Land for Love and Money

by Reid Lance Rosenthal

  I will resist the temptation to get sucked into the whirling vortex of politics. However, politics affects business, land, and decisions.

  Will Babies Get Thrown Out with the Bath Water?

  There’s a definite drumbeat of class warfare in the political currents. Whether or not things are fair, should the “rich” be taxed more? Should the tax code be revised? And if so, how? Do we give folks who need help something to eat, or do we teach them how to fish? And yes, if you’ve been keeping up on the news, there are tax proposals floating around that would affect charitable giving, probably adversely.

  If you follow the press on easements, and I do, there is a difference in the way an easement grant by an “old-time rancher” is treated, and the press related to the grant of an easement on a similar property by a non-generational owner perceived as a “rich guy.” In the former case, the grantors are lauded for keeping a way of life, a family and the ranch intact. In the latter case, there is a sometimes not-so-subtle aspersion or insinuation that this is “all about money” assuming the grantor cares far less about the land than they do about the tax benefit. That seems in keeping with the political message of the past few years.

  What most folks don’t know is that conservation easements typically granted by generational ranches are certainly prompted by the love of land, but in many cases are necessitated by a need for cash. Most of these grants on old-time properties involve more than the donation of property rights—there is a cash payment for a portion of that “donation” to the grantor. Yes, you can sell an easement as well as grant one. In Volume Two we will investigate the “easements for cash” phenomena, and as a subheading to that discussion and the real-life stories that go along with it, the grant of non-perpetual easements for finite timeframes, ranging from thirty to sixty years.

  The Bush tax cuts contain provisions that enhance the tax benefits flowing from the grant of conservation easements. Prior to the current tax treatment, the grant of an easement resulted in Federal deductions that the grantor could apply (a maximum of 30% per year) to their Adjusted Gross Income (AGI). To the extent the grantor didn’t use these federal deductions in any given year, starting with the year in which the easement was granted, they could be carried forward for up to six years.

  Under current law, which is set to expire December 31, 2012, and has already been discussed, the tax bennies flowing from the grant of the easement may be applied to up to 50% of your annual AGI, and to the extent not used, will carry forward for 15 years.

  One of three things will happen over the next 6 to 12 months:

  1) There will be little, if any, change to the current tax-related structure of conservation easement grants; or,

  2) Current tax law will expire and the benefits from granting an easement will revert to the 30% per year, maximum six year carry forward, which they had been in the past; or,

  3) The rather powerful group known as the Land Trust Alliance, the organization that represents the approximate five thousand land trusts in the United States, and which enjoys fairly widespread bipartisan support, will be able to keep most or all of the benefits that flow from the grant of easements intact.

  Better to Have No Easement, than the Wrong Easement

  If you’ve been thinking about an easement, and you get right on it, you may have enough time—between your purchase of this book, and December 31, 2012—to potentially get an easement done on all or a portion of your property, and to take advantage of current tax guidelines. However, rushing an easement (which is perpetual in nature) that can materially affect the real value of your property and your ability to sell in the future—is not a good idea. Far better to have no easement than the wrong easement.

  For those of you who are contemplating purchasing, or who own property and have been toying with the idea of the grant of conservation easement, but simply can’t marshal your team and forces to get it done prior to December 31, 2012, you are now alerted to the possibility that the benefits that flow from easements may change. It’s conceivable, under the worst conditions (given the surreal nature of current politics, and the reality of America’s fiscal crisis), that the benefits related to the grant of an easement could be reduced to below what they were in the past. Govern yourself accordingly!

  If you are currently working on the grant of a conservation easement, investigating the possibility, or have vaguely contemplated a grant for your land or future land purchase, keep your nose to the wind and your eyes wide open.

  As you know by now, I have a special love and affinity for the land. It is the source of my energy, the precipitator of my passions, the wellspring of my spirit, and both the source and adjunct to my perceptions of personal freedom, self-sufficiency and self-reliance—notions we need to pass onto our children. Hopefully, Land for Love and Money gives substance or definition to feelings you may have about the land.

  There is nothing quite like land. You can’t hunt, fish, farm, or hike on gold and silver. You can’t feel energy or grow crops on a stock certificate, or enjoy the view from, or ride a horse on a bond. It’s my hope that this first volume of Land for Love and Money has provided a good feel for some universal truths about land and afforded useful nuggets about facets of this unique asset that will make or save you money. It is my wish that these books will increase your pleasure on all levels. And, maybe even save you from a few ugly wrecks.

  Many of the topics covered here could quite literally be a book unto themselves, and entire books have been written on some of the subjects—not in this style, but detailed and informative. A number are included in the Resources section.

  I hope too, that I have introduced the concept of BIG PICTURE THINKING. Engage your brain on a macro basis. You’re not buying this asset, owning it, or selling it in a microcosm. Your partnership with your land is a long term commitment! Sure, you have to focus and concentrate on the details of the actual purchase, sale, or management. But understand there are powerful forces at work far larger than your piece of land, your community, your state, and even your country. This “Arc of Influence” will continue to affect land, real estate, you and your family. Sometimes adversely and positively. Being aware of how, and understanding why, can turn the situation to your advantage.

  The more people are vested in, know, understand and feel the land, the better stewards they will be. And what’s good for the land benefits us all.

  A convergence of events can turn the best plans upside down and put your land at risk (look for strategies in Volume Two). In western parlance it is known as “circling the wagons.” Harry Potter called it, “Defense against the dark arts.” Volume Two contains stories of stormy times, deals gone bad, and the art of defense and offense critical to survival and protection—for you, your land and real estate when everything goes wrong. There will be plenty of positives too, focusing on other aspects of the subjects covered in Volume One, and the “ownership phase”—the management, improvement and enjoyment of land.

  Most importantly, I hope I’ve been able to impart the basic essence, as well as the “hands on” of buying, selling, and owning land. Except in rare cases, you purchase land, enjoy it, and own it because you love it. In most instances you’re sorry when you have to sell. But mixed in with love is the money reality. Understanding, integrating, and using this financial reality can make or save you money, and enhance your love affair with your land.

  Land—it really is for love and money. Thank you. Reid.

  Each of the volumes of Land for Love and Money, including this one, will have an accompanying Green for Green workbook in a CD-DVD format. Typically, the workbook will be published 2 to 4 weeks after release of the main volume with which it is associated.

  I’ve worked hard to keep this book engaging and enjoyable. I believe lessons are better learned through stories than textbooks. No one’s going to glean significant useful information from a book they simply can’t get through. These volumes are meant to provide an overall instructional platform. The workbooks have
the nitty-gritty details: forms, charts, and checklists for due diligence, closing, selling and buying, actual excerpts from conservation easements regarding reserved rights and other matters, excerpts from real working documents on deals that are advantageous to the buyer, the seller, or both regarding seller financing, purchase, sale, and protections for the various players involved. Most were developed by me and forged in the fire of thousands of real deals in my career.

  The contents of these workbooks have all originated in the crucible of trial and error in the course of more than $1 billion in property business. As an example, the Volume One workbook will contain, just as a sampling:

  Acquisition and Due Diligence Checklists

  Sample contract outline for bare land and improved properties*

  Recommended sales contract provisions*

  Sample real estate commission form

  Sample studies’ excerpts on hydrology, soils, mineral, water rights, environmental issues

  Sample maps: resources, enhancements, etc.

  Charts on rural and county governments, departments, and roles of each

  Sample conservation easement and amendment language*

  Sample management agreements (for recreation property, agricultural property, contractors)*

  The volumes and the workbooks will also become a series of instructional CDs after both have been published. Updated material, based on current economics, environmental issues, and tax policies will be available on the Land for Love and Money website according to its terms, ensuring that Land for Love and Money stays relevant in real time, and “evergreen” in this quickly changing political, and mercurial financial landscape.

  *Though written by attorneys in specific locations for specific transactions, all sample contracts or contract language are provided only to afford you a feel and overview of the business concepts—they should not be used until your attorney has reviewed, approved, and or modified the language as your legal representative familiar with local and state laws in your area, and the specifics of your transaction.

  The Land Is Yours: Now What?

  In Volume One of Land for Love and Money, we talked about writing down what you want in your relationship with the land—what you need, what factors are absolute (your “must have” property attributes), what financial parameters are key to success, and finally, but no less important, connecting with the energy of the land. Whether you purchase a residential home on a one-acre lot, or a five thousand-acre spread, key questions and issues will arise once you’ve signed the dotted line.

  Volumes Two and Three will demonstrate no holds barred truths in the same entertaining, anecdotal, hard-hitting and humorous style as Volume One of Land for Love and Money. Volume Two and its following Green for Green workbook, will examine additional tips on buyer and seller matters covered in Volume One, the ownership and improvement phase of the land cycle, along with marketing and value adding secrets. Volume Two, given the current economic environment, will also delve into offensive and defensive strategies that work in a crunch; practical advice to guide new and existing owners through a myriad of common, unexpected and sometimes unpleasant situations. Foresight, knowing what to look out for ahead of time, is key to success. PPPPP!

  Of money, management and moxie.

  How am I going to run this place? How can I generate income? Do I need a manager?

  If it ain’t broke, why fix it? The “when and how” of making changes and the intricacies of stewardship.

  If it has testicles or tires, it’s gonna cause trouble!

  What if I want to fish in my neighbor’s pond? The symbiosis of Cross Use Associations©—a unique recreational sharing concept and agreement developed by Reid.

  This damn dog is wagging my tail! Or, what to do when the land starts running you.

  Why can’t I just wait until tomorrow? Procrastination is not your friend.

  Build it and they will come. Creating sanctuary for water fowl, wildlife and livestock.

  You mean there’s a federal grant for that? Improving the land for everyone.

  I’ve lived here five years, and they still call it the Smith place. Rural, small town conflicts.

  Water wars—”Whiskey is for drinking—water is for fighting.” What are my rights?

  What do you mean, they own the mineral rights? Legal trespass and what to do about it.

  Natural disasters—have a plan. Your life and credit depend on it.

  The “land grab” of Eminent Domain—Oh, no you won’t, Bubba!

  Defense against the Dark Arts—when a landowner must circle the wagons.

  Agenda 21 (United Nations, Maps and Other Links)

  The Local Agenda 21 Planning Guide

  http://www.freedomadvocates.org/research_center/

  Agenda 21 (United Nations—UN.org): Programme of Action for Sustainable Development, Rio Declaration On Environment and Development, Statement of Forest Principles, © United Nations (Local Agenda Planning Guide)

  http://www.freedomadvocates.org/images/pdf/local-agenda-21.pdf

  U.N. Department of Economic and Social Affairs Division for Sustainable Development, Agenda 21

  http://www.un.org/esa/dsd/agenda21/

  U.N. World Heritage and Biosphere Programs in the United States

  http://www.un-freezone.org/images/unbiomap2.jpg

  http://whc.unesco.org/en/254/ (interactive map)

  Appraisals and Appraisers

  Appraisal Standards

  http://www.treasurer.ca.gov/cdiac/reports/appraisalStds.pdf

  Fannie Mae Guidance for Lenders and Appraisers

  https://www.efanniemae.com/sf/guides/ssg/relatedsellinginfo/ appcode/pdf/appraisalguidance.pdf

  Fannie Mae MH Select Appraisal Guidelines

  https://www.efanniemae.com/sf/guides/ssg/relatedsellinginfo/ manufachousing/pdf/mhselectapprgdlns.pdf

  FDIC Interagency Guidance Appraisal and Evaluation Guidelines

  http://www.fdic.gov/news/news/financial/2010/fil10082.html

  VA Appraisal Fee Schedules and Timeliness Requirements Page (State by State Appraisal Rules)

  http://www.benefits.va.gov/homeloans/fee_timeliness.asp

  Home Valuation Code of Conduct

  https://www.efanniemae.com/sf/guides/ssg/relatedsellinginfo/ appcode/pdf/hvcc.pdf

  Business/Entities

  Limited Liability Company (LLC)

  http://www.irs.gov/businesses/small/article/0,,id=98277,00.html

  Sub S Corporations

  http://www.irs.gov/businesses/small/article/0,,id=98263,00.html

  Environmental

  Endangered Species Act

  http://www.fws.gov/laws/lawsdigest/esact.html

  Environmental Quality Incentives Program (EQIP)

  http://www.nrcs.usda.gov/wps/portal/nrcs/main/national/programs/ financial/eqip

  Wildlife Habitat Incentive Program (WHIP)

  http://www.nrcs.usda.gov/wps/portal/nrcs/main/national/programs/financial/whip

  National Conservation Easement Database (NCED)

  http://www.conservationeasement.us/

  FDIC

  FDIC Law, Regulations, Related Acts

  http://www.fdic.gov/regulations/laws/rules/5000-4700.html

  FDIC Federal Register Citations

  http://www.fdic.gov/regulations/laws/federal/2005/05notice328.html

  Federal/State Agencies

  Environmental Protection Agency (EPA)

  www.epa.gov

  Farm Service Agencies (FSA)

  http://www.fsa.usda.gov/FSA/webapp?area=home&subject=landing&topic=landing

  FarmerMac—Financing Rural America

  http://www.farmermac.com/

  U.S. Army Corps of Engineers

  http://www.usace.army.mil/

  U.S. Department of Agriculture (USDA)

  http://www.usda.gov/wps/portal/usda/usdahome

  U.S. Department of the Interior

  http://www.doi.gov/index.cfm

  U.S. Department of Housing and Rural Developm
ent (HUD)

  http://portal.hud.gov/hudportal/HUD

  Resolution Trust Corporation

  https://www.federalregister.gov/agencies/resolution-trust-corporation

  Office of the Comptroller of Currency

  http://www.occ.treas.gov/

  Financial Statutes/Regulations

  Community Reinvestment Act (CRA)

  http://ecfr.gpoaccess.gov/cgi/t/text/text-idx?c=ecfr&tpl=/ecfrbrowse/Title12/12cfr25_main_02.tpl

  Dodd-Frank Wall Street Reform and Consumer Protection Act Public Law 111 - 203

  http://www.gpo.gov/fdsys/pkg/PLAW-111publ203/content-detail.html

  Federal Financial Institutions Examination Council

  http://www.fdic.gov/regulations/laws/federal/00uniform.pdf

  Federal Financial Institutions Examination Council

  https://www.ffiec.gov

  Financial Institutions Reform, Recovery and Enforcement Act (FIRREA)

  http://www.fdic.gov/regulations/laws/rules/8000-3100.html

  Truth in Lending Act

  http://www.fdic.gov/regulations/laws/rules/6500-1400.html