Preserving perpetuity? Exploring the challenges of perpetual preservation in an ever-changing world.

• Author: Phelps, Jess R.

1. INTRODUCTION II. BACKGROUND A. Preservation Easements: An Overview B. The Move to Permanence--Protection for Historic Properties Through Division of the Fee Estate 1. Deed Restrictions/Zoning Controls 2. Purchase of Historic Properties 3. The Introduction of the Local Historic District/Regulatory Controls 4. Limitations to the Common Law/Early Innovations and Experimentation 5. The Rise of the Modern Perpetual Easement C. Preservation Easements Today D. The Challenge to Perpetuity? III. LEGAL FRAMEWORK A. Overview. B. General Requirements under Federal Law C. Amendment of Perpetual Easements 1. Overview 2. Federal Treatment of Amendment of Perpetual Easements 3. Express State Oversight over Amendment of Perpetual Easements 4. The Debate over the Charitable Trust Doctrine i. The Argument for the Charitable Trust Doctrine ii. The Argument Against Application D. Extinguishment E. Specific Easement Provisions 1. Easement Donations Generally 2. Defining the Casualty Event 3. Insurance Requirements 4. Amendment 5. Condemnation 6. Extinguishment/Allocation of Percentage Interests IV. RESPONDING TO THE CASUALTY EVENT A. Before a Disaster: The Importance of Relationship Building B. The Initial Response: Surveying the Situation C. Evaluating the Damage: Developing a Response Strategy D. Developing a Legal Response: What is the Future of the Protected Resource after a Casualty Event? 1. Minor Damage i. Creating a Rehabilitation Plan/Schedule for Work ii. Preparing New Baseline Documentation iii. Possible Amendment of the Easement 2. Total Loss of the Protected Historic Resource i. Extinguishment of the Easement ii. Moving the Historic Resource iii. Salvage iv. Use of the Charitable Proceeds: An Easement Holder's Legal and Ethical Obligations v. Preserving the Story: Oral Histories and Archival Materials V. CONCLUSION I. INTRODUCTION

   At their core, preservation easements are intended to provide permanent, or perpetual, protection to significant historic resources against insensitive alteration or even outright demolition. (2) Every day, easement-holding organizations partner with property owners to protect additional properties, which can provide sympathetic owners a meaningful degree of assurance that their treasured historic resources will be preserved beyond their lifetimes. (3) In recognition of the role this tool can play in protecting important heritage assets, certain types of voluntary easement donations are incentivized through the Tax Code. (4) This use of tax expenditures to influence individual preservation decisions constitutes an important public investment in preserving our nation's most significant properties, but only will accrue to the donor if the easement meets express, and increasingly proscribed, criteria; namely, that its terms actually provide for perpetual protection. (5) Perpetuity is an admittedly challenging target, and one that requires close attention from a drafting perspective, particularly as the IRS will go beyond the expressed period of duration to ensure that the easement truly provides the requisite level of permanent protection dictated by statute. (6) Moving beyond drafting concerns, however, if one is to take the concept of perpetuity seriously, the same degree of close attention also needs to be given to the monitoring and enforcement of the easement over that same period. (7)

   Despite challenges, many easement-holding organizations have demonstrated the effectiveness of this tool for more than a half-century. (8) This is not, however, equivalent to perpetuity, and issues will inevitably arise that call into question the continued ability of this tool to provide permanent protection to critical historic resources. (9) Despite the protection of an easement, a governmental entity may, for example, still seek to seize a historic property through eminent domain to accomplish a particularly prized local objective. (10) Similarly, fires will destroy historic properties, and climate change and coastal flooding can be predicted to affect historic homes despite meaningful efforts to avoid the loss. (11) What should easement-holding organizations do in such situations in light of their perpetual commitment to protect these properties?

   The purpose of this Article is to consider this question. Many of the potential issues are unresolved, and are easily enough put off until a real emergency develops. Purely reactive solutions will likely lead to imperfect or non-optimal outcomes both in responding to the emergency and in dealing with the aftermath. (12) It is perhaps an unavoidable reality that protected historic properties will be lost, but planning for a responsible response will respect the resource, the donor's intentions, and will protect any public investment in subsidizing the easement donation, while fulfilling the organization's responsibility as a qualified easement holder. (13)

   To this end, this Article is broken into three primary parts. Part II provides an overview of the history of preservation easements with an eye to explaining the motivations that led to the development of this protective mechanism. Part III explores the legal framework that governs an easement--holder's response to a catastrophic event. Finally, Part IV outlines and evaluates an easement-holder's options in assessing and responding to a threat or actual property damage. Ultimately, it will be the ability of easement-holding organizations to respond responsibly to catastrophic events that will validate this critically important preservation tool, or in a meaningful sense, preserve the perpetuity that is its defining hallmark.

2. BACKGROUND

   1. Preservation Easements: An Overview

      Preservation easements, at their most fundamental level, are simply a legal tool designed to help individual property owners and easement-holders partner to permanently safeguard significant historic resources. (14) To accomplish this objective, an owner donates a limited property interest to a qualified easement holder (most often a nonprofit), which prohibits alterations to protected features without the easement holder's express review and approval. (15) "Using the traditional bundle of sticks metaphor for property, we can describe the landowner as losing one of the sticks in her bundle ... and giving it to someone else" who agrees to hold subsequent owners responsible for complying with the terms of the agreement. (16) To ensure this compliance, an easement holder agrees to periodically monitor the property, generally at least annually, or more frequently if rehabilitation work is occurring on site, and to enforce the terms of the easement against potential future violations--thereby ensuring the continued preservation of the protected resource. (17) The truly unique aspect of preservation easements is that state legislatures have generally granted these property interests exemption from the common law rule against perpetuities, which allows for "permanent" protection for historic resources so encumbered. (18) In some instances, the donation of a perpetual easement can reduce the value of the underlying property being protected, and the federal tax code allows owners to potentially recover some of the loss by claiming a noncash charitable deduction for any diminution in value associated with that donation. (19)

      Within the preservation context, easements are a highly flexible tool that can be tailored to protect the specific attributes of an individual historic property. (20) Depending upon the owner's and the easement holder's objectives, an easement can protect the property's exterior, accessory buildings, the landscape or setting, as well as important interior features. (21) Easements that protect interior details are a unique preservation mechanism as this is the only generally available means of protecting a historic interior from alteration or even total "gut" renovation. (22) Restrictions on interior modification can protect significant interior details, such as mantels, paneling, room configuration, light fixtures, plaster, hardware, staircases, flooring, and any other character defining details called out for specific attention in the easement document by the owner and easement holder. (23) A comprehensive easement protecting interior, exterior, and landscape elements is the only meaningful way, outside of museum curatorship, to provide "whole" protection to a historic resource, and allow it to tell the story of its representative time and place. (24) In all, this legal tool affords Individual property owners the option of partnering with a governmental or nonprofit entity to protect significant historic properties that they own and want to see preserved for posterity. (25)

      "The real work with conservation easements, [however], begins after the signature ink is dry. Even the best written easements are only as good as the holder's resolve and capacity over the long term to monitor, enforce, and defend them." (26) The choice of an easement holder, and the responsibility of the organization to its donors and the public generally, is the true key to easements working as a functional preservation tool. (27) Monitoring and enforcement are critical components of any effective easement program, and without periodic site visits to verify the condition of the property, a program loses its vitality and an easement holder could even conceivably waive its interest due to continued inaction. (28) Best practices in this field require the easement holder to commit considerable resources to stewarding its easement properties, and to building responsive and responsible relationships of trust with property owners, while retaining sufficient distance to remain a responsible arbitrator willing to enforce the terms of the agreement even when uncomfortable or potentially costly. (29) This type of stewardship is critical to ensure that both parties share the same long-term " preservation goals for the property, which will allow the...