A preservation easement is a voluntary legal agreement that
establishes protection of significant historic, archaeological, landscape or other
cultural resource. .
Preservation easements in some states may also be called preservation “restrictions,” “covenants,” or “equitable servitudes.”
Once recorded, the easement restrictions become part of the property’s chain of title and “run with the land” in perpetuity, thus binding not only the owner who grants the easement but all future owners as well.
Protection is typically in perpetuity, or with a term limit of a specified number of years.
Tax law requires that preservation
easements be held by qualified non-profit organizations or governmental
Owners of an easement property are legally
obligated to honor the terms of the easement, while retaining
private ownership of the property.
While easements are tailored to the site they are to protect,
they normally consist of provisions guaranteeing that the property
owner will demolish
a building, will not alter the architectural character of the structures
on the site, will not change the use or density of the property,
will not construct new buildings or disturb archaeological features,
and will not subdivide the property without approval of the
The owner retains all the usual private property rights, but
not the rights to demolish or alter the property in ways that
detract from its historic character. Alterations, improvements,
and even additions to the structure may be allowed, providing
they do not compromise the historic character of the property.
For buildings easements may pertain to the enterior, interior, or both.
An easement allows a property owner to retain private ownership of the property while insuring that the historic character of the property will be preserved.
An easement-holding organization may require the easement donor to make an additional donation of funds to help the organization administer the easement.
Funds are often held in an endowment that generates an annual income to pay for easement administration (and, at lime, legal costs for enforcement) costs such as staff time for annual inspections or needed legal services.
According to the Internal Revenue Code, an income tax deduction may be available for a preservation easement protecting a certified historic structure or a historically important land area.
A property is considered a certified historic structure if it is a building, structure, or land area individually listed in the National Register of Historic Places, or if it is a building located in a registered historic district and is certified by the National Park Service as contributing to the historic significance of that district.
To claim the Federal income tax deduction for a historic preservation easement, at least some visual public access to the property must be available.
An easement donor makes a “qualified contribution”
or "charitable contribution" of an easement, the donor may be entitled to Federal income tax deduction for the value of the easement.Federal estate taxes also may be reduced.
The value of the easement is generally the difference between the appraised fair market value of the property prior to conveying an easement and the appraised fair market value of the property after the easement.
Many State tax codes provide state tax benefits for conservation easement contributions where a reduction in the value of a property occurs.
There may also be local tax benefits where property tax assessment is based on a property’s highest and best use.
A property owner conveying an easement on an historic building that has or will be rehabilitated may also be eligible for a 20% tax credit under the Federal Historic Rehabilitation Tax Incentives Program.
An easement placed on a building that is the source of a reha- bilitation tax credit may be considered a partial disposittion of the building, which could affect the available tax credits.
Where rehabilitation tax credits have been claimed within five years preceding the easement donation, the Internal Revenue Code requires some reduction in the amount of the easement contribution deduction.
To be tax deductible, a preservation easement generally cannot be amended.
A conservation easement gives the organization to which it is conveyed the legal authority and responsibility to enforce its terms.
The organization that holds the easement must have the resources to manage and enforce the restrictions provided for in the easement and have a commitment to do so.
This includes the right to inspect the property to ensure that the owner is complying with the terms of the easement.
Proposed alterations to the property may require prior approval from the easement holding organization.
Planned architectural improvements can be submitted for consideration
before the donation is completed. Individual donors may wish
to add special easement provisions to protect specific interior
or landscape features.
Congress has recognized the public benefits of the donation
of preservation and conservation easements. Consequently, an
easement donation may qualify for income, gift and estate tax
deductions through Internal Revenue Code Section 170(h) and
Treasury regulations and tax court decisions
have upheld easement valuations for certain family properties,
historic land areas, and historic commercial rehabilitations.
In the 1990s, many states enacted comprehensive easement
legislation, thus settling a number of issues regarding this
mechanism for property stewardship.
A mortgage taken out on property that already has one mortgage,
with priority in settlement of claims given to the earlier mortgage.
Liek others, a second mortgage is a loan that is secured by
the equity in your home.
A secured loan (or mortgage) that is subordinate to another
loan against the same property. More specifically, the second
loan in sequence.
In real estate, a property can have multiple loans against
it. The loan which is registered with county or city registry
first is called the first mortgage. The loan registered second
is called the second mortgage. A property can have a third or
even fourth mortgage, but those are rarer.
Second mortgages are called subordinate because, if the loan
goes into default, the first mortgage gets paid off first before
the second mortgage gets any money. Thus, second mortgages are
riskier and generally have a higher interest rate.
Second mortgages enable borrowers to access their home equity
without actually tapping the first mortgage. Borrowers frequently
take out second mortgages to pay for the college education of
their kids, consolidate debt or in case of urgent bills. By
doing so, they avoid a worsening of the interest rate on the
first mortgage whilst gaining liquidity for their financial