How Land Trusts Work

The Nature Conservancy is a nonprofit organization dedicated to the protection and conservation of natural resources. In the U.S. alone, the Nature Conservancy helps to protect 15 million acres of land from commercial development, industrial pollution and other activities that degrade or spoil land or water resources [source: Nature Conservancy]. The Nature Conservancy is one of the largest examples of a conservation land trust, a organization that acquires properties — through purchase or donation — in order to protect them for future generations.

One of the most popular methods for protecting private land is through a conservation easement. In a way, an easement is similar to the contractual relationship in a real estate land trust. With an easement, a property owner either sells or donates a portion of her land to a conservation land trust. Together, the owner and trustee draw up restrictions on how that land can be used. For example, it may be used for agriculture and recreation, but not real-estate development.

For the property owner, the advantage of a conservation easement is that she retains full property rights to the land. The benefit to the land trust is the ability to place more land under conservation, protecting it from future acquisition and possible exploitation. There are both large and small land trusts operating in every U.S. state and across the world.

Community land trusts are another type of nonprofit organization dedicated to providing affordable housing for lower-income communities. Key to understanding community land trusts is the concept of dual ownership. When you buy a home, you typically pay for both the structure and the land it occupies. With a community land trust, the nonprofit organization buys the land and the homeowner only pays for the house.

As an added benefit, community land trusts sell their homes at affordable prices independent of market fluctuations [source: National Community Land Trust Network]. To buy a home in a community land trust, you must be able to cover your mortgage and upkeep costs, and you must also agree to sell the home for the same price that you paid in order to keep housing affordable.

Unlike real estate land trusts, community land trusts and conservation trusts are legal in all 50 states.

For lots more information about buying a home, investing in real estate and navigating the estate tax, check out the related links below.

Author's Note: How Land Trusts Work

It's clear from my research for this article that not all land trusts are created equal. Real estate land trusts are designed to shield wealthy investors from litigation and taxes, and conservation and community trusts are dedicated to keeping the land healthy and housing affordable. Call me a hippie, but I'm cheering for the second camp. Interestingly, it seems that real estate land trusts are almost more trouble than they're worth. According to lawyers who write on the subject, there are plenty of unscrupulous shysters trying to convince property owners to place their assets in a trust, promising legalized tax evasion for the price of a simple contract. The truth is that real estate land trusts are only legal in a handful of states, and even then are subject to close scrutiny. There's no such thing as a free lunch, unless you count the meatloaf in the prison cafeteria.

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