Mar 01, 2003

Protected Land: Conservation Covenant Agreements #357

Mar 01, 2003

Protected Land: Conservation Covenant Agreements #357

By Gerry Neely
B.A., LL.B.

A number of licensees are active with local conservation groups. These individuals are dedicated to preserving the natural beauty of the province and the environmental, recreational and heritage values important to their communities. For example, one such licensee was instrumental in the incorporation of The Land Conservancy of British Columbia (TLC) in 1997. Since then, TLC has raised $15 million, either alone or in partnership with other conservation groups, for the protection of more than 100 properties throughout British Columbia.

The preservation of special features of properties presents potential business opportunities for licensees who are familiar with the benefits and risks to their principals and to themselves. A licensee with a listing of a property suitable for protection could benefit from the fundraising capabilities of a conservation group like TLC interested in purchasing the property. Also, an owner who wants to protect a property, and who donates all or part of the land or accepts less than fair market value, is entitled to a tax benefit.

Conservation groups such as TLC protect land, or land and building in one of three ways: a fee simple purchase, long-term lease or conservation covenant, which is given to a recognized conservation group by a land owner. A conservation covenant may serve the same purpose as a fee simple purchase, but at less or no cost to the conservation group holding the covenant. In each case, a covenant is registered on title.

There is an increased awareness among property owners that they can protect the special features on their lands while continuing to live there, through the use of conservation covenants. Owners who retain possession agree to limit their occupation and use of the lands to avoid impairing or interfering with the special features to be protected. The conservation group is given an easement for access to the special feature and the right to remedy any damage. The covenant is registered under sections 218 and 219 of the Land Title Act.

A buyer's agent who discovers a covenant on title should make any offer subject to two factors, upon which conditions can be appropriately worded:

1. Did the owner "donate" the covenant? This is important because the owner may have received a charitable receipt for the difference between the fair market value of the land before and after the covenant was given. The restriction on use created by the covenant, for example one preventing subdivision, may have a significant impact upon the value of the property. A successive owner may not know whether a tax receipt was issued, and it is unlikely that the Canada Customs and Revenue Agency would agree to a modification of the covenant. The conservation group holding the covenant should be able to provide this information.

2. Has the owner breached any of the covenant obligations? This is important because a buyer could become responsible, as the covenant is binding upon the buyer. The covenant agreement provides for a stiff fine, called a rent charge, for the breach of an obligation. Ask the covenant holder if it is aware of any breaches, and have the covenant holder inspect the property. If there are breaches that the seller will not remedy, the buyer can refuse to remove the condition. If the covenant holder does not notice existing breaches, it cannot use them to sue the buyer.

At a minimum, a listing agent who is aware of the covenant should advise the owner to anticipate a conditional offer, which will require answers to satisfy the buyer's two main concerns.

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Legally Speaking 357 discussed how an owner who wishes to retain possession of a property while protecting its special features can do so by using a conservation covenant. The following example describes a covenant intended to preserve the characteristics of an old growth forest, while allowing the landowner to remain in possession of the land.

In this case, the 3.24 hectares of land, last logged in 1925, principally contains stands of mature Douglas fir and western cedar in a scarce ecosystem, limited to the southern portion of Vancouver Island and the Gulf Islands. Trails, benches and small bridges are within the protected area. A 4,000-square foot house, septic system, well and driveway are retained for the use of the owner.

The conservation covenant agreement, signed by the owner and the covenant holder, is given in perpetuity so that, while the owner and those who succeed her will have the benefit of it, they also have the burden of the obligations. The owner retains all rights to the property except as they are limited by the agreement, along with the responsibility of paying all taxes and other costs relating to ownership, use and occupation of the land.

The owner can repair and maintain the facilities needed to reside in the house, however, replacements can only be made within the footprint of its present location, and all services must be provided within a ten-metre wide service corridor. She can build or enhance features relating to the residence within a 50-metre radius; beyond that area she cannot dump fill, garbage or other non-naturally occurring material, allow hunting, fishing or grazing of domestic animals, disturb any component of the land or remove it for commercial purposes. The owner has the right, if she chooses, to continue to build and maintain trails, benches and other improvements in the protected area, but she cannot cut, damage or remove any native plant or tree, living or dead, in this area. She cannot subdivide the land nor introduce herbicides, insecticides or pesticides.

Attached to the agreement is a Baseline Documentation Report containing an exhaustive examination of the land, fortified with location map, aerial photo with boundary overlay and photographs of the property and its flora and fauna. The report includes examinations of topography, hydrology, trees and understory vegetation, riparian areas, wildlife, soil and non-native plant intrusions.

The agreement contains a dispute resolution clause with mediation, and a provision to vary the limitations with the consent of the covenant holder, or as a result of an emergency. The covenant holder can repair damage in the protected area at the owner's expense if it is caused by the owner, or the owner's neglect to fulfill an obligation of the agreement.

The agreement grants to the covenant holder as security for a breach of an owner's obligations, a perpetual rent charge against the owner's land of $10,000 per year per violation. If a breach occurs, the rent charge is increased by 110 per cent of the market value of the removed, damaged or destroyed flora, fauna, or soil and rock at the date of the breach. The rent charge is tied to changes in the Consumer Price Index. The rent charge has priority over all financial charges and encumbrances, and payment can be enforced by the usual means available to a creditor.

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