Agricultural easements can address farmland preservation and farm transition goals, part 2
An agricultural easement is a legal instrument that can protect farmland from non-farm development and preserve the legacy of family land for the future. An earlier blog post explains how an agricultural easement works and answers common questions about agricultural easements. As we explained, an agricultural easement not only preserves farmland but can also be a valuable financial and tax tool that can enable a transition of the farm to the next generation. But are there drawbacks to agricultural easements? Here's a summary of potential negative implications of easements that landowners should also consider.
It's difficult to forecast the future of a farm. The very nature of the easement requires a best estimate of how the farmland might be used for agriculture into the future--a challenging task. The Deed of Agricultural Easement the parties agree to must predict agricultural activities that are consistent with the easement and those that would violate the easement. There could be future problems if the predictions and forecasting aren’t flexible enough to accommodate agriculture in the future.
The “perpetuity” requirement. While it’s possible to draft an easement that lasts only for a certain term of years, most agricultural easements remain on the land “in perpetuity,” or permanently. The programs that pay a landowner to grant an agricultural easement and the federal income and estate tax benefits for donating all or part of an easement require that the easement is perpetual. This differs from the conservation programs we’re accustomed to in agriculture that require shorter term commitments, and it can be a deterrent to a landowner who wants future generations to have a say in what happens to the land. These concerns might be addressed in the deed of agricultural easement, however, which may provide sufficient flexibility to address those future concerns.
Termination can be difficult and costly. Hand in hand with the perpetuity issue is the difficulty of terminating an agricultural easement once it’s in place. Typically, both parties must agree on a termination and a court of law must determine that conditions on or surrounding the land make it impossible or impractical to continue to use the land for agricultural purposes. Attempts to terminate without following the stated procedures can result in penalties for the current landowner. If there was a payment for the agricultural easement, a deed of easement will likely require the landowner to reimburse the paying party for the proportionate share of the fair market value of the land with the easement removed and will also require the party receiving the reimbursement to use the funds only for similar conservation purposes.
Eminent domain can be an issue. As one Ohio farm family has learned, an agricultural easement might not protect the farmland from an eminent domain proceeding. In Columbia Gas v. Bailey, 2023-Ohio-1245, the Bailey family was forced to litigate an attempt by Columbia Gas to use eminent domain for the construction of a gas pipeline across their farmland. Their predecessor had placed an agricultural easement on the farmland in 2003, and the family argued the easement prevented the taking of land for the pipeline under the doctrine of “prior public use.” That doctrine prohibits an eminent domain action that would destroy a prior public use. The court agreed that the agricultural easement did create a prior public use on the land, and the court shifted the burden to Columbia Gas to prove that the pipeline would not destroy the established prior public use. Rather than doing so, Columbia Gas withdrew its eminent domain proceeding and moved the location of the pipeline. The court's decision to recognize an agricultural easement as a prior public use might provide some protection from eminent domain for future owners of agricultural easement land but, like the Baileys, landowners may have to fight a long, expensive battle to prove that an eminent domain action would destroy an established prior public use.
Lenders and other interests must be on board. A landowner must deal with any existing mortgages, liens, leases, or easements on the farmland before entering into an agricultural easement. The State of Ohio’s agricultural easement, for example, requires a lender to subordinate a mortgage to the rights of the easement holder. Renegotiation of the mortgage might be necessary, and the lender might require a paydown of the outstanding mortgage if the property’s value could reduce below that amount. Without subordination and other approvals, a landowner will not be able to enter into an agricultural easement.
Local governments must be on board. Ohio’s program for purchasing agricultural easements requires a landowner to submit a resolution of support from the township and county where the land is located. This means the local governments must agree that committing the land to agriculture is consistent with local land use plans. An early conversation with local officials is necessary to ensuring consistency with the community’s future plans.
There will be monitoring. An easement holder has the responsibility of ensuring there is not a violation of the easement or conversion of the land to non-agricultural uses. This means there will be a baseline or “present condition” report of the easement property upon easement creation and monitoring of the property “in perpetuity.” An annual visit to the property and completion of an annual monitoring report by the easement holder is common.
It's a lengthy process. Agricultural easements don’t pop up overnight. Especially when applying for funding from competitive programs like Ohio’s Local Agricultural Easement Purchase Program or the NRCS Agricultural Land Easements Program, it can be a year or more before an agricultural easement is in place.
Planning and integration with plans is necessary. An agricultural easement is one piece of what can be a complex plan addressing a landowner’s expansion, retirement, estate, and transition needs. A landowner would be wise to work with a team of professionals—financial planner, tax professional, attorney—to ensure that an agricultural easement integrates with all other parts of the plan.
Still interested? Ohio landowners interested in learning more about agricultural easements may want to consider these steps:
- Review the resources on the Ohio Department of Agriculture’s Office of Farmland Preservation.
- Talk with other landowners who have entered into easements. Refer to the Coalition of Ohio Land Trusts landowner resources and landowner stories.
- Visit American Farmland Trust’s Farmland Information Center.
- Talk with a “local sponsor” or land trust in your area. The Office of Farmland Preservation provides a list of local sponsors for the Clean Ohio Agricultural Easement Purchase Program on its website.
- Talk with your attorney, financial planner, and accountant about the implications of entering into an agricultural easement.