Terminating and Amending Conservation Easements in Colorado, 0816 COBJ, Vol. 45, No. 8 Pg. 47

• Author: Walter Downing, J.

45 Colo.Law. 47

Terminating and Amending Conservation Easements in Colorado

Vol. 45, No. 8 [Page 47]

The Colorado Lawyer

August, 2016

Real Estate Law

Walter Downing, J.

Terminating and Amending Conservation Easements in Colorado

Colorado ’s conservation easement enabling statute states that conservation easements can be terminated in the same manner as other easements. However, because conservation easements are donated to governmental entities and land trusts for the benefit of the public in perpetuity, are these easements actually charitable trusts enforceable by the attorney general in the courts and not freely terminable? This article examines the arguments on both sides.

According to data from the National Conservation Easement Database (NCED), there are 2,927 conservation easements in Colorado covering an estimated 1.5 million acres of land.¹ Approximately 90% of these lands, known as land trusts, are held by private landowners who have donated conservation easements to governmental entities and to charitable conservation organizations.²

An earlier article in The Colorado Lawyer looked at the practical, regulatory, and legal limitations of conservation easements.³ This article addresses the circumstances under which conservation easements may be terminated or amended, who should have the authority to make these decisions, and what standards should apply. No appellate case law in Colorado exists to answer these questions. Therefore, this article will attempt to provide some answers.

Statutory Framework and Common Law

At least initially, the ability to freely terminate conservation easements in Colorado appears to be expressly authorized in CRS § 3830.5-107, which provides:

Conservation easements in gross may, in whole or in part, be re leased, terminated, extinguished, or abandoned by merger with the underlying fee interest in the servient land or water rights or in any other manner in which easements may be lawfully terminated, released, extinguished, or abandoned.

Under Colorado law, easements may be terminated, released, extinguished, or abandoned by (1) a binding agreement to vacate an easement,⁴ (2) termination in accordance with the provisions of the easement itself,⁵ (3) a change of circumstances^{,6(4) abandonment,7 and (5) adverse possession.8 Easements can also be terminated by merger. Merger occurs when the owner of the dominant estate acquires the servient estate, or vice versa, so that both estates are under common ownership.9 Lastly, an easement may be terminated directly by the exercise of eminent domain.10}

While CRS § 38-30.5-107 does not address amendments to conservation easements, it is generally understood that parties to an agreement may amend it if the parties agree to amend it, even if the agreement itself expressly prohibits amendment.¹¹ Because both the common law and the Colorado enabling statute allow parties to a conservation easement to modify or terminate such easements in the same manner as other easements, one would presume that conservation easements may be modified or terminated absent an express provision to the contrary in the conservation easement. However, given the perpetual nature of the grant of a conservation easement and its purpose of protecting publicly significant conservation values, there is a growing debate as to whether conservation easements are as freely amendable as the statute implies.

The Debate

There are two camps of thought on amending and terminating conservation easements. One is based on the law of trusts and the other on easements generally.

Law of Trusts

The argument based on the law of trusts is that conservation easements are in reality restricted charitable gifts to governmental entities and charitable organizations for a specific charitable purpose and that the rules of charitable trusts should thus apply.¹² Under this theory, the holder of the conservation easement should not be permitted to release, extinguish, terminate, or amend the conservation easement for a purpose other than that for which it was granted without receiving judicial approval in a cy pres¹³ proceeding. However, the holder could agree to amendments that are consistent with the purpose of the conservation easement. Advocates for applying charitable trust principles to conservation easements rely on the drafters’ comments to the Uniform Conservation Easement Act (UCEA), the Restatement (Third) of Trust s (2003),the Restatement (Third) of Property: Servitudes (2000), the Uniform Trust Code, and federal tax law to support their position.

Easements

Advocates of the second approach believe that conservation easements should be treated like all other easements—that is, as private arrangements between the owner of the land and the holder of the easement. The parties should be free to modify or terminate the easements as they deem fit, provided only that the holder comply with rules generally applicable to the management of assets owned by governmental entities or charitable organizations.¹⁴ Proponents argue that there is no basis in the common law or in the states’ enabling statutes for imputing to easement grantors the intent to create a charitable trust.¹⁵ Such proponents maintain their position even in states that have adopted the UCEA. Proponents also point out that no reported appellate case has applied charitable trust principles to conservation easements.¹⁶ They further argue that the doctrine of cy pres applies to the law governing charitable trusts, which places the doctrine within the law of trusts, whereas conservation easements are governed by the law pertaining to easements, which is property law.¹⁷ Finally, application of the cy pres doctrine to conservation easements would expand standing to enforce the terms of conservation easements beyond the landowner and the easement holder to include the attorney general of the state in which the trust is established.¹⁸ Such an expansion of standing would complicate enforcement of conservation easements and likely increase the time and cost of enforcement.^[19]

The Uniform Conservation Easement Act

Those advocating application of charitable trust principles to conservation easements rely primarily on the comments in the UCEA. The UCEA was approved by the National Conference of Commissioners on Uniform State Laws (NCCUSL) in 1981, ²⁰ five years after Colorado adopted its enabling statute for conservation easements.²¹ It has been adopted by 24 states and the District of Columbia,²² but not by Colorado. Much like Colorado’s enabling statute, the UCEA provides that a conservation easement may be modified or terminated “in the same manner as other easements.”²³ In the comments to § 2, the drafters stated that “[t]he Act enables parties to create a conservation easement of unlimited duration subject to the power of a court to modify or terminate it in states whose case or statute law accords their courts that power in the case of easement.” (Emphasis added.)

Section 3 of the UCEA addresses standing to bring an action but differs significantly from Colorado’s enabling statute. Section 3(a) of the UCEA identifies four categories of persons who may bring actions to enforce, modify, or terminate conservation easements: owners, holders of the easement, persons having a third party right of enforcement, and “a person authorized by other law.” Section 3(b) of the UCEA provides “this Act does not affect the power of a court to modify or terminate a conservation easement in accordance with the principles of law and equity.”²⁴ In the comments to § 3, the drafters stated that “the Act also recognizes that the state’s other applicable law may create standing in other persons.” As an example, the drafters note that “the Attorney General could have standing in his capacity as supervisor of charitable trusts, either by statute or common law.” Yet the comments continue by stating that “[t]he Act leaves intact the existing case and statute law of adopting states as it relates to the modification and termination of easements and the enforcement of charitable trusts.”

In 2007, NCCUSL approved amendments to the § 3 comments. The amended comment states in part:

[B]ecause conservation easements are conveyed to governmental bodies and charitable organizations to be held and enforced for a specific public or charitable purpose—i.e., the protection of land encumbered by the easement for one or more conservation or preservation purposes—the existing case and statute law of adopting states as it relates to the enforcement of charitable trusts should apply to conservation easements.²⁵

The comment concludes:

[W]hile Section 2(a) provides that a conservation easement may be modified or terminated “in the same manner as other easements,” the governmental body or charitable organization holding a conservation easement, in its capacity as trustee, may be prohibited from agreeing to terminate the easement (or modify i t in contravention of its purpose) without first obtaining court approval in a cy pres proceeding.²⁶

Those advocating that conservation easements should be treated as private agreements between private parties (as opposed to charitable trusts) point out that the comments reinforce the fact that the UCEA leaves intact the existing case and statutory law of adopting states as it relates to the modification and termination of easements.

Restatements and Other Uniform Laws

In addition to the UCEA, those advocating application of charitable trust principles to conservation easements look to the Restatement (Third) of Trusts (2003), the Restatement (Third) of Property: Servitudes (2000), and the Uniform Trust Code (2000).

Comment a to § 28 of the Restatement (Third) of Trusts states that a gift made to a charitable...