Presenting a live 90-minute webinar with interactive Q&A Conservation Easement Amendments: Navigating Amendment Mechanisms, Overcoming Challenges and the Lack of an Amendment Provision WEDNESDAY, SEPTEMBER 21, 2016 1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific Today’s faculty features: Thomas J. P . McHenry, Partner, Gibson Dunn & Crutcher , Los Angeles Professor Nancy A. McLaughlin, University of Utah College of Law , Salt Lake City Ann Schwing, Of Counsel, Best Best & Krieger , Sacramento, Calif. The audio portion of the conference may be accessed via the telephone or by using your computer's speakers. Please refer to the instructions emailed to registrants for additional information. If you have any questions, please contact Customer Service at 1-800-926-7926 ext. 10 .
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Conservation Easement Amendments Strafford Webinar, September 21, 2016 • Ann Taylor Schwing, Best Best & Krieger LLP ann.schwing@bbklaw.com • Thomas McHenry, Gibson Dunn tmchenry@gibsondunn.com • Nancy A. McLaughlin, University of Utah SJ Quinney College of Law nancy.mclaughlin@law.utah.edu
The Basics Ann Taylor Schwing, Best Best & Krieger LLP Archer Taylor Preserve 6
W HAT I S A C ONSERVATION E ASEMENT A MENDMENT ? • Amendments range from simple corrections, to positive alterations, to major changes or rewriting of easement provisions. • The first two are relatively common and normally improve easement enforceability and effectiveness. • Major changes and substantive easement revisions typically violate perpetuity requirements. • Any change is an amendment, no matter what terminology is used. • A purported “amendment” may constitute an extinguishment. 7
Y OU M UST K NOW S IGNIFICANT E ASEMENT D ETAILS TO R EACH A NY C ONCLUSION ON A MENDMENT • Easement amendments may be governed by a variety of federal and state laws. • State laws on real estate transactions, recordation, title, and the like will normally apply. • Easements may be donated, purchased (in whole or in part), or exacted. • Donated easements may have unusual amendment provisions from donors. • Donated or bargain sale easements for which federal deductions are claimed must satisfy federal tax law requirements. • Easements purchased pursuant to federal or state funding or other programs must meet program requirements. • The same is true when institutional funders provide significant funding. • Mitigation easements may fall under any of these categories. 8
T HE M ECHANICS O F A N A MENDMENT A RE T HE E ASY P ART • Amendments are done by drafting new language and identifying how the easement is altered, obtaining necessary approvals and signatures, and recording the document. • Parties that signed the original easement or their successors must sign. Easements may also require other interested persons to sign (often funders). • Easements may require that notice of any amendment be given or that other special steps be taken before the amendment is effective. • Good relations with neighbors, federal and state regulators, and others may require notice of amendment. 9
T HE H ARDER P ARTS D EPEND O N T HE C IRCUMSTANCES • Is the proposed amendment appropriate and necessary under its enabling laws, under the specific facts, under the specific easement requirements, under any other relevant requirements? • What research is needed to learn the facts and requirements? • Failure to comply with all existing legal requirements may result in an amendment that is void ab initio or subject to challenge and creates a cloud on title. • Set out recitals of all relevant facts explaining the amendment and satisfaction of all applicable laws. 10
P RIVATE I NUREMENT A ND I MPERMISSIBLE P RIVATE B ENEFIT • Will the time and resources (charitable/public assets) spent by the holder considering and executing the amendment benefit the public or only the landowner requesting the amendment? • Consider private inurement and impermissible private benefit throughout the process. Can the amendment be revised to eliminate these concerns? Is an appraisal needed? Has the amendment been altered in negotiations so that private inurement and private benefit must be reassessed? • Can the owner be required to accept additional restrictions or contribute more land or money for stewardship to ensure there is no private inurement/impermissible private benefit? 11
D OES T HE A MENDMENT S ATISFY A LL A PPLICABLE S TATE L AWS ? • What laws might be applicable? • State statutes authorizing the creation of conservation easements (easement “enabling” statutes ) • State laws authorizing state easement purchase programs • State laws authorizing state tax benefits for easement donations (many piggyback on federal tax law) • State real property and contract laws • State laws governing the operations of charitable organizations • State laws governing administration of charitable gifts (including easements donated in whole or in part) 12
D OES T HE A MENDMENT S ATISFY A LL A PPLICABLE F EDERAL L AWS ? • The following federal laws may also be applicable: • Federal laws authorizing federal tax benefits for easement donations • Federal laws authorizing federal easement purchase programs • Federal laws on tax-exempt status of charitable orgs (private inurement/benefit) • Land must have conservation values and easements must protect those values • Baseline must be completed at time of gift and not be slipshod • Mortgages must be subordinated at transfer to avoid extinguishment if foreclosure • Easement must be recorded in year of deduction if claimed to be perpetual • Judicial proceeding is required for full or partial extinguishment, including any swap • On extinguishment, holder must be entitled to % of proceeds to replace lost conservation values • Satisfaction of these requirements is always wise because they ensure protection of the public interest/investment in the easement 13
W HO I S I NVOLVED , D IRECTLY OR I NDIRECTLY ? • Who should be involved in the amendment? • Assess who needs to be involved (federal official/agency, state AG or other public official/agency, court, funder, easement grantor?) Those involved before an amendment may provide valuable insight, suggest alternatives, understand the owner and land trust reasoning, and accept the desirability of the amendment. • Are neighbors, the grantor, the community, or federal or state regulators likely to object to the amendment? Can steps be taken to address their objections? • If it is determined that the amendment is appropriate and necessary, will it benefit the public and comply with all applicable laws and policies? If so, draft the amendment narrowly, with great clarity. • Does the amendment comply with the organization’s amendment policy as to who is involved? 14
A MENDMENT P OLICY A conservation easement Amendment Policy will usually include the following, although the nature of contents varies with the kinds and circumstances of permitted amendments. • Statement of Land Trust’s Philosophy on Amendments; Allowable Purposes of Amendments; Amendment Principles • Amendment must clearly serve the public interest/be consistent with the land trust’s mission • Amendment must comply with all applicable federal, state, and local laws • Amendment must not jeopardize land trust’s tax -exempt status or status as a charitable organization under federal or state law • Amendment must not result in private inurement/impermissible private benefit • Amendment must be consistent with the conservation purpose(s) and intent of the easement • Amendment must be consistent with intent of grantor and any direct funding source • Amendment must have a net beneficial or neutral effect on the relevant conservation values 15
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