CONSERVATION EASEMENT vs. PROFIT A PRENDRE
This article was prompted by the experiences of two Colorado ranchers. Mr. Jones had created a conservation easement on his land, pursuant to C.R.S. 38-30.5-104, conveying the conservation easement to a qualified trust under that statute. Mr. Jones still owned the land and actively farmed it as part of his ranching activities. He chafed at the fact that his farming activities were dictated by trust directors who lacked experience and knowledge of ranching activities. Mr. Smith, on the other hand, had sold his land and the purchaser conveyed to him a common law Profit a Prendre covering the entirety of the ranch. As allowed by the Profit, Mr. Smith pastured his cattle and used appurtenant water rights to produce seasonal hay crops. Under the terms of the Profit a Prendre, Mr. Smith annually paid the landowner a nominal fee. Mr. Smith worried, however, that, should the landowner attempt to develop the land for condominiums, his Profit a Prendre might be imperiled.
An interesting contrast. One client rancher owned the land but not the easement, while the other rancher owned the easement but not the land. Each had the same financial problems of high land values, heavy taxes and operating losses. Each was devoted to continuing farming and ranching. Each had certain restrictions on their activities. Which easement – statutory or common law – would have been best suited for Messrs. Smith and Jones?
Conservation Easement: As related to the land itself,1 C.R.S. Sec. 38-30.5-102 defines a “conservation easement” as a right:
“…in the owner of the easement to prohibit or require a limitation upon or an obligation to perform acts on or with respect to a land … owned by the grantor (of the easement) appropriate to the retaining or maintaining of such land … including improvement, predominantly in a natural, scenic or open condition, or for wildlife habit, or for agricultural, horticultural, wetlands, recreational, forest or other use or condition consistent with the protection of open land, environmental quality or life sustaining ecological diversity…..”.
Conservation easements are “easements in gross”. C.R.S. 38-30.5-103(1) Easements in gross are personal rights of the easement holder and do not create dominant or servient estates. Sinclair Transportation Company v. Sandberg 350 P.3d. 924, 930 (Colo. App. 2014) Easements in gross were, under the common law, historically prohibited from sale, assignment or testamentary devise. See: Box L Corp. v. Teton Cnty. 92 P.3d. 811, 816-17 (Wyo. 2004); Assignability and Divisibility of Easement in Gross or License in Respect of Land or Water 130 A.L.R. 1253 (1941)
Colorado’s General Assembly may alter the common law. Vigil v. Franklin 103 P.3d. 322, 327 (Colo. 2004). C.R.S. 38-30-101 provides that any person “…entitled to hold real estate, or any interest in real estate whatever, shall be authorized to convey the same to another….”. See: Restatement (Third) of Prop.: Servitudes §4.61)(c) (2000) (A benefit in gross is freely transferable) In Sinclair (Supra) the Court of Appeals held that easements in gross are freely transferable and inheritable. (350 P.3d. at Pg. 931)
Nonetheless, since 1976, C.R.S. 38-30.5-103(1) and (2) has specifically declared that the conservation easement is freely transferable, in whole or in part and transferable by any lawful method. Contrary to the common law rule, this statute also declares that the conservation easement in gross “…shall not be deemed personal in nature….” and are perpetual easements unless otherwise specified by the instrument creating the conservation easement.
Conservation easements were statutorily created in response to two needs. On the one hand, the rancher often faced heavy taxes (whether property or estate) on land increasingly more valuable for condominiums than for ranching. The economics of ranching and farming depend upon cheap land. On the other hand, the public had an interest in preserving the agricultural nature of land surrounding mountain resorts and ski areas. The solution was to allow the rancher to impose the conservation easement upon his ranch land which preserved the agricultural character. Because the restriction diminished the future market value of his land, the rancher was then allowed to declare tax credits measured by the difference in market value between farm land and the “highest and best use” of that land (which frequently meant condominiums). C.R.S. 38-30.5-109; Sec. 39- 22-522
The dilemma for the rancher, however, was the provision of Sec. 38-30.5-104(2), requiring that the rancher convey the easement “…through a grant to or a reservation by a governmental entity or a grant to or a reservation by a charitable organization (qualifying under Sec. 501(c)(3) 1986 Internal Revenue Code….”. The rancher retains all interests in the land comprising the conservation easement, including his right to jointly use that land. C.R.S. 38-30.5-105 The rancher’s uses, however, could not be inconsistent with the terms of the easement, or uses prohibited by either the easement or other law. (Id.) If the rancher violates such restrictions, the easement holder can obtain civil injunctions and monetary damages against the rancher. C.R.S. 38-30.5-108(2) and (3) If the easement holder violates the easement terms, the rancher has a right to similar remedies. (Id.) However, the rancher is the “active” user of the land while the trustee is the “passive” user: leading to more claims against the rancher than the trustee.
Generally, landowners and easement holders must accommodate each other’s reasonable needs and interests. Lazy Dog Ranch v. Telluray Ranch Corp. 965 P.2d. 1229, 1238 (Colo. 1998) (Since both the easement and land owner burden by the easement have right to use the property then the interests of both parties must be balanced in order to achieve due and reasonable enjoyment of both the easement and the servient estate.) Restatement (Third) of Property, §4.9 cmt. c. See Roaring Fork Club, L.P. v. St. Jude’s Company 36 P.3d. 129, 1235 (Colo. 2001) This Doctrine of Accommodation does not apply where either owner seeks unreasonable uses. Hornsilver Circle, Ltd. v. Trope 904 P.2d. 1353, 1357 (Colo. App. 1995)
The literal language of Sec. 38-30.5-102 makes it apparent that the Accommodation Doctrine does not apply to conservation easements. As stated in that statute, the easement owner has the right
“…to prohibit or require a limitation upon or an obligation to perform act on or with respect to a land or water area …owned by the grantor appropriate to the retaining or maintaining of such land … in a natural, scenic or open condition, or for wildlife habitat, or for agricultural, horticultural, wetlands, recreational forest, or other use or condition consistent with the protection of open land, environmental or life-sustaining ecological diversity….”.
The statute clearly and unambiguously provides that the conservation easement holder has the unilateral power to determine the husbandry practices applied to the land within the boundaries of the easement. The landowner must comply upon penalty of civil injunction or money damages under Sec. 38-30.5-108(2) and (3). The argument that the parties can contract to avoid such a result is not apposite. Conservation easements were not known at common law. They are purely a creature of Colorado statute. To create such an easement, one must strictly comply with the statutory structure. C.R.S. 38-30.5-104(1) (requiring the grantor to declare his specific intention to create the easement pursuant to Article 30.5)
This compels the conclusion that the conservation easement is not, in operation, an easement for the rancher’s benefit. Instead, operation of the conservation easement is for the benefit of the easement holder’s environmental agenda: what that was at the outset or may later become. Add to this concern the fact that easements in gross are not tied to the land and may be freely sold and conveyed. It is entirely conceivable that conservation easements on several farms and ranches may be combined into large conglomerates. The conglomerate then has the legal authority to prohibit or require local ranchers to subordinate ranching activities that only favor the goals of the conglomerate. If wildlife habitat is more favored than crop cultivation then could such a conglomerate ban all farming in one valley?
To the rancher’s potential horror, his near-total subordination to the agenda of the easement holder is “eternal”. A conservation easement is perpetual unless the creating instrument specified otherwise. C.R.S. Sec. 38-30.5-107 allows for judicial termination of the conservation easement. But this requires proof that the “….conditions on or surrounding….” the property have changed to such great extent that it is “…impossible to fulfill its conservation purposes….” As those are defined in the creating instrument. Moreover, both parties must jointly seek the termination. Unilateral requests are not authorized under the statute.
Profit a Prendre: Profits a prendre (Prah-Fit Ah Prahn-Dray) are easements but involve a greater interest than a simple traverse of another’s land. A profit a prendre is an easement allowing its holder to take a part of the soil or produce of the land, such as timber, oil and gas, other hard or soft minerals as well as wildlife, fish and grass. Alexander Dawson, Inc. v. Fling 396 P.2d. 599, 604 (Colo. 1964) A profit is not a specific grant of the right to traverse the land, but such traverse is presumed in order to reach the “product of the soil” to be extracted. Notch Mountain Corp. v. Elliott 898 P.2d. 550, 556 (Colo. 1995)
Profits a prendre may be appurtenant or may be in gross. Lobato v. Taylor 13 P.3d. 821, 826 (Colo. 2000) The Lobato decision illustrates the difference between easements in gross and appurtenant. In 1863, Narcisco Beaubien, the holder of a large Mexican land grant, promoted the settlement of San Luis, in Colorado’s San Luis Valley. To attract settlers, Beaubien gave the original settlers the right to graze their cattle, hunt wildlife and take firewood from his surrounding lands. In 2000, the Colorado Supreme Court held that Beaubien had created profits a prendre in favor of the descendants of these original settlers, which profits were appurtenant to their lands in San Luis.
A profit a prendre may not be acquired by prescription. Lobato (Supra at Pg. _834, citing Desert Livestock Co. v. Sharp 259 P.2d. 607 (Utah 1963). Profits a prendre may only be created by express instruments. Alexander Dawson (396 P.2d. at Pg. 604) Since a profit a prendre in gross is an easement, it may be sold, conveyed and inherited like any other easement in gross. Sinclair Transportation Company v. Sandberg 350 P.3d. 924, 930 (Colo. App. 2014) The right to transfer an easement in gross is not patent or automatic. It must arise from the terms of the grant. To determine assignability, the courts look for certain phrases within the grant: e.g., phrases such as “successors and assigns”. (Id.) In the absence of such language, the easement in gross may not actually be transferable. (Id.)
The conveyance of the profit a prendre severs the profit from the land, thereby creating separate and distinct estates. Notch Mountain 898 P.2d. at Pg. 556 This severed interest may be conveyed separately from the land itself. (Id.) The severed estates are thus subject to the Doctrine of Accommodation discussed in Roaring Fork Club (Supra) as well as set forth in Gerrity Oil & Gas Corp. v. Magness 946 P.2d. 913 (Colo. 1997). In Gerrity, the profit holder seeking oil and gas was required to build access roads in areas designed to cause the least disruption to the standing alfalfa crop maintained by the surface estate owner. Logically, the holder of a profit a prendre to fell timber could face similar restrictions on his logging roads.
Another difference between the two interests is their treatment for taxes. To induce preservation of farmland, the conservation easement statute offered favorable tax credits to the grantor of the conservation easement. The credits are measured as the difference in market value between farm or unimproved land and that same land in its “highest and best use”. (This has led, obviously, to substantial abuse in the valuation of such “highest and best use”. However, that abuse is not the subject of this article). These tax credits may be sold to third parties, entirely separate from the land itself.
By contrast a profit a prendre does not bring with it special, transferable tax credits. Admittedly, any encumbrance upon a parcel of land diminishes the value of that land in relation to a parcel without any such encumbrances. But such loss in value is caused by an initial action of the landowner. The rancher has, for example, sold his land and reserved a profit a prendre. Or, the landowner acquired his land before ever conveying a profit a prendre to a third party. These circumstances are unlike those involved in conservation easements. In conservation easements, the landowner retains his ownership of the land but self-imposes the conservation easement upon his property in direct, open, and specific exchange for tax credits.
Which Interest Is Better? Creation of a conservation easement cannot, by definition, produce a favorable edge in the grantor’s continuing ranching or farming activity. For the duration of the conservation easement the qualified charitable trust controls the grantor’s activities upon the land. And that life span is interminable. Though called an “easement in gross”, C.R.S. 38-30.5-103(2) confers upon the conservation easement all the attributes of an easement appurtenant. Any balance of interests between the grantor-rancher and the qualified charitable trust must arise from the terms of the grant instrument creating the conservation easement. The enabling statute, itself, does not provide any such balancing.
In sum, the conservation easement appears to have but two advantages. First, the rancher receives one-time tax credits which he can sell to third parties. However, once the tax credits are sold, they are gone. The temptation to maximize the tax credits by fudging on the value of “highest and best use” could land the rancher in criminal problems. Second, the rancher can say he did something to protect the land from urbanization.
By contrast, profits a prendre provide a direct, tangible benefit to the rancher or farmer. The rancher may sell his land and reserve to himself (and his family members as additional “measuring lives”) a profit a prendre. The land buyer can construct his trophy cabin but not be responsible for the husbandry of the land surrounding it. Such husbandry can be assigned to the profit holder. The rancher may elect to retain his land but transfer a profit a prendre to a third party or even a separate corporate entity. By his grant instrument, the rancher can specifically define the scope and operation of the profit: e.g., cattle grazing, hay production, or felling of timber. Once conveyed, the profit holder, not a qualifying trust, determines the seasonal operations under the profit a prendre.
In the end, the selection of one easement over another comes down to the emotional issue of “control”. Does the rancher select the conservation easement, obtain one-time tax credits but lose control over his land? Or, does he create a Profit a Prendre (perhaps in favor of his children or a family entity), possibly sell the land but retain personal control over farming upon that land though without tax credits? As with most plans, the answer lies with the client and not with the attorney.
© Copyright James A. Beckwith (2021)
Footnotes:
1 C.R.S. 38-305.103(5) authorizes conservation easements on water rights. That subject, however, is outside the scope of this article. Mesa County Land Conservancy, Inc. v. Allen 318 P.3d. 46 (Colo. App. 2012) is the only Colorado decision found dealing with water rights in conservation easements.