How are conservation easements valued?
Qualified appraisers determine the easement’s value. As a general rule, the value equals the difference between the fair market value of the land before the easement’s in place and the fair market value of the land after the easement’s in place. This is called the “before and after” test. To carry the “bundle of rights” illustration through, each stick in the bundle of property rights has a value. Together, these values make up the property’s overall worth. By limiting certain uses of the property, conservation easements essentially remove sticks from the bundle, thereby reducing the property’s overall value. The value of the removed sticks equals the value of the conservation easement. The value of conservation easements vary depending on the terms of the agreement (particularly what future development will be allowed) and the development pressure in the area.
