, Michigan

Glossary of Terms

Appraisal
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.

Baseline Document
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.

Conservation Easement
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 property.

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.

Estate Planning
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 appraisal value.

Land Trusts/Conservancies
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 recreational activities.

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 sale.

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 easement.

Market Value of the Property Before
- (Market Value of property After)
Value of the development rights



This is printed from: http://preservewashtenaw.org/glossary/index_html
on June 28, 2017 8:06 am