Purchase of Development Rights ProgramsBy: Breana Behrens
Many municipalities have programs that enable them to purchase development rights from private landowners. Municipalities have an interest in purchasing your development rights to keep open space, farmland, or forestland from being developed. Development costs cities and towns money through infrastructure costs (roads, water, sewage, etc.) and maintaining public services (schools, police, etc.).
Property owners have a multitude of different rights that come with owning property. These rights are sometimes referred to as a bundle of sticks. The right to develop your property is one of the sticks in the bundle. When you sell this right you can still pass your property to your heirs, mortgage it, and do various other actions on your land such as farming or timber harvesting, but you cannot develop or subdivide it.
When a municipality purchases your development rights, it places a conservation easement
on your property. Depending on whether the rights are bought outright, through a bargain sale, or you donate those rights will depend on whether you will qualify for a federal charitable tax deduction. The outright sale of your property, while it will not provide a tax credit, will put cash in your pocket.
Private landowners of working landscapes tend to be land rich and cash poor, which makes it difficult to reinvest in your business or pass your estate to multiple heirs. By selling your development rights, you will obtain cash to distribute to heirs that may not be interested in participating in the family business. As a bonus, it will protect the viability of the farm, ranch, or forest and will ensure that the property remains in this use for generations to come!