Conservation Easements and the Doctrine of Merger

Article excerpt

I

INTRODUCTION

As relatively novel real-property interests, conservation easements raise a number of interesting legal issues, not the least of which is whether a conservation easement is automatically extinguished pursuant to the real- property-law doctrine of merger if its government or nonprofit holder acquires title to the encumbered land. (1) This article explains that merger generally should not occur in such cases because the unity of ownership that is required for the doctrine to apply typically will not be present. For merger to occur, "the two estates must be in the same person at the same time and in the same right." (2) If the government or nonprofit holder of a conservation easement subsequently acquires title to the encumbered land, the two estates will be "in the same person at the same time," but they generally will not be held "in the same right."

This is not simply a technical legal issue of interest only to real-property-law scholars. If the doctrine of merger is misapplied to conservation easements there will be significant negative public policy ramifications. Conservation easements are not private contracts between private parties entered into for private benefit, like rights-of-way easements between neighbors. Rather, conservation easements are authorized under state law because they provide significant conservation or historic benefits to the public. (3) They are held and enforced by government entities and charitable organizations on behalf of the public. (4) And the public subsidizes their acquisition through, among other things, appropriations to federal and state easement purchase programs and the provision of federal and state tax benefits to easement donors. (5)

Allowing conservation easements that continue to provide significant benefits to the public to be extinguished through the doctrine of merger would be contrary to the conservation and historic preservation policies that underlie the state conservation easement enabling statutes and the easement purchase and tax incentive programs. It would also permit government entities and land trusts holding conservation easements to avoid the restrictions on the transfer, release, modification, and termination of conservation easements imposed by many of the state enabling statutes, federal tax law, and the laws governing the administration of charitable gifts, which restrictions operate to safeguard the public interest and investment in conservation easements. (6)

II

CHARITABLE GIFTS OF CONSERVATION EASEMENTS

To understand why the doctrine of merger generally should not apply to extinguish conservation easements, some background regarding the manner in which conservation easements are typically conveyed and drafted is in order. Many conservation easements are conveyed to government entities and land trusts as charitable gifts for a specific charitable purpose--the protection of the particular land encumbered by the easement for the conservation purposes specified in the instrument of conveyance in perpetuity. (7) In addition, to satisfy the requirements for a federal charitable income tax deduction under Internal Revenue Code (IRC) [section] 170(h), many such easements expressly provide that they can be (1) transferred only to another government entity or conservation organization that agrees to continue to enforce the easement (8) and (2) extinguished only in a judicial proceeding, upon a finding that continued use of the land for conservation purposes has become impossible or impractical, and with a payment of a share of the proceeds from a subsequent sale or exchange of the property to be used by the donee in a manner consistent with the conservation purposes of the original contribution. (9) Many conservation easements also contain a provision granting the holder the discretion to agree to amendments to the easement, but only if, inter alia, such amendments are consistent with or further the conservation purpose of the easement. …