Conservation Easements: Subdivision Considerations in Farm Succession Planning

Agricultural conservation easements (ACES) – given their perpetual and restrictive nature – are considered the best tool for protecting valuable agricultural soils from non-farm residential and commercial development. While ACES are also considered helpful in farm succession planning due to cash and tax – and often emotional – benefits, their principal feature – a restriction of future subdivision – may have frustrating consequences on an equal division of estate value and desired future development. While the outright restriction on subdivision is the default position in most ACE deeds, pathways exist in federal and state policy to preplan subdivision for the distribution of family lands to heirs to avoid co-tenancy while ensuring the resulting parcels are protected. Once a blanket restriction on subdivision is granted, however, it is tough – if at all – to undo.

Given the need for consolidation of management over tracts used in farming and forestry, it is generally undesirable to have multiple co-tenants on a single parcel, mainly when one “heir” is farming and one or more (usually siblings) are not, which can frustrate long-term decision-making and use of the land as collateral for loans. While parcel partition usually is available to a real property co-tenant under a state law proceeding, the conservation easement likely frustrates any judicial order of partition “in kind” (i.e., physical subdivision), resulting in a sale of the parcel as a whole.

Most agricultural conservation easement deeds receiving federal monies are based on a common template language provided by NRCS, which must include specific language to conform to public policy goals associated with the monies and tax benefits (among these being a blanket prescription against subdivision). However, the NRCS deed guidance provides sample language to contemplate the present or future subdivision of a parcel, and it is critical to ensure this option remains open from the outset of the application process (the NRCS manual provides criteria for consideration and acceptance of future subdivisions, including allocation of impervious surface ratios among subdivided parcels). Additionally, state laws and funding policies may contemplate future subdivisions. For example, North Carolina’s state ACE purchase fund – the NC Agricultural Development and Farmland Preservation Trust Fund – allows future subdivision provided no parcel is less than 20 acres, and North Carolina’s ACE authorization statute restricts such subdivisions to no more than three parcels).

How a request for future subdivisions impacts a particular project application’s ranking is unclear. Still, pre-planning is critical for those wishing to protect a large parcel while allowing a future subdivision among family members. For more detailed information on this topic, a draft paper is in development.

Author: Robert Andrew Branan, JD

Assistant Extension Professor, Agricultural and Resource Economics

Brannon, Robert Andrew. “Conservation Easements: Subdivision Considerations in Farm Succession Planning.” Southern Ag Today 2(48.5). November 25, 2022. Permalink