The VAD/EVAD Conservation Agreement Requirement
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[Farm Law editor’s note: the following piece is in draft pending academic peer review, and written as part of the series Farm Law: Owning, Managing and Transferring Farm Interests, sponsored by the North Carolina Tobacco Trust Fund Project # #583400-10363. Comments to firstname.lastname@example.org are welcome. For this paper with citations, see this document]
One of the three requirements for enrollment of a parcel of land in a Voluntary Agricultural District (VAD) or Enhanced Voluntary Agricultural District (EVAD) is the execution of a conservation agreement by the landowner. The form of conservation agreement is not specific to the VAD ordinance and generally describes an agreement by the landowner to restrict certain activities on the land for a term.
The conservation agreement is defined by statute as:
“[A] right, whether or not stated in the form of a restriction, reservation, easement, covenant or condition, in any deed, will or other instrument executed by or on behalf of the owner of land or improvement thereon or in any order of taking, appropriate to retaining land or water areas predominantly in their natural, scenic or open condition or in agricultural, horticultural, farming or forest use…”
Such conservation agreements are distinguished from conservation easements, which under North Carolina statute mirror the federal definition in the Internal Revenue Code, which requires perpetuity. (The concept of “perpetuity” means that there is no current legal avenue whereby the parcel becomes free of the restrictions imposed by the conservation easement.) While there are two additional requirements for an enrolled VAD/EVAD parcel, this short paper focuses on the conservation agreement requirement.
Term and Revocability
As a baseline, a conservation agreement has a standard term of ten (10) years in both VAD and EVAD enrollments. The VAD agreement is revocable at the election of the landowner. Though the statute is silent on the form of revocation, it is presumed such revocation be in writing in that it involves a real property interest per North Carolina’s statute of frauds. Unlike an EVAD agreement (see below), a VAD conservation agreement has no required automatic renewal period, and because the statute requires “at least” a 10-year term, some counties elect to add an automatic renewal in their ordinance and agreement.
Conservation agreements executed for enrollment in an EVAD are irrevocable for a 10 year term with an automatic 3 year renewal period. Unlike the VAD agreement, the landowner must affirmatively notify the county holder of the agreement that the agreement must terminate at the expiration of the 10-year term to prevent the 3-year automatic renewal term. This notice – presumably in writing – must be given in a “timely manner… as prescribed in the ordinance,” so counties have discretion as to the notification period when drafting or revising the ordinance. Though landowners should be familiar with this period, counties should consider placing the notification period in the agreement itself. Without notification, the agreement by statute automatically renews for a period of three (3) years.
EVAD conservation agreements are not easily modified, and the county (the holder of the agreement) is without unrestricted authority to modify or allow early termination of the agreement, even in the event of greater economic opportunity (including increased tax revenue) from the parcel. This raises the question: under what circumstances can a conservation agreement be revoked or modified?
Because the VAD/EVAD enabling statute points to a separate General Statute Chapter 121 to define “conservation agreement,” it follows that the provisions of that chapter apply to termination of such EVAD agreements which are irrevocable for a set statutory term (10 years). (Again, one assumes a VAD agreement is revocable because the VAD enabling statute specifically says so.) Under N.C.G.S. §121-39.1, a specific process is prescribed for modifying or terminating conservation agreements, though a county body cannot circumvent the process described below.
To modify an agreement or terminate “prior to the period of time stipulated in the agreement,” the landowner with EVAD enrolled land would approach the farmland preservation advisory board (however such body is titled under the VAD/EVAD ordinance; here, “farm preservation board”) (or vice versa) with request for early termination or modification of agreement such as removal of some acreage from the agreement. That body is then required by statute to conduct a “conservation benefit analysis.” The farm preservation board has discretion to design the form of analysis, but is restrained from allowing any modification (including termination) that fails to increase the conservation benefit of the tract as currently enrolled.
If such an analysis demonstrates that the modification improves the conservation benefit, the farm preservation board reports the results to the Council of State, the body established by the NC Constitution of elected state agency heads (including the governor, lieutenant governor, and commissioners of agriculture, insurance, education, etc.). The Council has “the final decision” on the modification, one would assume by majority vote. It would appear the Council is similarly constrained in its decision to produce an increase in conservation benefit, though the statute does not specifically so state.
Therefore, while EVAD 10 year-irrevocable conservation agreements are in theory terminable or subject to modification before the end of their term (or automatic 3 year renewal), the process appears to be steep. As such, landowners cannot easily expect land to be removed in the event a lucrative commercial, industrial or development opportunity arises. (Without further analysis, it is not immediately clear who would have legal standing to challenge a farm preservation board decision or Council of State vote to early terminate or remove acreage from a conservation agreement.)
(An interesting research calculation would be – based on a carbon equation of conservation benefit -,would be whether a potential solar PV facility could – under a conservation benefit analysis – be shown to allow a better savings in net carbon output relative to the land as fallow, in forest management or under cultivation.)
Form of Agreement and Recording
A brief review of county VAD/EVAD programs reveal several approaches to the conservation agreements. Some counties record (with the Register of Deeds) a stand-alone document executed by the landowner. Other counties may require a stand-alone document but refrain from recording it, simply keeping it on file. Others consolidate the conservation agreement language as executed and agreed in the same document by which a landowner applies for enrollment in a VAD or EVAD. Program administrators may opt for this last option as it requires less paperwork for the landowner.
While the enabling statute does not specify the form, it is clear that conservation agreements for VAD-enrolled land need not be recorded, though an EVAD agreement (irrevocable) must be recorded. Therefore, for EVAD conservation agreements, a stand-alone document is required in the form of a recordable instrument per state statute, as follows:
(1) Be eight and one-half inches by eleven inches or eight and one-half inches by fourteen inches. (2) Have a blank margin of three inches at the top of the first page and blank margins of at least one-half inches on the remaining sides of the first page and on all sides of subsequent pages. (3) Be typed or printed in black on white paper in a legible font. A font size no smaller than 9 points shall be considered legible. Blanks in an instrument may be completed in pen and corrections to an instrument may be made in pen. (4) Have text typed or printed on one side of a page only. (5) State the type of instrument at the top of the first page.
An EVAD conservation agreement that does not meet these criteria may nonetheless be recorded after payment of a non-conforming document fee payable to the Register of Deeds. An example of a stand-alone conservation agreement (for a VAD) may be found in the Granville County Register of Deeds at Deed Book 1809, Page 166 (viewable pdf here). Arguably, a tract purported to be enrolled in an EVAD with an unrecorded agreement is not enrolled in an EVAD, but may qualify as a VAD-enrolled parcel.
In the event VAD/EVAD conservation agreement language is incorporated into the initial application, it is advisable to follow the statutory language defining such agreements. Also required will be the initial term of ten (10) years. Though VAD conservation agreements do not have an automatic renewal, some counties choose to add this language. And though EVAD conservation agreements have an automatic renewal unless earlier terminated prior to their 10-year term, such automatic renewal should be included in the agreement language.
One question that emerges is whether a VAD or EVAD enrollment “runs with the land.” This term refers to the common law principle that a disposition of real property interest relates to the property itself, and not to the owner (unless such limitation is specifically stated in the written instrument.) Under this principle, a subsequent owner of real property is bound by the restriction agreed by the previous owner. North Carolina common law suggests that for a restriction or some other disposition to run with the land against a subsequent purchaser, the instrument must be recorded in the chain of title for that real property, and thus be enforceable against subsequent purchasers. Whether a VAD conservation agreement runs with the land is less clear, though if recorded such argument would be stronger. Because an EVAD conservation agreement must be recorded, the restriction very likely runs with the land regardless of who holds title during the 10-year term (and automatic renewal if applicable).
Proposed Agreement Language on Enrollment Form
The example provided above of a stand-alone agreement (Granville County) serves as a good example of such an approach by the farmland preservation board. Given the recording requirement for EVADs, this approach is recommended in the form prescribed by the statute for recordable instruments.
For counties choosing the “application approach,” it is advisable to a) only use this with VAD enrollments, and b) follow the statutory language describing conservation agreements. A proposed example of such language – placed immediately above the landowner’s signature – read as follows:
We the landowner(s) hereby certify that the information in this application is correct to the best of our knowledge and the public record. And that we have agreed by our signature below that we will retain land or water areas predominantly in their natural, scenic or open condition or in agricultural, horticultural, farming or forest use, and agree to refrain from any or all of the following: (i) construction or placing of buildings, roads, signs, billboards or other advertising, utilities or other structures on or above the ground, (ii) dumping or placing of soil or other substance or material as landfill, or dumping or placing of trash, waste or unsightly or offensive materials, (iii) removal or destruction of trees, shrubs or other vegetation, (iv) excavation, dredging or removal of loam, peat, gravel, soil, rock or other mineral substance in such manner as to affect the surface, (v) surface use except for agricultural, farming, forest or outdoor recreational purposes or purposes permitting the land or water area to remain predominantly in its natural condition, (vi) activities detrimental to drainage, flood control, water conservation, erosion control or soil conservation, or (vii) other acts or uses detrimental to such retention of land or water areas.
We further certify that (parcel) is ___ is not ___ considered highly erodible land (HEL) by the Soil Conservation Service (e.g. Natural Resources Conservation Service or NC Soil & Water Conservation District). If the parcel is designated HEL, a management plan approved by the Soil Conservation Service is attached.
This agreement will terminate ten (10) years from the date of signature below. Unless terminated in writing prior to the end of the 10-year term, this agreement shall automatically renew for a period of three (3) years. Landowner may terminate at any time with written notice.
With the above language, the landowner could strike the “3-year renewal” language, which will terminate the agreement at the end of 10 years without any further action. A landowner could also easily negate a 3-year renewal in an EVAD agreement by insisting that the agreement terminates at the expiration of 10 years without further action by the landowner.
Without a conservation agreement executed by the landowner, a tract of land does not qualify for VAD or EVAD status and benefits (per the ordinance), and if a county program is lacking either an application-based conservation agreement or a stand-alone document in its program, while the ordinance remains valid, there is no enrolled acreage.
From the enabling statute, we know that EVAD conservation agreements must be recorded, and should conform to the requirements of a recordable instrument under state statute. The EVAD recorded conservation agreement is sufficient to provide notice in the chain of title for the restriction to run with the land against a subsequent purchaser.
Because the process for early termination or modification of an EVAD conservation agreement is so steep, a landowner should consider the agreement truly irrevocable, and should carefully consider whether their plans for the future or possible more lucrative uses of sales of the land can withstand a set 10 (or possibly 13) year term.
Relevant Statutory Provisions
Below are the relevant statutory provisions upon which the above narrative is based:
§106-737. Qualifying farmland.
In order for farmland to qualify for inclusion in a voluntary agricultural district or an enhanced voluntary agricultural district under Part 1 or Part 2 of this Article, it must be real property that:
(1) Is engaged in agriculture as that word is defined in G.S. 106-581.1.
(2) Repealed by Session Laws 2005-390, s. 11 effective September 13, 2005.
(3) Is managed in accordance with the Soil Conservation Service defined erosion control practices that are addressed to highly erodible land; and
(4) Is the subject of a conservation agreement, as defined in G.S. 121-35, between the county and the owner of such land that prohibits nonfarm use or development of such land for a period of at least 10 years, except for the creation of not more than three lots that meet applicable county and municipal zoning and subdivision regulations. (1985 (Reg. Sess., 1986), c. 1025, s. 1; 2005-390, ss. 3, 11; 2011-219, s. 1.)
Subject to any additional definitions contained in this Article, or unless the context otherwise requires:
(1) A “conservation agreement” means a right, whether or not stated in the form of a restriction, reservation, easement, covenant or condition, in any deed, will or other instrument executed by or on behalf of the owner of land or improvement thereon or in any order of taking, appropriate to retaining land or water areas predominantly in their natural, scenic or open condition or in agricultural, horticultural, farming or forest use, to forbid or limit any or all (i) construction or placing of buildings, roads, signs, billboards or other advertising, utilities or other structures on or above the ground, (ii) dumping or placing of soil or other substance or material as landfill, or dumping or placing of trash, waste or unsightly or offensive materials, (iii) removal or destruction of trees, shrubs or other vegetation, (iv) excavation, dredging or removal of loam, peat, gravel, soil, rock or other mineral substance in such manner as to affect the surface, (v) surface use except for agricultural, farming, forest or outdoor recreational purposes or purposes permitting the land or water area to remain predominantly in its natural condition, (vi) activities detrimental to drainage, flood control, water conservation, erosion control or soil conservation, or (vii) other acts or uses detrimental to such retention of land or water areas.
(2) “Holder” means any public body of this State, including the State, any of its agencies, any city, county, district or other political subdivision or municipal or public corporation, or any instrumentality of any of the foregoing, any agency, department, or instrumentality of the United States, any nonprofit corporation or trust, or any private corporation or business entity whose purposes include any of those stated in (1) and (3), covering the purposes of preservation and conservation agreements.
(3) A “preservation agreement” means a right, whether or not stated in the form of a restriction, reservation, easement, covenant, condition or otherwise, in any deed, will or other instrument executed by or on behalf of the owner of the land or any improvement thereon, or in any other [order] of taking, appropriate to preservation of a structure or site historically significant for its architecture, archaeology or historical associations, to forbid or limit any or all (i) alteration, (ii) alterations in exterior or interior features of the structure, (iii) changes in appearance or condition of the site, (iv) uses not historically appropriate, or (v) other acts or uses supportive of or detrimental to appropriate preservation of the structure or site. (1979, c. 747, s. 2; 1995, c. 443, s. 1.)
§106-737.1. Revocation of conservation agreement.
By written notice to the county, the landowner may revoke this conservation agreement. Such revocation shall result in loss of qualifying farm status. (1985 (Reg. Sess., 1986), c. 1025, s. 1; 2005-390, s. 3.)
§106-743.2. Conservation agreements for farmland in enhanced voluntary agricultural districts; limitation.
A conservation agreement entered into between a county or city and a landowner pursuant to G.S. 106-743.1(a)(2) shall be irrevocable for a period of at least 10 years from the date the agreement is executed. At the end of its term, a conservation agreement shall automatically renew for a term of three years, unless notice of termination is given in a timely manner by either party as prescribed in the ordinance establishing the enhanced voluntary agricultural district. The benefits set forth in this Part shall be available to the farmland that is the subject of the conservation agreement for the duration of the conservation agreement. (2005-390, s. 5.)
§121-41. Public recording of agreements.
(a) Except as provided in subsection (c) of this section, conservation agreements shall be recorded in the office of the Register of Deeds of the county or counties in which the subject land or improvement is located, in the same manner as deeds are now recorded.
(b) Releases or terminations of such agreements shall be recorded in the same waiver. Releases or terminations, or the recording entry, shall appropriately identify by date, parties, and book and pages of recording, the agreement which is the subject of the release or termination.
(c) A conservation agreement entered into for the purpose of enrolling real property in a voluntary agricultural district pursuant to G.S. 106-737(4) is not required to be recorded unless such conservation agreement is irrevocable as provided pursuant to G.S. 106-743.2. (1979, c. 747, s. 8; 2011-219, s. 2.)
§121-39.1. Termination or modification of agreements.
(a) Easements secured by the Agricultural Development and Farmland Preservation Trust Fund, including perpetual agricultural conservation easements and forest land easements, military base protection and flyway easements regardless of funding source, or any other agricultural conservation easement that has been secured, in whole or in part, with federal funds and where at least one party to the agreement is a public body of this State, shall not be terminated or modified for the purpose of economic development.
(b) Prior to any modification or termination of a conservation agreement where at least one party to the agreement is a public body of this State, the agency requesting the conservation agreement modification or termination shall conduct a conservation benefit analysis. The criteria for the conservation benefit analysis shall be established by the agency requesting the conservation agreement modification or termination. Conservation agreements may only be modified or terminated if the conservation benefit analysis concludes that the modification or termination results in a greater benefit to conservation purposes consistent with this Article.
(c) The conservation benefit analysis conducted by the requesting agency shall be reported to the Council of State prior to the vote of the Council of State on the final decision to modify the agreement.
(d) Notwithstanding any authority given to a public body of this State, including the State, any of its agencies, any city, county, district or other political subdivision, municipal or public corporation, or any instrumentality of any of the foregoing, to release or terminate conservation easements under other law, this section shall apply to conservation agreements that are intended to be effective perpetually or that are terminated or modified prior to the period of time stipulated in the agreement, and where at least one party to the agreement is a public body of this State, including the State, any of its agencies, any city, county, district or other political subdivision, municipal or public corporation, or any instrumentality of any of the foregoing.
(e) Parties to a conservation agreement may include a provision at the time an agreement is executed requiring the consent of the grantor or the grantor’s successors in interest to terminate or modify the agreement for any purpose.
(f) Any agency managing a conservation agreement program may adopt rules governing its procedure for termination or modification of a conservation agreement, provided that any such rules may be no less stringent than the requirements of this section.
(g) This section shall not apply to a condemnation action initiated by a condemnor governed by Article 6 of Chapter 40A of the General Statutes or to a voluntary termination or modification affecting no more than the lesser of two percent (2%) or one acre of the total easement area of the conservation agreement when requested by a public utility, the Department of Transportation, or a government entity having eminent domain authority under Article 3 of Chapter 40A of the General Statutes. (2015-263, s. 13(a); 2017-108, s. 14.)
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