the exercise of the Option (the “Closing”),
shall take place at _____________a.m. on the Closing Date at the [County] Registry of Deeds or,
upon written notice from Buyer, at the offices of Buyer’s attorney, Buyer’s lender, or the attorney
of such lender, so long as such offices are [in the greater Boston area] [within a 30-mile radius of
8. The Seller’s Representations and Covenants. The Seller represents, warrants and
covenants that (a) Seller has not and will not enter into any leases, mortgages, liens, restrictions,
encumbrances or other agreements under which any person or entity, not a party to this Option
Agreement, has, will have and will obtain any rights, interest or claim that impairs the Buyer’s
rights or the Seller’s ability to perform hereunder, or in any way affects the title to or the
condition of the Premises. The Seller agrees to promptly, and in all events within thirty (30) days
remove, cure, or bond over any breach of this representation, warranty and covenant.
9. Possession and Condition of the Premises. Full possession of the Premises, free
from any tenants and occupants, is to be delivered at the time of the delivery of the deed. The
Seller covenants and agrees that it will take no action, or allow others claiming under it to take
such action, as would (a) adversely affect the condition of the Premises, (b) violate, increase or
expand any existing violation, of any safety, health, wetlands, environmental, building or zoning
laws and regulations, (c) violate the provisions of any instrument of record affecting the Premises,
or (d) interfere with or impair the Buyer’s rights under this Option Agreement. The Seller
warrants and represents that it has no knowledge of and has received no notice of violations of
any such laws and regulations and that no easement, covenant, restriction, or other instrument of
record affecting the Premises has been violated, which warranty and representation shall survive
the delivery of the deed. If such representation and warranty is materially inaccurate or is
materially incomplete or misleading, when made or on the Closing Date, the Buyer shall have the
right, in addition to other rights and remedies contemplated herein or permitted by law, to
terminate this Option Agreement, on or prior to the Closing Date and to have any funds expended
for payments hereunder promptly refunded and reimbursed to the Buyer.
10. Extension to Perfect Title or Make Premises Conform. If the Seller shall be
unable to give title or to make conveyance, or to deliver possession of the Premises all as herein
stipulated, or if at the time of the delivery and recording of the deed the Premises do not conform
with the provisions hereof, then the Seller shall, if the Buyer so elects, use reasonable efforts to
remove any defects in title, or to deliver possession as provided herein, or to make the Premises
conform to the provisions hereof, as the case may be, in which event the Buyer shall give written
notice thereof to the Seller at or before the time for delivery of the deed and thereupon the time
for performance hereof shall be extended for a period of thirty (30) days.
11. Failure to Perfect Title or Make Premises Conform. If at the expiration of the
extended time for performance set forth in Section 10 above, the Seller shall have failed to so
remove any defects in title, deliver possession, or make the Premises conform, as the case may
302 Acquiring Land and Conservation Easements
Sample Option Agreement
be, all as herein agreed, then, at the Buyer’s option, the Buyer shall be entitled to specific
performance of the Seller’s obligations hereunder in addition to remedies of law, or the Buyer
may terminate this Option Agreement and any payments made under this Option Agreement shall
be forthwith refunded and all other obligations of all parties hereto shall cease and this Option
Agreement shall be void without recourse to the parties hereto.
12. Acceptance of Title by Buyer. The Buyer shall have the election at either the
original of any extended time for performance, to accept such title as the Seller can deliver to the
Premises in their then condition and to pay therefor the purchase price with reasonable deduction,
in which case the Seller shall convey such title, except that in the event of such conveyance in
accordance with the provisions of this paragraph if the Premises have been damaged by fire or
casualty insured against, then the Seller shall, unless the Premises have previously been restored
to their former condition, either:
a) Pay over or assign, without recourse, to the Buyer, upon delivery of the
deed, all amounts recovered or recoverable on account of such insurance, less any amounts
reasonably expended by Seller for any partial restoration, or
b) If a holder of a mortgage on the Premises shall not permit the insurance
proceeds or part thereof to be used to restore the Premises to their former condition or to be so
paid over or assigned, the Seller shall give to the Buyer a credit against the purchase price, on the
delivery of the deed, equal to the amount so recovered or recoverable and retained by the holder
of the mortgage less any amounts reasonably expended by the Seller for any partial restoration.
13. Acceptance of the Deed. The acceptance of the deed by the Buyer, or its
nominee as the case may be, shall be deemed to be a full performance and discharge of every
agreement and obligation herein contained or expressed, except such as are, by the terms hereof,
to be performed after the delivery of the deed.
14. Use of Purchase Money to Clear Title. In order to enable Seller to make
conveyance as herein provided, Seller shall, at the time of the delivery of the deed, use the
purchase money or any portion thereof to clear title of any and all encumbrances of adverse
interests, and all instruments required therefor shall be procured by Seller and shall be recorded
simultaneously with the recording of the deed.
15. Adjustments of Real Estate Taxes. Real estate taxes for the then-current tax year
shall be apportioned at the applicable Closing Date and the net amount thereof shall be deducted
from or added to the purchase price payable by Buyer to Seller, as the case or cases may be. If
the amount of such taxes are not then known, the same shall be apportioned and based upon the
assessment and rate for the previous year, subject to readjustment as and when such applicable
taxes are known. All other municipal assessments, of every type, nature or description, as at any
Closing Date, assessed and applicable to the Premises, and outstanding, shall be forthwith paid in
full by Seller.
16. Buyer’s Default. If Buyer shall fail to fulfill its agreements herein to purchase
the Premises, then and in such event, all sums paid by Buyer to Seller shall be held by, or for the
account of, Seller as liquidated damages and thereupon neither party shall have any further right
against the other at law, in equity or otherwise.
17. Right of Entry. For and during the term of the Option, Buyer shall have the right,
from time to time, at Buyer’s sole cost, expense, risk and hazard and in all such manner as Buyer
Purchasing Land and Easements 303
Sample Option Agreement
may reasonably determine, without damage being imposed upon the Premises, to enter upon the
Premises to make, or cause to be made, engineering findings in respect thereto, including
(without limitation) (a) surveying, (b) conducting test borings in order to determine subsoil
conditions of ledge, peat or other soft materials, (c) conducting engineering tests and
environmental site assessments, [(d) assess availability of potable water and utilities], and (e) in
general conducting all other tests, analyses and studies of the Premises necessary or desirable to
enable Buyer to determine the suitability of the Premises for [insert Buyer’s intended use]. Buyer
agrees to indemnify and hold harmless Seller for any damage done to the Premises or incurred by
the Seller resulting from the exercise of Buyer’s rights under this Section 17.
18. Other Research. During the term of the Option, Buyer intends to conduct any
and all such other research as Buyer deems necessary in order to determine governmental
authority and economic and financial feasibility for [insert description f Buyer’s intended use] at
the Premises. To that end, it is the intention of Buyer to determine that (1) appropriate access to
the Premises can be secured; (2) the Premises are zoned in manner permitting the foregoing or
that appropriate variances can be obtained, (3) that such building and other permits including
(without limitation) permits for the installation of required septic, water and other utilities, may
be issued by all such state, county and local authorities as have jurisdiction over the Premises for
such purposes; and (4) that such construction and use of the Premises will not create any adverse
environmental impact upon the local community. For purposes of making any such
determinations which may require the filing of applications with governmental or other
authorities (which may require such filings to be made in the name of Seller, as record owner),
Seller does hereby authorize Buyer to file, at Buyer’s sole cost and expense, any such
application(s) in the name of Seller, and to cooperate with Buyer in all respects, including
attendance at any hearings, if reasonably required, for the purposes of processing and prosecuting
any such applications to final decision. Buyer agrees to indemnify and hold harmless Seller for
any damage done to the Premises or incurred by the Seller resulting from the exercise of Buyer’s
rights under this Section 18.
19. Hazardous Waste. As part of the research enumerated in Section 17 and Section
18 above, Buyer intends to determine the compliance of the Premises with state and federal laws
regarding hazardous waste. The cost of such investigations and research shall be borne by Buyer.
If such investigations determines that there has been a release or there is any threat of release of
hazardous material or that the Premises are otherwise not in compliance with such laws, Buyer
shall so notify Seller within _________ from the date hereof by sending Seller a copy of any
professional reports obtained by Buyer, whereupon Seller shall promptly remedy such
noncompliance to the reasonable satisfaction of Buyer [and Buyer’s lender] and the governmental
entity having jurisdiction, at Seller’s sole cost and expense. If Seller fails to remedy any
noncompliance to the satisfaction of Buyer, [Buyer’s lender,] and of such government entity
having jurisdiction, Buyer may, at its option, close this transaction pursuant hereto and pay the
purchase price with deduction for the reasonable cost of remedying such noncompliance, or, at its
option, Buyer may send written notice to Seller terminating this Option Agreement together with
copies of all professional reports and other documents assembled by Buyer with respect to such
matters during the course of its investigation; and thereupon Seller shall promptly refund to Buyer
all deposits made hereunder pursuant to Section 2 or Section 3 above, and this Option Agreement
shall terminate and be of no further force or effect.
20. Real Estate Broker. Each party represents and warrants to the other that no
broker has been engaged in connection with this transaction.
304 Acquiring Land and Conservation Easements
Sample Option Agreement
21. Seller’s Default. If Seller shall fail to fulfill its agreements herein, including
specifically but without limitation, its agreement to convey the Premises upon the terms recited
herein, then and in such event, in addition to all rights of Buyer at law or in equity, including the
right of specific performance, Buyer shall be entitled to an immediate return of all sums paid to
22. Release by Spouse. The Seller’s spouse hereby agrees to join in the deed and to
release and convey all statutory and other rights and interests in the Premises.
23. Additional Documents. Seller agrees to furnish to Buyer, and to Buyer’s
mortgage lender and title insurance company, at the time of delivery of the deed: (a) an affidavit
verifying the nonexistence of mechanics’ and material mens’ liens and lien rights and certifying
that no basis for the same exists; (b) an affidavit verifying that there are no parties in possession
or other persons entitled to rights of possession; (c) any other documentation reasonably
requested or as shall be reasonably necessary or desirable to carry out the terms of this Option
24. Construction of Agreement. This instrument, executed in multiple originals, is to
be construed as a [state where Premises are located] contract, is to take effect as a sealed
instrument, sets forth the entire agreement between the parties, is binding upon and inures to the
benefit of the parties hereto and their respective heirs, devisees, executors, administrators,
successors and assigns, and may be cancelled, modified or amended only by a written instrument
executed by both the Seller and the Buyer. If two or more persons are named herein as Buyer or
Seller, their obligations hereunder shall be joint and several. The captions are used only as a
matter of convenience and are not to be considered a part of this Option Agreement or to be used
in determining the intent of the parties to it.
25. Notices. Any and all written notices required herein shall be deemed properly
given upon the earlier of (i) two business days after deposit with the United States Postal Service
if sent by registered or certified mail, return receipt requested, postage prepaid, (ii) tender if
delivered by hand to the addresses set forth below (or to an alternative address provided to the
other party by written notice as set forth in this Section), or (iii) receipt:
if to Seller: __________________
with a copy to: __________________
if to Buyer: __________________
with a copy to: __________________
26. Assignability. The Buyer may, at the Buyer’s option, make an assignment of, or
give a security interest in, any and all of its rights and obligations under this Option Agreement.
27. Recording. The Buyer may record this Option Agreement or a notice thereof, at
the Buyer’s expense and option, in which event the Seller agrees to execute any additional
documents or notices reasonably required in connection therewith.
Purchasing Land and Easements 305
Sample Option Agreement
IN WITNESS WHEREOF the parties have caused this Option Agreement to be signed under
seal this ____ day of ________, 20___.
• Add Signature Blocks for both Buyer and Seller.
• [Insert Notary Jurat for Jurisdiction, for both Buyer and Seller]
• Exhibit A to Option Agreement - Legal Description of Premises
306 Acquiring Land and Conservation Easements
Sample Right of First Refusal Agreement
RIGHT OF FIRST REFUSAL AGREEMENT
THIS RIGHT OF FIRST REFUSAL AGREEMENT (this "Agreement"), dated and
effective as of the ____ day of __________, 200__, is made by and between MICHAEL AND
NANCY LANDOWNER, (the "Landowner") and GENERIC OPEN SPACE LAND TRUST, a
Georgia nonprofit corporation (the "Land Trust").
The Landowner owns certain real property as more particularly described on Exhibit A
attached hereto and incorporated by this reference, located in Cherokee County, Georgia (the
The Landowner desires to give, grant, bargain, sell, and convey to Land Trust certain
rights to purchase the Property on the terms and subject to the conditions set forth herein.
Accordingly, for good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties agree as follows:
1. Right of First Refusal. In the event Landowner shall receive a bona fide offer
for the purchase of the Property at anytime after the date hereof [and before the Expiration Date
as hereinafter defined], and the offer of purchase shall be acceptable to Landowner, Landowner
will not sell the Property or any portion thereof without first offering the Property to Land Trust
pursuant to this paragraph. Landowner shall give Land Trust the right to purchase the Property at
the price and on the terms of the offer so made. This right shall be extended by Landowner
giving written notice of the offer by registered mail to Land Trust, requiring Land Trust to accept
the offer in writing and to sign a purchase agreement within forty-five (45) days after the mailing
of the notice. In the event that Land Trust does not purchase the Property on the terms set forth
above, then the Right of First Refusal granted herein shall lapse.
2. Burden and Benefit. The covenants and agreements contained herein shall be
binding upon and inure to the benefit of the successors and assigns of the respective parties
hereto. No party may assign this Agreement without the consent of the other party.
3. Severability of Provisions. Each provision of this Agreement shall be
considered severable, and if for any reason any provision that is not essential to the effectuation
of the basic purposes of the Agreement is determined to be invalid and contrary to any existing or
future law, such invalidity shall not impair the operation of or affect those provisions of this
Agreement that are valid.
4. No Continuing Waiver. None of the parties hereto shall be deemed to have
waived any rights hereunder unless such waiver shall be in writing and signed by such party. The
waiver by any party of any breach of this Agreement shall not operate or be construed to be a
waiver of any subsequent breach.
5. Governing Law. This Agreement shall be construed and enforced in accordance
with the laws of the State of Georgia, without regard to principles of conflicts of laws.
6. Binding Agreement. This Agreement shall be binding on the parties hereto, and
Purchasing Land and Easements 307
Sample Right of First Refusal Agreement
their heirs, executors, personal representatives, successors and assigns.
7. Headings. All headings in this Agreement are for convenience of reference only
and are not intended to qualify the meaning of any provision of this Agreement.
8. Terminology. All personal pronouns used in this Agreement, whether used in
the masculine, feminine, or neuter gender, shall include all other genders, the singular shall
include the plural, and vice versa as the context may require.
9. Counterparts. This Agreement may be executed in several counterparts, each of
which shall be deemed to be an original copy, and all of which together shall constitute one
agreement binding on all parties hereto, notwithstanding that all the parties shall not have signed
the same counterpart.
IN WITNESS WHEREOF, the parties have executed this Right of First Refusal Agreement
as of the date first above written.
GENERIC OPEN SPACE LAND TRUST, a
Georgia nonprofit corporation
Maggie Loveland, Executive Director
[Include proper notorial jurats if parties intend right of first refusal to be recorded in land
Include Exhibit A Legal Description
308 Acquiring Land and Conservation Easements
Appraising Easements: Guidelines for Valuation of Land Conservation and
Historic Preservation Easements, 3rd ed., by the Land Trust Alliance
and National Trust for Historic Preservation (1999).
A Conservation Easement Appraisal Guide: A Brief Overview of
Easement Valuation in Colorado, by the Colorado Coalition of Land
Trusts (2005), available at www.cclt.org/education.html.
Doing Deals: A Guide to Buying Land for Conservation, by the Land
Trust Alliance and Trust for Public Land (1995).
Getting to YES: Negotiating Agreement Without Giving In, by Roger
Fisher, William Ury and Bruce Patton (Penguin Books, 1989).
Uniform Appraisal Standards for Federal Land Acquisitions (the Yellow
Book), by the Interagency Land Acquisition Conference (The
Appraisal Institute, 2000). The Appraisal Institute offers a wealth of
information and training on appraisals that you can access from their
Uniform Standards of Professional Appraisal Practice (USPAP), by
The Appraisal Foundation (2008). The Appraisal Foundation also
publishes a guidance document along with the USPAP. Both docu-
ments, along with other useful information, can be ordered from their
Purchasing Land and Easements 309
Check Your Progress
Before complete this chapter, check that you can:
l Define fair market value and appraised value.
l Determine when the land trust needs to obtain an appraisal.
Conversely, determine when it is appropriate to use alternative
methods of establishing value. Understand the documentation
requirements for determining the value.
l Understand the key elements of an appraisal and other meth-
ods of valuing land. Determine whether an appraisal is useful
(for example, for negotiations) or required (for justifying an
l Explain the rare situations when a land trust may pay above
the appraised value. Know how to document the reason for
paying above fair market value.
l Describe the characteristics of a qualified independent
appraisal (as defined by Land Trust Standards and Practices).
l Understand methods of evaluation used by appraisers.
l Know how to find and contract with a qualified appraiser.
l Describe examples of the basic steps in the negotiation of
a purchase price for a conservation parcel (fee interest or
l Understand principled negotiations and be able to utilize
principled negotiations in land trust transactions.
l Explain why it is important to be ethical with landowners
when engaged in negotiations.
l Understand the basic elements of a contract, particularly ones
related to the conveyance of real property, such as those used
in purchase agreements, options and rights of first refusal.
l Define purchase and sale agreement and option. Understand
how to work with attorneys to draft and review such
l Describe additional steps to take if the purchase involves an
“insider” to the organization.
l Identify the key differences between a transaction in which
land is sold and one in which land is donated.
310 Acquiring Land and Conservation Easements
Purchasing Land and Easements 311