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Conservation Easement Considerations

Updated: Jul 23, 2020

By Sarah Everhart

Brown horse eating grass (Photo Credit Edwin Remsberg).

At this year’s Maryland State Bar Association Conference the Agriculture Law Section of the Bar co-hosted a panel discussion with the Environment and Energy Section pertaining to legal considerations for conservation easements. One of the panelists was Nancy Russell-Forrester, Esq. Nancy represents the Maryland Agricultural Land Preservation Foundation (MALPF) program and she put together the following checklist for attorneys advising clients considering a conservation easement. I am posting the checklist because it is helpful for both attorneys and landowners considering a conservation easement.

MARYLAND AGRICULTURAL LAND PRESERVATION FOUNDATION (“MALPF”) PROGRAM Considerations for Attorneys Representing Landowners Statutory Authority: Md. Code Ann., Agric. § 2-501 et seq. Regulations: COMAR 15.15.01 et seq.

I. Conservation Easements in General– What are they? A. Bundle of Covenants to restrict use of land, including restrictions on 1. subdivision and/or development, 2. commercial, industrial, agricultural, or residential use or activity, 3. open space maintenance, and/or 4. type-specific conservation objectives (i.e.; agricultural land, plant or animal habitat, stream buffer, forests)

B. Authorized in Maryland under Md. Code Ann., Real Prop. § 2-118

C. Easement document is recorded among the Land Records, the Easement “runs with the land” and is usually perpetual

D. Can be donated or sold by a landowner to an Easement “holder”.

E. Each Easement program has its own processes for purchasing or accepting donation of an easement – consult with the specific program for details

II. Considerations Prior to Applying to Sell an Easement to the MALPF program A. What are the landowner’s goals relative to the farm into the future? 1. Does the landowner have children who desire to live on the farm? -consider withholding land for building lots, but keep in mind effect on development rights then available to sell 2. How would the landowner use the proceeds from the sale of an easement? -ex.: like kind exchange, capital improvements, pay down debt, cash for estate

planning 3. Does the landowner want to be able to subdivide the farm for the next generation? a. Subdivision is not a right. b. Foundation’s regulations provide a process to subdivide easement properties for agricultural purposes only c. Multiple parcels are considered to be one tract under the MALPF Easement and may not be conveyed apart from each other 4. Are there any commercial, residential or industrial uses on the farm or on an area of the farm that are incompatible with the MALPF program? a. land must be assessed for agriculture b. payment will not be made for areas consumed by gravel pits, graveyards, cell towers, non-agricultural commercial operations, or one acre surrounding dwellings 5. What are options for lot selection under the MALPF program? a. one Unrestricted lot (convey to anyone), b. up to three Family lots, depending on acreage of the farm, (for original owner or his children only), or c. Lot waiver (no further residential development) 6. Does the ag operation need a tenant to reside on the farm? -consider rolling a trailer on to the land prior to application, but keep in mind effect on development rights then available to sell

B. Does the land meet the eligibility requirements for the MALPF program? See Md. Code Ann., Agric. § 2-509 (d) (2016), COMAR 15.15.01*, and MALPF website: *Note that the Regulations appearing in Chapter 1 of Title 15, Subtitle 15 refer to eligibility for a “District”. Districts are no longer required to be established prior to sale of an easement, but the eligibility factors listed are still applicable to sale of an easement. 1) Quality of Soils 2) Minimum of 50 acres 3) At least one remaining development right to extinguish after lot selection 4) Location in Priority Preservation area of the county preferred 5) Agricultural activities permitted under county zoning Consult with County Administrator – Roster with contact information attached.

C. Title and Survey Issues 1. Have you reviewed the title to the farm? Is title in a trust, corporation, LLC or other entity? -make sure there is authority to sell a conservation easement, entity documentation is current, personal property tax returns have been filed and that entity is otherwise in good standing 2. Is the farm one contiguous tract of land or does it consist of more than one parcel? – survey – deed of consolidation 3. Are all parcels comprising the farm titled identically? -deed(s) to place all parcels into identical ownership 4. Are there other encumbrances on the farm? a. Are there already prohibitions on development? b. Are there any prohibitions on agricultural use? c. Are there any oil and gas leases or any other type of lease, recorded or unrecorded? d. Are there open mortgages or deeds of trust? i. Will lender require payoff and release or is lender willing to subordinate to MALPF Easement? ii. Does the mortgage encumber the entire farm or just part of it? iii. Is the landowner planning to refinance? 5. Does the landowner have any boundary line disputes with adjacent landowners or are there any encroachments over boundary lines? -issues must be resolved 6. Does legal access to the land exist? -formal agreement may be required

III. Considerations When Advising Clients Who Own Land Subject to a MALPF Easement A. Read the Easement! Look for particular restrictions on subdivision and off-conveyance, as well as lot rights.

B. The farm may not be further encumbered with additional restrictions or easements without MALPF Board permission. See COMAR (General Prohibitions), COMAR 15.15.13 (Forest Easement Overlays), COMAR 15.15.09 (Civil Penalties). -including easements to governmental entities, utilities and neighbors -Foundation Board may approve with conditions

C. Certain types of uses may be permissible only with the Foundation’s approval. See COMAR 15.15.07. See also Md. Code Ann., Agric. § 2-513(c) (2016) and COMAR 15.15.14 (Renewable Energy Generation Facilities), COMAR 15.15.09 (Civil Penalties).

D. Renewable Energy Generation Facilities. (Copy of COMAR 15.15.14 attached) 1. July 1, 2019 deadline 2. 5 acres/ 5% 3. Easement amendment 4. Monitoring fee and 5% lease payment 5. Reclamation 6. Performance Bond

E. The landowner may not subdivide, re-configure, or off convey any part or parts of land (including separately described parcels) that are included in the legal description of the Deed of Easement without MALPF permission. See Md. Code Ann., Agric. § 2-515 (2016) and COMAR 15.15.12. See generally Covered Bridge Farms II, LLC v. State of Maryland, 210 Md. App. 535 (2013), cert. denied, 432 Md. 468 (2013); Stitzel v. State of Maryland, 195 Md. App. 443 (2010), cert. denied, 418 Md. 192 (2011). COMAR B sets forth criteria that permit the Foundation to approve an agricultural subdivision: (1) The proposed subdivision serves an agricultural purpose (2) The proposed subdivision will enhance or have no effect upon the agricultural operations being conducted upon the land; and (3) The resulting divided parcels from the agricultural subdivision are able to sustain long-term agricultural production. If the Foundation Board approves the agricultural subdivision, the landowner must execute a Corrective Easement for each subdivided parcel that waives the right to request termination of the Easement, and also provide a perimeter survey of each subdivided parcel (COMAR C. –D, .07B.)

F. Is a lender seeking to place its lien on less land than the Deed of Easement encumbers? 1. Lien subordinate to MALPF Easement 2. Prohibited from separating the land under Easement in event of foreclosure

G. Has the Buyer of MALPF Easement land been given a Notice and a copy of the recorded Deed of Easement within the specified time frames as required by Md. Code Ann., Real Property §10-705? Has MALPF been notified of the transfer of title to the land as required in subsection (f) of that same section?

H. A Release from the MALPF Easement for a lot must be closely examined to determine if the lot is unrestricted, meaning it can be freely sold or conveyed, or if the lot is restricted to use of a particular person or persons for use as a dwelling. See Md. Code Ann., Agric. § 2-513 (b)(2) and (3) (2016) and COMAR 15.15.06. See also Maryland Agricultural Land Preservation Foundation v. Claggett, 412Md. 45 (2009).

This is not an exhaustive list of considerations and attorneys are urged to contact the staff at the Foundation with questions pertinent to their particular situations. Foundation staff may be contacted at 410-841-5860 and will be able to answer most questions you may have about the history of a particular property in the MALPF program. In addition, as the program grows older, both legislative and regulatory changes are likely to occur, which will impact the advice you can give to a client. Of note in this past legislative session is HB 155, (Now Chapter 114, 2017 Laws of Maryland, copy included in materials) which streamlined the process to apply for termination of an Easement approved for purchase by the Board of Public Works prior to September 30, 2004.

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