Affirmative Agricultural Easements

1. What Is an Affirmative Agricultural Easement?
2. Tools for Revenue, Affordability, and Legacy
3. Sale, Donation, and Bargain Sale
4. Land Trust or Government Agency
5. How Affirmative Agricultural Easements Work
6. The Affirmative Agricultural Easement Deed
7. Impact on Future Landowners
8. Impact on the Value of Land
9. What About a Mortgage?
10. Pros and Cons of Affirmative Agricultural Easements
11. How an Attorney Can Help
12. Additional Resources

An affirmative agricultural easement is a voluntary legal agreement that restricts the use of land only to agriculture. An affirmative agricultural easement happens when the landowner sells or donates an affirmative agricultural easement to a land trust or government agency. Once land has an affirmative agricultural easement, its value is usually lowered (because it is no longer available for development). This decreased value can make the land more affordable for buyers, including farmers who may want to purchase the land.

Affirmative agricultural easements are one of several different legal tools to help farmers balance goals of: 1) generating revenue for farming or retirement; 2) making their land more affordable to future farmers; 3) keeping their farmland in farming; and 4) maintaining a treasured legacy of sustainable farm stewardship.

Other legal tools include:

• Conservation easements (prohibiting certain types of development)
• Options to purchase land at agricultural value (OPAVs) (encouraging land to be re-sold only to farmers),
• Differential assessment/current use programs (lowering taxes on agricultural land), and
• Federal farm programs (loans, grants, cost-shares).

These tools can be used separately or in combination, and are discussed within the Access Tools section and elsewhere in this toolkit.

In the case of selling an affirmative agricultural easement, the landowner would receive a cash payment. This is just like selling a house in that there’s a purchase price, and the buyer pays the seller the purchase price. In the case of donating an affirmative agricultural easement, the landowner does not receive any cash, but may receive important tax benefits.

Sometimes, selling the affirmative agricultural easement at its full value is a bit too expensive for the buyer. Other times, the seller may need both the cash and the donation-linked tax benefit. In those cases, the affirmative agricultural easement can be sold as a “bargain sale.” This means the landowner gets less cash than if it was a full value sale, and a lower tax benefit than if it was a full donation. Still, the landowner gets some cash and some tax benefit. When this occurs, the landowner may qualify for federal and/or state tax benefits for the portion of the land value “donated” (equal to the difference between the value of the affirmative agricultural easement and the actual sale price).

For example, if the value of an affirmative agricultural easement was $100,000, a bargain sale may involve 1) a cash payout to the landowner of $50,000 and 2) the landowner donating the other $50,000 and getting tax benefits associated with the donated portion of the land.

To sell or donate an affirmative agricultural easement, farmers need to find an organization willing to own the affirmative agricultural easement. Owning an affirmative agricultural easement is usually referred to as “holding" it and the owner is usually called the “holder." Usually, an affirmative agricultural easement holder is a land trust or a government agency.

Funding to acquire affirmative agricultural easements is limited. As a result, many sales are bargain sales, which stretches a holder’s limited dollars further. The holder of the affirmative agricultural easement is responsible for monitoring and enforcing the terms of the easement, which, in general, is in perpetuity or forever. Consequently, the organization agreeing to hold the easement needs to have the capacity to monitor land under easement and enforce the terms of the easement going forward.

So, while conservation easements, affirmative agricultural easements, and options to purchase at agricultural value (OPAVs) are powerful tools, they are available only if there is an organization with money, capacity, and interest in acquiring and holding the easement.

Another consideration is finding the right fit for the organization that will hold the affirmative agricultural easement. For example, a land trust dedicated to preserving wildlife may not be willing to hold an affirmative agricultural easement. Finding an agriculture-oriented organization is crucial for farmers considering placing their land under affirmative agricultural easement.

Once an affirmative agricultural easement is in place, the holder will check the property periodically to make sure that the terms of the affirmative agricultural easement are being followed. This is called “stewardship.” When a property is sold, the easement holder will usually introduce themselves to the new owner and make sure the new owner is up to speed about the affirmative agricultural easement requirements. The affirmative agricultural easement holder and the landowner will have an ongoing relationship and must work together in many ways.

Full ownership of land comes with a variety of ownership rights. Some of these rights include:

• the right to build homes and other structures,
• the right to minerals,
• the right of access,
• the right to timber,
• the right to exclude others from the property,
• the right to rent or sell the property,
• the right to subdivide the property, and
• the right to restrict use the land in certain ways.

These property rights can be thought of as a “bundle of sticks.” A landowner can hold all the sticks in the bundle or transfer some of those sticks to others. An affirmative agricultural easement takes several of the sticks in the bundle and transfers them to the buyer. After the affirmative agricultural easement is in place, the landowner still has many of the sticks, such as the right to farm, and the affirmative agricultural easement holder has other sticks, such as the right to commercial development.

The “bundles of sticks” concept is commonly used to illustrate the separation of property rights between the landowner and the affirmative agricultural easement holder. Nevertheless, it’s important to note that the bundle of sticks concept is an over-simplification. As discussed below, the affirmative agricultural easement document itself is long and complicated, and goes into great detail about how the land can and cannot be used.

Because affirmative agricultural easements limit the landowner’s use of the property and give the affirmative agricultural easement holder certain rights, it is very important to specifically describe who can do what, and under what circumstances. Also, because an affirmative agricultural easement is a property right, it is transferred from the landowner to the affirmative agricultural easement holder through a written deed, typically called an Easement Deed. The deed is then recorded publicly within the land records.

Affirmative agricultural easement deeds are a very big deal. They can be very long and can take months, or even a couple of years, to negotiate. Frequently, the landowner and the affirmative agricultural easement holder go back and forth many times giving each other revised drafts. Usually, a lawyer will be involved on behalf of the landowner and another lawyer involved on behalf of the affirmative agricultural easement holder.

Once everyone has signed the affirmative agricultural easement and it has been recorded within the land records, it is binding on all current and future landowners. This includes anyone who may use the land. As lawyers say, affirmative agricultural easements “run with the land” – meaning they become a part of the chain of title and stay in effect even after ownership of the land changes. A new farmer buying land with an affirmative agricultural easement is bound by the terms of the affirmative agricultural easement. The new farmer is not allowed to negotiate new terms with the affirmative agricultural easement holder. Consequently, a farmer buying land with an affirmative agricultural easement should closely examine the affirmative agricultural easement deed to make sure the farmer understands the limits and will be able to comply with them without undue economic burden.

In rare circumstances, affirmative agricultural easements are not permanent and have some sort of expiration. This could be a term of years, or it could be connected with a certain farmer’s lifetime or use of the farmland. Because temporary affirmative agricultural easements are so rare, these materials assume that affirmative agricultural easements are permanent.

Affirmative agricultural easements restrict a landowner’s development rights and in turn lower the property’s fair market value typically between 10 to 40 percent. This should have the effect of making that land more affordable for future landowners.

The value of an affirmative agricultural easement is determined by a qualified appraiser. The appraiser determines the value of the land before the affirmative agricultural easement and subtracts the value of the land after the affirmative agricultural easement to determine at the value of the affirmative agricultural easement. For example:

When granting an affirmative agricultural easement, landowners are essentially receiving a portion of the fair market value of their land, either through payment for the affirmative agricultural easement by the easement holder (a land trust or government agency) or through tax benefits from the donation of the easement.

Because an affirmative agricultural easement generally lowers the property’s fair market value, farm-seekers should be able to purchase the land under easement at a lower price. Or, farm-seekers looking to buy land without an easement may have a unique opportunity to purchase the land and simultaneously sell an affirmative agricultural easement. If a farm-seeker is unable to afford farmland or is interested in lowering the purchase price, the farm-seeker could look for an organization such as a land trust willing to buy an affirmative agricultural easement on the property at the same time the farmer purchases the land. This way, the easement holder pays for the value of the affirmative agricultural easement and the new farmer pays for the value of the land without the development rights. This sort of arrangement is known as an “affirmative agricultural buyer transaction.” It is important to note that affirmative agricultural buyer transactions are not commonplace because they require the right circumstances—availability of land, seller, buyer, funding, and an easement holder as well as closely coordinated land transactions.

Farm-seekers considering buying land under easement (or buying land and restricting the land with an affirmative agricultural easement) should also consider that if they later choose to sell the land, they will generally receive the reduced value of the land. However, sometimes land continues to appreciate (increase in value) even with affirmative agricultural easement restrictions, or a subsequent buyer is willing to pay more than the market value of the land despite it being encumbered by an affirmative agricultural easement. Consequently, farmers placing their land under affirmative agricultural easement might also want to consider granting the easement holder an option to purchase at agricultural value, or OPAV, discussed here. OPAVs were also developed to encourage farmland to be farmed by restricting certain sales.

If a farm has a mortgage (as many do), it is still possible to do an affirmative agricultural easement. It does, however, add some extra steps. Typically, both an affirmative agricultural easement holder and a mortgage company will want to be in first position, meaning they will get paid out first in the event of a foreclosure or other default or loss. It is possible that the mortgage company would not allow an affirmative agricultural easement. This is especially likely if the proceeds from the sale of the affirmative agricultural easement would not be enough to completely pay off the mortgage. If there is a mortgage, contact your bank or mortgage company to discuss. Sometimes, someone from the land trust or the government agency who would hold the affirmative agricultural easement can assist in this conversation. And if you have a lawyer, your lawyer can assist you.

• Selling an affirmative agricultural easement can be a good way to get some cash out of the property.
• Landowners who donate affirmative agricultural easements may receive tax benefits.
• Affirmative agricultural easements can reduce the property’s overall value, making the land more affordable for future farmers.
• Affirmative agricultural easements can give peace of mind that a beloved property will not be commercially developed.
• Landowners can negotiate, creating an agreement tailored to the landowner’s needs.

• Limited number of affirmative agricultural easement holders.
• Limited amount of funds available to purchase affirmative agricultural easements.
• Most affirmative agricultural easements are permanent and bind all future landowners (including heirs).
• Affirmative agricultural easement holders and farmers may not always share a common vision.
• Affirmative agricultural easements can reduce the property’s overall value, making the land worth less for future sales.
• Farmers with a mortgage may have limited options with respect to selling an affirmative agricultural easement.
• The amount of a loan offered by a bank to mortgage a property with an affirmative agricultural easement on it may be reduced.
• New owners are not allowed to negotiate new terms with the affirmative agricultural easement holder.

Additional Resources

• National Young Farmers Coalition, Farmland Conservation 2.0:  How Land Trusts Can Protect America’s Working Farms (explains how farmers can use affirmative agricultural easements, affirmative agricultural easements, OPAVs and more to make farmland more affordable)
• Land Trust Alliance, Find a Land Trust (tool to find a land trust near you)