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A prospective buyer of eased land may want the owner of the land to provide them a guarantee that the easement holder won’t pursue claims against them for violations that predate their interest. A mortgage lender may want a guarantee that there are no violations that could jeopardize payback of their loan. This guide describes how a holder can responsibly provide sufficient assurance. It also provides background for WeConservePA’s Model Compliance Statement.
A conservation easement is a perpetual real estate interest that continues in full effect regardless of changes in ownership of the eased land. As a result, successor landowners may find themselves liable for easement violations that originated with previous owners. For that reason, a person or entity acquiring an interest in eased land (whether as a buyer, mortgage lender, or otherwise) may understandably seek assurances about the absence or existence of outstanding easement violations that could become their own liabilities.
This dynamic is not unique to conservation easements. Buyers acquiring tenant-occupied property typically seek assurance from the tenant that it does not have outstanding claims under the lease. In that context, the conventional legal tool for this task is referred to as an “estoppel certificate.” An estoppel certificate is a means for a party (usually a tenant) to identify unresolved claims, or state that it has none. If the party that provided an estoppel certificate later discovers it has a claim that predates the certificate but wasn’t specifically mentioned, the party may find itself “estopped”—blocked as a matter of law—from asserting the claim against a party who relied on the certificate.
In the conservation easement context, providing formal estoppel certificates to prospective buyers or mortgage lenders is problematic. Despite even the most robust easement monitoring practices, there are innumerable reasons why a violation may be discovered months or years after it first occurred. For example, it may be physically impossible or financially infeasible to inspect every square meter of a property each visit. Some matters subject to the easement may not be reasonably verifiable with every inspection (e.g. impervious coverage). Some violations are by their nature difficult to detect in a prompt manner, such as prohibited subsurface improvements.
The easement holder’s role is to protect the public interest in conservation. Its ability to seek correction of easement violations should not be compromised merely because of a change in land ownership, the granting of a mortgage, or other transaction that principally advances a non-conservation interest.
The result is a tension between maximum preservation of a holder’s enforcement rights, and acting reasonably and amicably toward landowners. WeConservePA’s Model Compliance Statement provides a reasonable middle ground: offering a reasonable degree of assurance to a prospective buyer or mortgage lender without limiting holder’s rights.
Upon receiving a request from a landowner for an estoppel certificate or other documentation about the status or lack of outstanding violations, the easement holder’s first task is to review the grant to see what obligation (if any) the holder has under the grant. Prospective holders are advised to avoid agreeing to an obligation to provide an estoppel certificate when negotiating a grant; however, estoppel provisions were not unusual in older grants. (In some instances, holders have negotiated with buyers for the payment of a “conveyance fee” or “transfer fee,” which may have been specifically defined as compensation for one or more specific holder tasks occasioned by a transfer of the property, including providing some form of assurance or report regarding easement compliance.)
If the holder is bound by prior agreement to produce a statement regarding compliance, the holder should generally comply with the requirement in the barest reasonable manner—that is, provide exactly what’s required and nothing more. If the grant is silent on the matter, the holder could (1) deny the request, or (2) provide a document that provides a meaningful assurance but with the minimum possible effect on holder’s legal rights. In most circumstances, it is possible to satisfy the basic needs of the parties needing assurance without compromising the holder’s legal rights.
Most buyers or lenders are primarily seeking an answer to a simple question: “are you planning to sue?” If the answer is “yes,” it is in the holder’s interests to make it known before the transaction occurs, as an enforcement action will only become more difficult and costly after one or more transfers of interests in the property. Assuming, however, that the answer is “no,” similar statements by the holder can have vastly different legal effects. Consider the following two statements:
The first statement, if relied upon by a buyer or mortgage lender of the property, may limit the holder’s ability to enforce a violation predating the statement, even for a later-discovered violation. The second statement has a much narrower effect: it does not limit holder’s remedies for later-discovered violations. The Model Compliance Statement takes the latter approach.
WeConservePA’s Model Compliance Statement has two basic parts:
If a requesting party objects to the limited scope of the letter, or specific contents, the holder may negotiate for reimbursement of costs required to conduct a more detailed investigation.
The Model Compliance Letter is available for use by all with no charge thanks to WeConservePA’s financial supporters. The latest edition of it and this guide are downloadable at the WeConservePA Library.
