Standard 9: Ensuring Sound Transactions
The land trust works diligently to see that every land and conservation agreement transaction is legally, ethically and technically sound.
Background
A land trust usually intends to protect the property it conserves in perpetuity. To help secure the perpetual conservation of land, its transactions must hold up over time and withstand challenges. Sound transactions rely on the land trust performing “due diligence” in its transaction steps. Land trust representatives need not be lawyers, but they must have good legal advice, and they should familiarize themselves with basic principles of real estate and tax law. The land trust should draw a landowner’s attention to issues that must be addressed as the transaction proceeds. However, a land trust should not represent itself as giving specific legal or financial advice; a landowner’s own advisors should do that. A land trust may have to call on other financial and technical experts in order to complete the transaction. Carefully documenting the steps a land trust takes in performing its due diligence can help secure the perpetual conservation of the property.
Relevant Law
- Property Law Act, RSBC 1996, c. 377, s. 35.
- Land Title Act, RSBC 1996, c. 250, s. 218-223.
- Canada Revenue Agency policy interpretation of Income Tax Act, SC 1985, c. I; see:
- Environmental Management Act, SBC 2003, c. 53, s. 40
- Contaminated Sites Regulation, BC Reg. 375/96, as am., s. 3.
- Land Title Act, RSBC 1996, c. 250, Parts 10 and 10.1
- Canada Revenue Agency policy interpretation of Income Tax Act, SC 1985, c. I;
see Income Tax Technical News No. 26 at:
- Taxation (Rural Area) Act, RSBC 1996, c. 447.
- School Act, RSBC 1996, c. 412.
- Police Act, RSBC 1996, c. 367.
- Property Transfer Tax Act, RSBC 1996, c. 378.
- Social Service Tax Act, RSBC 1996, c. 431.
PRACTICE
K. Selling Land or Conservation Agreements
When the land trust sells land or conservation agreements, it first documents the important conservation values, plans the project according to practice 8G, and drafts protection agreements as appropriate to the property. The land trust obtains a qualified independent appraisal that reflects the plans for the project and protection agreements and justifies the selling price. (The land trust may choose to obtain a short narrative from a qualified real estate professional in the limited circumstance when a property has a very low economic value.) The land trust markets the property and selects buyers in a manner that avoids any appearance of impropriety and preserves the public’s confidence in the land trust, and in the case of selling to an insider follows practice 4C. Land held under the Ecological Gifts Program requires special permission from Environment Canada prior to any changes in status. (Also, see 6H for sales of other assets.)
Background
This practice specifies that when a land trust sells land it should first evaluate every property for its important conservation values, and design protections (such as conservation agreements) accordingly (see 8G). Once the protection strategy has been determined, the land trust should then obtain a qualified independent appraisal (or, if the property has extremely low economic value, a short narrative). The land trust should market its conservation properties to ensure that the land trust receives a fair price and has the best potential stewards of the property, and to retain public trust and credibility. The goal of marketing is to reach as many potential conservation buyers as possible. Land trusts have increased ability to target marketing to conservation buyers via the Internet and tailored databases, eliminating the need to list a property with a real estate broker. This practice is further clarified in 4C when insiders may be involved in the transaction. For Ecological Gifts, Environment Canada must authorize disposition in order for the recipient to avoid penalty provisions as per section 207.31 of the Income Tax Act. See also 6H.
Assessment Questions
BC Assessment Questions
- Does the land trust have a policy on selling land or covenants?
- If a land trust is considering selling land, does it first identify, evaluate and document the conservation values of the land?
- Does the land trust develop a specific plan to protect the conservation values of the property prior to any sale?
- Does the land trust use a conservation covenant to protect the conservation values of the property prior to a sale?
- If the land trust sells land to a private individual, does it commission a current appraisal so as to not sell for less than Fair Market Value?
- Does the land trust follow it’s conflict of interest policy when selling land or covenants?
- Is the sale of any property consistent with the intent of the donor of the property, or in the case of purchased land, of the contributors to its purchase?
- Does the land trust evaluate the public perception of any proposed sale of land, both to the individual land trust, but also to the land trust community in BC?
CLTA Assessment Questions
- When selling land or conservation agreements, the land trust (check all that apply):
- Documents the important conservation values of the property
- Plans the project according to practice 8G and drafts appropriate protection agreements
- Obtains a qualified independent appraisal
- Markets the property to ensure that the land trust receives a fair price, has the best potential stewards of the property, and to retain public trust and credibility
