BILL ANALYSIS �
SENATE JUDICIARY COMMITTEE
Senator Noreen Evans, Chair
2011-2012 Regular Session
SB 328 (Kehoe)
As Introduced
Hearing Date: April 12, 2011
Fiscal: Yes
Urgency: No
BCP:rm
SUBJECT
Eminent Domain Law: Conservation Easement
DESCRIPTION
This bill would state that a person authorized to acquire
property for public use by eminent domain shall exercise that
power to acquire property that is subject to a conservation
easement only as provided in this bill. Specifically, this bill
would impose the following requirements on the condemnation of a
property subject to a conservation easement:
The person notifies the holder of a conservation
easement not later than 105 days prior to the hearing on a
resolution of necessity, or, at the time an offer is made
to the owner of the property, whichever occurs earlier, as
specified;
The holder informs the person seeking to acquire the
property of any public entity that provided funds for
purchase of the easement, or imposed conditions that
resulted in its creation, and notifies that entity of the
potential eminent domain action;
The holder and the public entity receiving notice have
the right to provide written comments to the person seeking
to acquire the property, and, that person must respond to
those comments within 30 days;
The holder is named as a defendant and may appear in the
proceedings, as specified; and
The holder of the conservation easement is an owner of
property entitled to compensation, as specified.
BACKGROUND
(more)
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In 1979, the Legislature declared that the preservation of land
in its natural, scenic, agricultural, historical, forested, or
open-space condition is among the most important environmental
assets of California. In conjunction with that declaration, the
Legislature broadly defined a "conservation easement," and
codified that those easements are an interest in real property,
perpetual in duration, not personal in nature, and having the
characteristics granted or specified in the instrument created
in the easement.
Generally speaking, a conservation easement is a legal contract
between a property owner and a third party (often a land trust)
that restricts the use of the land for the purpose of
conservation (retaining the land predominantly in its natural,
scenic, historical, agricultural, forested, or open-space
condition). Those easements typically restrict development and
subdivision of the property, run with the land (ie. bind the
original and subsequent owners), and are recorded with the
county recorder to provide public notice of the easement. Since
the property owner retains ownership of the property,
conservation easements also represent a less expensive
alternative to outright purchase of the property for nonprofits
seeking to protect land, and may result in a tax advantage to
the property owner. The easement itself is held by the third
party (nonprofit 501(c)(3), Native American Tribe, or government
entity, as specified). The sponsor, California Council of Land
Trusts, provides the following two examples of recent
conservation easement donations to the Land Trust of Santa
Barbara County:
�The first donation was] a 195-acre avocado farm that
protects farmland, wildlife habitat and a creek, and
provides scenic views from a public trail. The second
donation was appraised at $42 million on a 3,100-acre
property. It contains extensive watershed lands and
farmland, and because the property abuts a very popular
public hiking trail, it also provides scenic views to the
public.
In response to prior concerns about the condemnation of
conservation easements, AB 910 (Wayne, Chapter 863, Statutes of
2001) prohibited a governmental entity from condemning wildlife
conservation easements acquired by a state agency, or the
property under those easements, unless certain procedures were
complied with, including giving notice of the proposed
condemnation to the holder of the easement, and allowing that
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holder to state its objections and to receive a response. (Fish
& G. Code Sec. 1348.3.) The sponsor of that bill, the
California Waterfowl Association, argued that the ease with
which conservation easements could be condemned under California
law, at that time, "threaten�ed] to undermine one of
California's most successful and economically prudent natural
resource conservation strategies."
This bill, sponsored by the California Council of Land Trusts,
would similarly ensure that holders of conservation easements,
and any public entity involved with the easement, receive notice
of a potential eminent domain action, are involved in the
eminent domain process, and are entitled to compensation if the
property is taken, as specified.
This bill is identical to the enrolled version of SB 555 (Kehoe,
2009) that was vetoed due to concerns that it could delay
infrastructure projects. (See Comment 4.)
CHANGES TO EXISTING LAW
Existing federal law provides that "private property �shall not]
be taken for public use, without just compensation." (U.S.
Const. Amend. V.)
Existing state law provides that private property "may be taken
or damaged for public use only when just compensation,
ascertained by a jury unless waived, has first been paid to, or
into court for, the owner." (Cal. Const. art. I, sec. 19.)
Existing state law defines "just compensation" as a property's
fair market value "as determined by any method of valuation that
is just and equitable." (Code Civ. Proc. Secs.
1263.310-1263.320.)
Existing law further provides that the power of eminent domain
may be exercised to acquire property only for a public use, and
only if all of the following are established: (1) the public
interest and necessity require the project; (2) the project is
planned or located in the manner that will be most compatible
with the greatest public good and the least private injury; and
(3) the property sought to be acquired is necessary for the
project. (Code Civ. Proc. Secs.1240.010, 1240.030.)
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Existing law states that any person authorized to acquire
property for a particular use by eminent domain may exercise the
power of eminent domain to acquire property appropriated to
public use: (1) if the proposed use will not unreasonably
interfere with or impair the continuance of the public use as it
then exists or may reasonably be expected to exist in the
future; or (2) if the use for which the property is sought to be
taken is a more necessary public use than the use to which the
property is appropriated. (Code Civ. Proc. Secs. 1240.510,
1240.610.)
Existing law finds and declares that the preservation of land in
its natural, scenic, agricultural, historical, forested, or
open-space condition is one of the most important environmental
assets of California, and states that it is to be the public
policy and in the public interest of this state to encourage the
voluntary conveyance of conservation easements to qualified
nonprofit organizations. (Civ. Code Sec. 815.)
Existing law defines a "conservation easement" as any limitation
in a deed, will, or other instrument in the form of an easement,
restriction, covenant, or condition, which is or has been
executed by or on behalf of the owner of the land subject to
such easement and is binding upon successive orders of such
land, and the purpose of which is to retain land predominantly
in its natural, scenic, historical, agricultural, forested, or
open-space condition. (Civ. Code Sec. 815.1.) A conservation
easement has the following characteristics:
voluntarily created interest in real property that is freely
transferable;
perpetual in duration;
not deemed to be personal in nature, but shall constitute an
interest in real property; and
the particular characteristics shall be those granted or
specified in the instrument creating or transferring the
easement. (Civ. Code Sec. 815.2.)
Existing law only allows the following entities or organizations
to acquire and hold conservation easements: (a) tax-exempt
nonprofit 501(c)(3) organizations with a primary purpose of
preserving, protecting, or enhancing land in its natural,
scenic, historical, agricultural, forested, or open-space
condition or use; (b) the state or any city, county, city and
county, district, or other state or local government entity, as
specified; and (c) a California Native American tribe, as
specified. (Civ. Code Sec. 815.3.) Existing law also requires
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the recordation of instruments creating, assigning, or otherwise
transferring conservation easements, and provides for the
creation of a conservation easement registry. (Civ. Code Sec.
815.5; Pub. Res. Code Sec. 5096.520.)
Existing law provides that no governmental entity may condemn
any wildlife conservation easement, as defined, unless, prior to
the initiation of condemnation proceedings by a governmental
entity, the entity: (a) gives notice to the holder of the
easement; (b) provides an opportunity for the holder of the
easement to consult with the governmental agency; and (c)
provides a response to objections. In the condemnation
proceedings, the condemning governmental entity shall be
required to prove by clear and convincing evidence that its
proposed use satisfies specified requirements under the Eminent
Domain Law. (Fish & G. Code Sec. 1348.3; Code Civ. Proc. Sec.
1240.610 et seq.)
This bill would state that a person authorized to acquire
property for public use by eminent domain shall exercise the
power of eminent domain to acquire property that is subject to a
conservation easement only as provided below:
The person seeking to acquire the property subject to
the easement provides notice to the holder of the
conservation easement: (1) not later than 105 days prior to
a hearing by the governing body on a resolution of
necessity, or at the time an offer is made to the owner to
acquire the property; (2) if no hearing is required, notice
must be given 105 days prior to the time an offer is made
to the owner of the property. That notice must include the
following:
o a general description of the property subject
to the conservation easement;
o description of the public use or improvement;
o that written comments must be submitted no
later than 45 days from the mailing of the notice, as
specified;
o that the holder of the easement is required,
within 15 days of receipt of the notice, to send a
copy of the notice to each public entity that provided
funds for the purchase of the easement or imposed
conditions on approval or permitting that were
satisfied by creation of the easement, inform the
public entity regarding written comments, and notify
the person seeking to acquire the property of the name
and address of the public entity.
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The holder of the conservation easement, within 15 days
of receiving the notice, must send a copy of the notice to
each affected public entity, as specified, inform that
entity of regarding the ability to submit written comments,
and notify the person seeking to acquire the property of
the public entity. This requirement would only apply when
the holder of the easement is the original grantee of the
easement and there is a public entity, as specified, the
holder of the easement has actual knowledge of a public
entity, as specified, or the recorded documents evidence
the involvement of a public entity.
The holder of the conservation easement or the public
entity receiving notice, or both, may provide written
comments to the person seeking to acquire the property,
including any potential conflict between the public use
proposed for the property and purposes and terms of the
easement. Written comments must be submitted no later than
45 days from the date the notice was mailed to the holder
of the conservation easement.
The person seeking to acquire the property subject to a
conservation easement must respond in writing to comments
from the holder of the easement or from the public entity,
as specified, within 30 days of receiving those comments.
Notice of the hearing on the resolution of necessity
must be sent to the holder of any conservation easement and
to any public entity, as specified. The notice shall state
that failure to file a written request within 15 days after
mailing of the notice will result in waiver of the right to
appear and be heard.
Any resolution of necessity to acquire property subject
to a conservation easement must refer a section of existing
law that: (1) permits a property appropriated to public use
to be acquired by eminent domain if the proposed use will
not unreasonably interfere with or impair the continuance
of the public use, as specified; or (2) permits a property
appropriated for public use to be acquired if the use for
which the property is sought to be taken is a more
necessary public use than the sue to which the property is
appropriated.
This bill would require the holder of the conservation easement
to be named as defendant in the eminent domain proceedings to
acquire property subject to a conservation easement. This bill
would also require the holder to be allowed to appear in the
proceedings, as specified, and state that the holder shall have
all the same rights and obligations as any other defendant in
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the eminent domain proceeding.
This bill would provide that the holder of the conservation
easement is an owner of property entitled to compensation, as
specified, to be determined in accordance with all of the
following:
The total compensation for the acquisition of all
interests in property encumbered by a conservation easement
shall not be less than, and shall not exceed, the fair
market value of the property if it were not encumbered by
the conservation easement.
If the acquisition does not damage the conservation
easement, the total compensation shall be assessed by
determining the value of all interests in the property as
encumbered by the easement.
If the acquisition damages the conservation easement,
the compensation shall be determined, as specified, and the
value of the fee simple interest of the property shall be
assessed as if it were not encumbered by the easement.
This bill would provide the above compensation provisions do not
apply if similar provisions in existing law relating to
agricultural conservation easements apply.
This bill would not apply in its entirety if existing law's
provision relating to wildlife conversation easements applies.
COMMENT
1. Stated need for the bill
According to the author:
The current provisions of the CCP �Code of Civil Procedure]
do not identify or recognize conservation easements in spite
of the public benefits and investment in creating them.
Tremendous public and charitable assets have been invested
in the acquisition of conservation easements in California.
Yet, with the narrow exception created for a relatively
small number of easements in the Fish and Game Code section
1348.3, conservation easements are as vulnerable to
condemnation as any other property in private ownership.
The fact that a conservation easement exists, that sometimes
millions of dollars in public dollars have been expended to
conserve it, or that a public agency has said that the
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property's conservation advances certain public goals are
all irrelevant to a potential condemnation proceeding. In
spite of the implicit recognition of the public value of
conservation easements as evidenced in law and public
funding, they are not recognized as having any public use
for the purposes of eminent domain law.
Further, the easement holder - who holds a real property
interest - does not have to be notified of the proposed
condemnation. Nonprofit easement holders report that
governmental entities with the power of eminent domain often
fail to recognize a conservation easement as a separate and
distinct property right. In numerous instances, the entity
has refused to acknowledge the easement holder until the
holder of the fee title land refuses to talk with the entity
about the condemnation without the easement holder or the
easement holder has retained counsel to force discussion.
The conservation community is facing an increasing number of
condemnations of conservation easements, and it expects this
trend to increase as development pressure continues and
communities are built out. The conservation community is
not trying to eliminate the power of eminent domain - it
recognizes that other societal needs will sometimes require
the condemnation of a conservation easement. However, it is
seeking to ensure that easement holders receive notice and
have a right to object, and to create a high standard for
condemning easements to help ensure that public use and
investment is not lightly lost.
2. Eminent domain; formal recognition of conservation easements
The Fifth Amendment of the U.S. Constitution states that a
person's private property may be taken for a "public use" if the
owner is given "just compensation." When a public entity takes
private property under this provision, the public entity is
exercising its power of eminent domain. Although existing law
codifies various rights for the owners of the property that the
public entity is seeking to acquire, those sections are
ambiguous about whether or not the holder of a conservation
easement has similar rights, even though existing law defines
those easements as a property right. The author similarly notes
that "�n]umerous provisions in the Code of Civil Procedure are
applicable by reference to the condemnation of properties
encumbered with a conservation easement, but the law is not
explicit." This bill would clarify the issue by enabling owners
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of conservation easements to receive notice, submit comments,
and potentially receive compensation if the property is taken.
Staff notes that similar provisions were enacted with respect to
wildlife conservation easements by AB 910 (Wayne, 2001).
a. Notice to holder of the conservation easement and public
entity
Prior to filing an eminent domain action in court, a public
entity seeking to acquire property by eminent domain must
generally adopt a "resolution of necessity" and, before
adopting that resolution, must give each person whose property
is to be acquired by eminent domain a reasonable opportunity
to appear and be heard. (Code Civ. Proc. 1245.235.) Those
individuals then have a forum to dispute the three
requirements that must exist for a property to be acquired by
eminent domain: (1) that public interest and necessity require
the project; (2) the project is planned or located in the
manner that will be most compatible with the greatest public
good and the least private injury; and (3) the property sought
to be acquired is necessary for the project. That entity
must also, before adopting that resolution, establish an
amount that is believed to be just compensation for the
property and make an offer to the owners to acquire the
property for that amount. That offer, which must be not less
than the entity's appraisal of the fair market value,
generally provides owners who are willing to sell with the
opportunity to do so at an early point in the process.
To ensure that holders of conservation easements are aware of
the potential eminent domain action, this bill would require
the public entity seeking to acquire the property to give a
specified notice to the holder not later than 105 days before
the hearing on the resolution of necessity, or, at the time
the entity makes an offer to the owners of the property,
whichever occurs earlier. (If no hearing is required, notice
must be given 105 days prior to the time of the offer made to
the owner.) That notice would include a general description of
the property and outline the right and responsibilities placed
on the holder of the easements by this bill, including, the
obligation to notify any interested public entities, as
specified. By receiving notice of the pending eminent domain
action, holders of conservation easements would be empowered
to become involved in the process pursuant to the provisions
described below.
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To provide notice to public entities with an interest in the
easement, the bill would also require the holder to provide a
copy of that notice to each public entity that had provided
funds for purchase of the easement or that imposed conditions
on approval or permitting of a project that were satisfied, in
whole or in part, by the creation of the easement. The holder
of the easement would also be required to notify the person
seeking to acquire the property (condemning public entity) of
the name and address of any public entity that they sent a
copy of the notice to - that notification would make the
condemning entity aware of the other public entity's interest.
The providing of that notice, and the additional rights
discussed below, would allow those entities to participate in
the eminent domain process and potentially safeguard public
funds used for that easement. Absent these provisions, the
author contends that "�t]he fact that a conservation easement
exists, that substantial public dollars have been expended to
conserve the property, or that a public agency has said that
the property's conservation advances certain public goals
�would continue to be] irrelevant to a potential condemnation
proceeding."
b. Involvement of the easement holder and public entity
To provide the holder of the easement or public entity with an
interest in the easement, with an opportunity to comment on
the proposed taking of the property, this bill would allow
those parties to provide written comments on the acquisition.
Since the conservation easement itself is arguably already a
public use, those comments may include identification of any
potential conflict between the public use proposed for the
property and the purposes and terms of the conservation
easement. Those comments must be submitted no later than 45
days from the date the person seeking to acquire the property
mailed the notice to the holder of the conservation easement.
To ensure that those comments are received, and arguably
considered, the bill would require the person seeking to
acquire the property to respond in writing within 30 days
after receiving the comments.
The bill would also require that the holder of the easement,
and any public entity receiving a copy of the notice, be sent
a notice of the hearing on the resolution of necessity. The
adoption of that resolution is generally a prerequisite for
filing an eminent domain action, and serves to provide a
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public forum for interested parties to object and challenge
the bases for the resolution. The California Outdoor Heritage
Alliance (COHA), in support, further emphasizes that the bill
"would not prohibit condemnation�,but] would help to ensure a
more comprehensive analysis of the potential impacts to
wildlife and other natural resources found on the property
subject to the easement."
Consistent with the rights of the owner of the property, and
those with a claim or interest in the property, the bill would
require the holder and interested public entity to file a
written request to be heard within 15 days after notice of the
hearing on the resolution of necessity, require the holder of
the easement to be named as a defendant, and permit the holder
to appear in the proceedings, as specified. The bill would
also state that the holder of the conservation easement shall
have the same rights and obligations as any other defendant in
the eminent domain proceeding.
3. Compensation requirements
Pursuant to the federal and state Constitutions, property cannot
be taken for public use without just compensation. The Eminent
Domain law further states that the owner of property acquired by
eminent domain is entitled to compensation, that compensation
shall be awarded for any property taken, and that the measure of
that compensation is fair market value, as specified. This bill
would additionally state that the holder of a conservation
easement is an owner entitled to compensation under the Eminent
Domain Law in accordance with accordance with three principles:
(1) the total compensation of all interests shall not be less
than, nor exceed, the fair market value of the property as if it
were not encumbered by the easement; (2) if the acquisition does
not damage the easement, the total compensation shall be
assessed by determining the value of all interests in the
property; and (3) if the acquisition damages the conservation
easement, compensation shall be determined consistent with the
Eminent Domain law, and the value shall be assessed as if it
were not encumbered by the easement.
The sponsor notes that it is necessary to specify that the
easement holder is entitled to compensation because situations
have arisen where public agencies have argued that no
compensation should be paid to the easement holder because the
property is actually worth less after the easement was put in
place. Although conservation easements are negative rights (ie.
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restrictions on the use of the property), significant funds may
have been expended to purchase that easement, and those
easements are arguably worth the amount the encumbrance
diminishes the value of the underlying parcel of land.
The sponsor provides the following example of how the valuation
would work under this bill in a circumstance where both the fee
title and conservation easement are condemned: If a property
that has an appraised value of $1 million dollars and the
easement is valued at $400,000, the condemning agency may want
to use an appraisal based on the encumbered value of the
property, $600,000 ($1,000,000 - $400,000), and contend that
that fee title holder and easement holder should split the
$600,000. The sponsor asserts that, instead, the compensation
should reflect the total unencumbered value of the property
($1,000,000), with the fee title holder and easement holder
splitting that amount according to the relative values of their
property rights. Accordingly, the bill seeks to ensure that, in
the above situation, the compensation would be $1,000,000, not
$600,000.
4. Veto of SB 555 (Kehoe, 2009)
This bill is identical to the enrolled version of SB 555 (Kehoe,
2009) that was vetoed due to concerns that it could delay
infrastructure projects. Specifically, the Governor stated:
While protecting the value of conservation easements is a
noble endeavor, this measure unintentionally provides
opponents of controversial infrastructure projects another
tool to impede or discourage vital public infrastructure
planning and development in energy, water, and
transportation which are crucial for our state's job growth
and economic well-being.
Despite those concerns, the author notes that SB 328 represents
a compromise product and that: "There were a number of groups
who had concerns about SB 555 in 2009 and some initially opposed
the bill. We worked very hard with stakeholders throughout the
session so that by the time we reached the final enrolled
version, virtually all initially concerned were either
supporting the bill or had gone neutral. We checked in with
those we worked with in 2009 and so far no one has raised any
concerns." Although the Committee has received no opposition
letters as of the time of writing this analysis, the author
notes that the County of Orange "opposed the introduced version
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of �SB 555], and although the bill changed radically over the
course of the session, the county never withdrew its
opposition."
Support : Amargosa Land Conservancy; American Land Conservancy;
American River Conservancy; Bay Area Open Space Council; Bay
Area Ridge Trail Council; Big Sur Land Trust; Bolsa Chica Land
Trust; Catalina Island Conservancy; California Outdoor Heritage
Alliance; Center for Natural Lands Management; East Bay
Municipal District (EBMUD); Eastern Sierra Land Trust; Lake
County Land Trust; Land Trust for Santa Barbara County; Land
Trust of Santa Cruz County; Lassen Land and Trails Trust; Marin
Agricultural Land Trust; Mendocino Land Trust; Pacific Forest
Trust; Palos Verdes Peninsula Land Conservancy; Placer Land
Trust; Redwood Coast Land Conservancy; Sacramento Valley
Conservancy; San Diego County Water Authority; San Joaquin River
Parkway and Conservation Trust; Sequoia Riverlands Trust;
Sierra-Cascade Land Trust Council; Solano Land Trust; Southern
California Open Space Council; Transition Habitat Conservancy;
Trust for Public Land; Wildlife Heritage Foundation
Opposition : None Known
HISTORY
Source : California Council of Land Trusts
Related Pending Legislation : None Known
Prior Legislation :
SB 555 (Kehoe, 2009), see Comment 4.
AB 910 (Wayne, Chapter 863, Statutes of 2001), prohibited a
governmental entity from condemning any wildlife conservation
easement acquired by another state agency, except as provided.
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