Glossary of Terms
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A valuation of property rights conducted by a
professional real estate appraiser. An appraisal usually involves the
comparison of similar properties that have recently sold to determine the
value of the subject property. For the fee simple (outright) sale or
donation of property, only the development value is determined. For
the sale or donation of development rights, the appraiser also values the
property as if it was restricted by a conservation easement. The
difference between the development value and the restricted value is the
value of the development rights. Landowners who donate some or all of
the value of a property\\'s rights must have a qualified appraisal to be
eligible for federal income tax benefits.
A collection of photographs (ground and aerial), maps and other
descriptions of a property that is developed at the time of the conveyance
of a conservation easement. The baseline defines the condition of the
property; both the grantor (landowner) and the grantee (conservation agency
or organization) sign the document agreeing to its contents as an accurate
representation. The baseline is used for annual monitoring and if
necessary enforcement of the easement\\'s terms.
A permanent legal agreement between a landowner and a qualified
conservation agency or organization that limits the type and amount of
development that is allowed on a parcel of land. In a Conservation
Easement, the landowner agrees to convey certain rights to the land
(typically division, construction, surface mining and clearcutting of trees,
for example; commonly called the "development rights") while retaining
ownership and all other rights, including prohibiting public access.
The qualified conservation agency or organization is responsible for
annually monitoring and enforcing the conservation easement to ensure the
protection of the property\\'s conservation values.
The Conservation Easement is tailored to protect the
property\\'s conservation values, as well as to meet the financial needs of
the landowner and the land preservation organizations conservation goals.
An easement may be designed to protect rare or endangered species, specific
type of habitat or natural features or to protect the agricultural values of
Environmental Site Assessment
An evaluation of property, usually conducted by a professional
firm, to determine if there has been a release of hazardous materials or
substances. An ESA is usually conducted prior to the conveyance of
property interests to make sure the property is free from environmental
contamination. If contamination is found, the landowner has the
opportunity to remedy it prior to closing.
A process to designate the disposition of ones assets (including
land) prior to death. Conveying land or conservation easements to
qualified agencies can reduce the value of ones estate and hence reduce or
avoid federal estate tax.
Federal Farm and Ranchland Protection Program
A matching grant program operated by the U.S. Department of
Agriculture for the purchase of agricultural conservation easements.
Proposals are submitted annually by local units of government and land
conservancies. The program will provide up to 50% of the appraised
value of development rights, with a cap of $5,000 per acre. The grant
awardee and the landowner are responsible for providing the other 50% of
Nonprofit organizations that work to conserve natural, agricultural
and open space lands through the purchase or donation of land or
conservation easements. Land trusts and conservancies also conduct
educational programs and make nature preserves open to the public for quiet
Like-Kind Exchange (1031)
A section of the Internal Revenue Code that allows landowners who sell land
or conservation easements to use the proceeds to purchase other
income-producing properties. Every dollar that is spent on other
property is not subject to capital gains tax (the tax is deferred).
Properties must be identified within 45 days of closing on the property or
easement sale and must close within 180 days of the property or easement
P.A. 116 (State Income Tax Credits)
A program of the Michigan Department of Agriculture that provides a
state income tax credit for landowners who enroll. If a landowner\\'s
local property taxes exceed 3.5% of household income, the amount above that
percentage may be claimed as a credit on ones state income tax form.
In addition, enrollment provides exemption from special assessments for
water and sewer lines, public lighting and non-farm drainage.
Purchase of Development Rights Program
A public or private initiative in which development rights are purchased,
usually to protect active agricultural land. Public agencies usually
have a property tax millage or other dedicated revenue source that is
matched with state, federal and private funds. Payment is made in
exchange for a perpetual conservation easement. The value
of the development rights is the difference between the value of the land
based on its development potential and the value of the land after
Market Value of the Property Before
- (Market Value of property After)
Value of the development rights
on Sep. 19, 2018 6:13 pm