Q: My husband and I have land and want to give a conservation easement to a legitimate organization. Where do we start?
A: That’s a good, but tough, question. I would start by retaining a real estate attorney in your area who has experience with conservation easements. It is an area of law that has serious tax consequences if not done right.
I cannot provide specific legal advice in this column, but here are some things to consider based on recent court cases.
Is there a mortgage on your property? If so, you will have to get your lender to agree to subordinate to the easement. This means that the easement will be in first place ahead of your mortgage. Why? Because these easements must be perpetual. If the mortgage is in first place and there is a foreclosure, the easement will be eliminated, and thus is not perpetual. It may be difficult to persuade a lender to cooperate.
A recent court addressed the situation where the easement grantor decided to substitute another property. The court said that voided the tax deduction because of the perpetual requirement. The property — and only the property and not a substitute — has to stay in the easement forever.
Failure to comply with the law and IRS regulations could cost you a lot of money, and it could take years before a final decision is made by a court. If your easement fails to comply with the legal requirements, the IRS can decide that your deduction is void, and you will not only have to pay back what you deducted, but possibly penalties and interest.
Reader responses
I was happy with your response in a recent column about home inspections. While our home was not as old as the one in the column, we did have some issues that needed to be addressed. For around $350, we hired a home inspector about six months prior to putting our house up for sale. After a three-hour inspection and getting a report with photos of things that we needed to fix, we were able to spend about $3,000 for what we think was probably a $20,000 increase in our sale price. Subsequently, the buyer’s inspector found no issues at all.
There was also a home warranty insurance policy at a cost of $380 that protected us for any unseen issues. This was also money well spent.
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I hope these items can help anyone who is considering selling a property. — Stanley
A: Thanks for your kind comments about my column. Your advice is well-taken; if you have questions or concerns about the condition of the house you are about to sell, it makes sense to hire a professional home inspector — before you start the marketing.
I did find it interesting that the buyer’s inspector found no issues; that’s very unusual. I am not in any way trying to be critical of home inspectors, because I believe they have an important role in any real estate sale. However, from my experience, rarely will an inspector find a house in perfect condition. They are professionals, so they usually find something — despite how small or minor
But here’s a different response from a reader.
While inspections are good, there are defects that can’t be seen until walls are taken down. When we took down a wall, an electrical outlet was jumped from one outlet to another. Just two wires. No conduit, no BX (electrical cable), nothing. Unless you check every single outlet, there is no way to find those until a wall comes down. Plumbing not done right. These things may not show up in an inspection. People should have a right to sue. — Allen
Benny L. Kass is a practicing attorney in Washington and Maryland. No legal relationship is created by this column; [email protected].