In my previous blog, “Preserving Agricultural Land in Maryland – Reaping Rewards for Farmers,” I discussed the various programs available in the State of Maryland to provide financial incentives to encourage farmers to preserve valuable agricultural land for farming purposes. The genesis for agricultural land preservation programs and funding was the 1979 establishment of the Maryland Agricultural Land Preservation Foundation (the “MALPF”). The intent of the MALPF was, and continues to be: (1) to provide sources of agricultural products within the State for the citizens of the State; (2) to control urban expansion into the agricultural and woodland areas of the State; (3) to control the spread of “urban blight”; and (4) to protect agricultural and woodland areas for open space land.
At its recent 2017 legislative session, Maryland’s legislature adopted and enacted new legislation, effective October 1, 2017, that changes the MALPF regulations regarding the termination of agricultural preservation easements. Beginning October 1, 2017, it will be more difficult for agricultural land owners to terminate existing agricultural preservation easements on their land.
With a goal of preserving farmland from development for non-farm-related uses, the MALPF provides financial incentives to encourage farmers to give up future property development rights in exchange for agricultural preservation easements. In order to encourage farmers not to sell or develop farmland for non-agricultural purposes, such as residential or commercial uses, some financial incentive is necessary, and one of those incentive methods is through the purchase of easements.
The Maryland Agricultural Preservation Fund was created as part of the MALPF to fund the purchase and acquisition of agricultural preservation easements. While the intent of the MALPF is for those preservation easements to remain in place in perpetuity, there were provisions in the original law to allow for easements to be terminated. Under the prior law, once 25 years had passed from the date of the State’s purchase of the easement, a landowner could request to have the easement terminated. The new law makes that termination process more stringent and difficult.
Under the recent legislative changes, beginning on October 1, 2017, if a landowner wants to have an agricultural preservation easement terminated, the owner must first apply to the MALPF. The MALPF will then request a review by the governing body of the county in which the land under easement is located. An agricultural preservation easement may then be terminated only if the county governing body conducts a public hearing on the termination request, after adequate public notice of the hearing, and, after the public hearing, the county governing body approves the termination request by a written decision. The county’s review, findings and decision may be based on: (1) the county advisory board’s recommendation; (2) local comprehensive planning and zoning; (3) local priorities to preserve agricultural land; (4) local patterns of development; and (5) any other land use matters.
If the county governing body denies the request for termination, the MALPF does not have to take any further action and the application fails. If the county approves the request for termination, then, after written notice from the county, the MALPF Trustees shall determine whether it is feasible to continue to farm the land under the easement in a profitable manner. There is a presumption that the land can be farmed profitably. The landowner has the burden to rebut that presumption. If the MALPF denies the request for termination, because, for example, it determines that it is feasible to farm the land profitably, the termination review process ends. If the MALPF approves the request, then the Secretary and State Treasurer must review the request and make a recommendation.
If approved, the value of the easement must be determined, which requires two (2) fair market value appraisals. These appraisals must be reviewed by the Department of General Services and are then subject to approval of the State Board of Public Works. Upon a written notification to the landowner of the determined value of the land, the owner then has thirty (30) days to elect to repurchase the easement from the State for the fair market value as determined by the Department of General Services. The owner then has one hundred eighty (180) days to repurchase the easement.
The new legislation further limits the easement termination process by providing that all easements approved on or after October 1, 2004, are perpetual and are not eligible for termination.
With the recent legislative changes, it is now more difficult for farmers to repurchase agricultural preservation easement rights. Once the new law takes effect on October 1, 2017, there will be some additional speed bumps and road blocks in the way of any effort to terminate an agricultural preservation easement to “pave paradise to put up a parking lot.”
This blog was written by Anne-Herbert Rollins at Miles & Stockbridge.
Opinions and conclusions in this post are solely those of the author unless otherwise indicated. The information contained in this blog is general in nature and is not offered and cannot be considered as legal advice for any particular situation. Accessing this blog and reading its content does not create an attorney-client relationship with the author or with Miles & Stockbridge. The author has provided the links referenced above for information purposes only and by doing so, does not adopt or incorporate the contents. Any federal tax advice provided in this communication is not intended or written by the author to be used, and cannot be used by the recipient, for the purpose of avoiding penalties which may be imposed on the recipient by the IRS. Please contact the author if you would like to receive written advice in a format which complies with IRS rules and may be relied upon to avoid penalties.