Overview Our Conservation Easement Process

This overview describes the primary steps involved with placing land into a conservation easement with the New Mexico Land Conservancy.

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1. Initial contact and conversation between Landowner(s) and the New Mexico Land Conservancy (NMLC). Landowner describes in general terms his/her property and conservation goals; and NMLC explains how a conservation easement (CE) and the related process work, including a discussion of the potential tax benefits and the typical costs. NMLC clarifies that it can provide general tax information, but cannot provide specific legal, tax or financial advice regarding the CE and recommends that Landowner seek his/her own counsel on these matters. Landowner and NMLC decide whether to proceed to the next step.

2. NMLC staff visit Landowner and the property. NMLC provides additional information about CEs to Landowner and about issues they will need to address in order to complete a CE. NMLC obtains more detailed information about the property, its conservation values, and what rights Landowner may want to reserve (e.g., building sites and land divisions). In addition, any potentially complex issues (such as assessing commercial mineral potential if mineral rights have been severed from Landowner’s ownership) are identified and discussed. At this point, NMLC staff obtains preliminary approval to proceed from NMLC Board of Directors.

3. NMLC informs Landowner of the specific costs associated with completing the CE and discusses methods of payment of these costs. Costs include NMLC’s operating and transactional costs associated with completing the CE; the Landowner’s legal and closing costs; and the stewardship endowment which is used to cover the long-term monitoring, enforcement and legal defense costs associated with holding the CE. During the life of the project, NMLC generally requests two levels of contribution from Landowner. The Commitment Contribution (to be paid upfront) is used to defray some of NMLC’s initial operating costs. When Landowner is ready to move forward with the process, NMLC will prepare a letter of intent for Landowner to sign and ask Landowner to donate an initial Commitment Contribution to NMLC. Landowner also agrees to name NMLC as additional insured on its liability insurance policy. When the CE is ready to be executed, NMLC will ask Landowner to make a Final Contribution to cover the balance of its costs and the stewardship endowment.

4. NMLC begins to draft the CE, orders a current title commitment and title insurance for the CE, and gathers other necessary and relevant documents as part of the process of completing its due diligence. In cooperation with the Landowner, NMLC completes the Baseline Documentation Report (BDR), which is required under Internal Revenue Service (IRS) regulations. The BDR is an inventory of the property at the time the Landowner grants the conservation easement, and is used in the future as a baseline to monitor and compare any changes in the property. The BDR generally includes a description of the natural characteristics, current improvements on and uses of the property; maps of the property; and photographs that serve to document the current condition of the property. From time to time, depending on the nature of the conservation values and the complexity of the project, it may be necessary for NMLC to contract outside professionals or specialists. These may include: a surveyor; a biologist or ecologist to evaluate flora/fauna and wildlife habitat values; an archaeologist to assess cultural and historic resources; a geologist to determine the commercial mineral potential; and a consultant to conduct an environmental hazards assessment.

5. Landowner and NMLC discuss the CE draft, making adjustments until both parties are content with the document. This can take a few weeks to several months, depending on how many issues the Landowner may need to think through and decide, how difficult it can be for multiple Landowners to communicate and how fast each party can turn around drafts of the CE. It is possible to do this fairly quickly if the circumstances require. NMLC will do its very best to meet Landowner’s preferences for completion dates, however Landowner should be aware that NMLC cannot and does not guarantee that any CE can be completed in any specific calendar year because of the many issues over which NMLC has not control. Landowner is advised to begin the process as early in the year as possible because, toward the end of the year, there is a point when NMLC will no longer be able to undertake and complete a CE before the end of the year.

6. Once the terms of the CE are generally agreed upon, Landowner and NMLC each send the CE to their own legal counsel for review, along with any specific questions that remain unresolved or in flux and need legal input. Once the CE is completed and legally reviewed, NMLC completes supporting documentation and exhibits to accompany the CE. These can include certain items that the Landowner must provide in finished form such as warranty deeds, a legal description or survey, biology/geology reports, etc. If there are any existing mortgages/liens associated with the subject property, the Landowner will need to arrange with the mortgage/lien holders to have these subordinated to the CE. NMLC can provide the necessary mortgage subordination forms.

7. At some point during the CE drafting process, Land Trust and/or Landowner commissions a qualified appraisal if Landowner intends to take a charitable deduction for the value of the CE. NMLC can provide a list of certified CE appraisers upon request. Landowner should be aware that the IRS stipulates that the appraisal cannot be completed any sooner than 60 days prior to the signing of the CE, and no later than the date the Landowner files his or her income tax return for the year in which the CE was donated. Notwithstanding the foregoing, NMLC requires its own review of the completed appraisal at least 30 days prior to the income tax filing deadline.

8. NMLC staff present the final CE to the NMLC Board of Directors for their final approval and accompanying Resolution. Please note that the official acceptance by NMLC of any conservation easement occurs only when the NMLC Board of Directors passes a specific Resolution to that effect.

9. Landowner and NMLC sign the CE and the BDR. By signing the CE, Landowner is committing to notify and/or seek approval from NMLC on items required by the CE, and to comply with all terms of the CE (e.g. sending copies of all required information to NMLC as described in CE and notifying NMLC regarding any changes in ownership, including changes in percentage ownerships among existing owners). At this time, NMLC will also discuss to what extent Landowner is comfortable with NMLC publicizing the CE (e.g. in NMLC press releases, newsletters and website; and to outside media).

10. Landowner donates the Final Contribution to NMLC. NMLC records the CE with the relevant County Clerk’s office and sends copies of the recorded CE, associated documentation, and any other relevant information to Landowner and, if so desired, Landowner’s representative(s).

11. If Landowner is interested in pursuing the federal and/or New Mexico state (for New Mexico taxpayers only) income tax benefits associated with a donated CE, Landowner should inquire about and understand the respective requirements to qualify for these tax benefits as early in the CE process as possible. NMLC can provide general tax information, but cannot provide specific legal, tax or financial advice regarding the CE and recommends that Landowner seek his/her own counsel on these matters. If Landowner decides to pursue the federal income tax deduction, once CE is recorded, Landowner, or his or her representative, sends a completed copy of IRS Form 8283 (which acknowledges the donation and specifies its appraised value for Landowner’s federal income tax return) to NMLC for NMLC’s signature along with a copy of the final appraisal for NMLC’s review. NMLC must receive the final appraisal and the completed IRS Form 8283 at least 30 business days prior to the due date for Landowner's tax return. Landowner should be aware that, if the appraised value does not appear to be properly justified, NMLC reserves the right to postpone or decline signing the Form 8283. If Landowner wishes to pursue the New Mexico state tax credit associated with CE donations, Landowner should be aware that the state has its own application process for reviewing and certifying state tax credits.

12. Following NMLC’s completion and acceptance of the CE, at least once a year thereafter, NMLC will contact Landowner to monitor the CE. This involves an annual visit to the property by NMLC, ideally in conjunction with the Landowner, to ensure that Landowner is in compliance with the terms of the CE.

If you have any questions after reviewing this information please contact us.