Easement Exchanges

Questions and Answers​

The following questions and answers address some of the basic issues concerning the Williamson Act easement dedication provisions that are found in Government Code section 51256.

Government Code Section 51256 establishes linkage to CFCP criteria for approving agricultural land conservation easements. These section references are found in the Public Resources Code (PRC):

(a) Definition of an agricultural land conservation easement (PRC Section 10211)
(b) Easement eligibility criteria (PRC Section 10251)
(c) Easement selection criteria (PRC Section 10252, with particular emphasis on 10252 (a), (c), (e), (f) and (h).)
(d) Establishing the value of an agricultural conservation easement (PRC Section 10260)

In addition to CFCP criteria, a Williamson Act easement exchange must make a beneficial contribution to the conservation of agricultural land in its area (see questions 12 and 19 below).

The process is entirely voluntary for the owner of the Williamson Act contracted land, the owner of the land to be encumbered by the conservation easement, the organization that holds, monitors, and enforces the easement, and the city or county. The landowner must submit a petition for a Williamson Act easement dedication proposal to the local governing city or county. Upon making the required findings, and determining that the eligibility and selection criteria have been met, the city or county may approve the proposal. The proposal is then submitted to the Department of Conservation for review and final decision. If the proposal is approved by the Department, the city or county may enter into an agreement with the landowner to rescind the Williamson Act contract and simultaneously place the other land under an agricultural conservation easement.

There are five (5) key elements to keep in mind:

• Entering into an agricultural easement agreement is entirely voluntary for all parties involved,

• A proposal is initiated by the landowner who has land in a Williamson Act contract,

• The landowner of the proposed easement land agrees to establish a conservation easement in perpetuity to keep the land in agricultural use forever,

• A qualified organization agrees to hold, monitor and enforce the easement, and,

• The proposal must be approved first by the local jurisdiction and second, by the state.
  

An “agricultural conservation easement” is a less than fee simple interest in land. It includes the right to prevent forever the development or improvement of the land, as specified in Public Resources Code Section 10211 and Civil Code Section 815.1 for any purpose other than agricultural production. The easement is granted by the landowner to the local government or a qualified nonprofit organization that has conservation of agricultural land as one of its primary purposes. The land restricted by the easement remains in private ownership. Aside from the separation of specified development rights, the landowner retains all other rights to the land, including the right to deny public access and to manage the land for agricultural uses.

The most familiar conservation easements are usually for the protection of open space land, and wildlife habitat. An agricultural conservation easement is specifically for agricultural land. Each Williamson Act easement exchange agreement is negotiated individually to include terms that will encourage agricultural operations and restrict uses which will impair agricultural uses. The landowner will continue to make his or her decisions with respect to the agricultural use of the land.

What Internal Revenue Service (IRS) tax status must private organizations meet in order to hold conservation easements?

Easement holders must be government entities or nonprofit corporations that qualify under Internal Revenue Code section 501 (c)(3) and also either IRC 170 (h)(3) or IRC 170 (b)(1)(A)(vi) organizations. (PRC 10221) The CFCP incorporates the Internal Revenue Code and Treasury Regulation requirement that a non-governmental easement holder must be: (1) an IRC 170 (b)(1)(A)(vi) publicly-supported charitable organization or an IRC 501 (c)(3) organization that is either an IRC 509 (a)(2) publicly-supported charitable organization, or (2) an IRC 509 (a)(3) public charity organization that is not publicly supported but is controlled by a government or a publicly-supported charity. (See Treas. Reg. 1.170A-14 (c)(1)).

Must the nonprofit corporation holding an easement have land preservation as its primary purpose?

Yes. The state’s conservation easement law requires that land preservation be the organization’s primary purpose (Civil Code Section 815.3). Because this Civil Code section is the legal authority creating conservation easements in California, nonprofit easement holders must meet the primary land conservation purpose test.

The CFCP allows nonprofit organization easement applicants to have conservation of agricultural lands among their purposes (PRC 10221), and the IRC permits organization purposes to be primarily or substantially for conservation purposes (Treas. Reg. 1.170A-14(c))(1).

The easement holder must have the experience, financial, and personnel capability to draft, hold, monitor, and enforce conservation easements. The organization must demonstrate the ability and commitment to draft sound conservation easements, effectively monitor the easement, successfully enforce, and obtain correction of violations of the easement through negotiation with the landowner and, when necessary, litigation.

The easement title holder, normally a local agricultural land trust or conservancy, or a city or county, is responsible for assuring that the terms of the easement agreement are upheld. Typically, a representative of the easement title holder visits the easement property at least once a year to verify that no uses have occurred that are specifically prohibited by the easement agreement. At the time the easement is established, a map or aerial photograph of the property is filed with the easement title holder to document the buildings, roads and other improvements. This baseline information is then used annually to compare approved uses with current uses in order to verify compliance with the terms of the easement agreement. If the land’s lease or ownership changes, the easement holder assures that the new lessor or owner knows the terms of the easement and that the property is being monitored.

An agricultural conservation easement is granted in perpetuity [as the equivalent of a covenant running with the land]. (Public Resources Code Section 10211 and Civil Code Section 815.2 (b)). A conservation easement is an enforceable restriction under Article 13, section 8 of the state constitution that severely limits the ability of the state to terminate the contracts and easements.

Where can agricultural conservation easements be established?

The eligibility and selection criteria for determining easement location are defined in PRC sections 10251 and 10252. The easement land should: [(1)] be of a sufficient size to support commercial agriculture, [(2)] be located within an agricultural preserve designated by a local government, and [(3)] be located within two miles outside of the exterior boundary of the sphere of influence of a city as established by the local agency formation commission. The agricultural easement should support the continuation of agricultural uses in an established agricultural area, and the applicable city or county's general plan must demonstrate a long-term commitment to the preservation of agricultural land. Without conservation, the land would likely be converted to non-agricultural use in the foreseeable future.

Contracted lands on the urban edge of cities and other developed areas are eligible. One of the findings required to cancel the contract stipulates that the agreement to terminate the Williamson Act contract “will not result in discontiguous​ patterns of urban development” (Government Code Section 51256(a)). If the development proposed is not urban in nature, such as mining for mineral extraction, then contracted lands not contiguous to urban areas may be eligible for a Williamson Act easement exchange agreement.

A board or council must make the findings defined in Government Code section 51282. Additional findings require that: 1) the conservation easement is consistent with criteria defined in PRC sections 10251 and 10252, 2) the land restricted by the easement must be of equal or larger size than the land being removed from the Williamson Act contract and, 3) the value of the easement (based on an appraisal) must be equal to, or greater than, the cancellation fee calculated for rescission of the Williamson Act contract. An additional finding must be made that the proposed easement will make a beneficial contribution to the conservation of agricultural land in the area. (PRC 10256 (b)

Prior to a hearing by a city or county for contract cancellation, the assessor must establish the cancellation valuation of the contracted land. The cancellation valuation is based on the current fair market value of the land as though it were free of the contractual restriction. The cancellation fee is computed at 12.5 percent of the cancellation valuation.

An independent real estate appraiser must be selected and retained to determine the value of the agricultural conservation easement (PRC section 10260). The value of the proposed easement must be equal to, or greater than, the cancellation fee required if the Williamson Act contract cancellation is approved. The value of the easement is determined by subtracting the agricultural use value (the restricted value) of the property to be placed under the easement, from its unrestricted current fair market value.

Yes. Both the easement and cancellation values are required to be determined within 90 days of the city or county approval of a Williamson Act easement agreement. If final approval by a board or council takes longer than 90 days from the time the cancellation fee and easement value are determined, the valuations must be updated.

No. A Williamson Act easement exchange cannot be approved by the state where a conservation easement has been purchased with CFCP funds in the past, or where CFCP funds are requested to be use for a proposed Williamson Act easement exchange. (Government Code section 51256.1) Approval is not anticipated for CFCP applications submitted for lands and landowners affected by a previous Williamson Act easement exchange. Because Williamson Act contract cancellation fees are lost to the state's General Fund in a Williamson Act easement exchange process, an additional grant of state funds through the CFCP would be against public policy.

Yes, both with respect to the Williamson Act contract termination and the easement exchange. Also, eligibility criteria require the applicant city or county to have a general plan that demonstrates a long-term commitment to agricultural land conservation. This commitment must be reflected in the goals, objectives, policies, and implementation of the plan. Finally, if the easement is within the sphere of influence of a city, the city must indicate approval of the easement as being consistent with its general plan.

No. Once the local entity makes the findings and approves the proposal, the resolution of approval and supporting documentation must be submitted to the Director of the Department of Conservation for review of the proposed land exchange.

The Director will determine if the city or county’s Williamson Act contract cancellation findings, as required by Government Code sections 51256 and 51282 are supported by substantial evidence. In addition, the Director will determine if the proposed easement is consistent with the required eligibility criteria in PRC section 10251 and evaluated according to the selection criteria defined in PRC section 10252, and whether the exchange will make a beneficial contribution to the conservation of agricultural lands in the area. The Director will also verify that the value of the easement is at least equal to 12.5 percent of the cancellation value, as provided in Government Code section 51256. Finally, the Director will verify the adequacy of the appraisal that documented the value of the agricultural easement.

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