Protect Your Land: Understanding Your Options

Many vital ecosystems exist on privately owned land. For landowners who want to preserve the natural features of their property, there are two main legal mechanisms available: conservation covenants and land donation. Each option has different implications for ownership, use, and taxation.

Conservation Covenants

What is a Conservation Covenant?

A conservation covenant is a legal agreement that permanently protects specific natural features on your property. It is registered on the land title and remains in effect even when the property is sold or transferred to heirs.

How It Works

Under a conservation covenant, you retain full ownership of your land. You continue to live on the property and can sell it or pass it to your heirs at any time. However, you agree to certain restrictions on how the land can be used in order to protect its natural features. These same restrictions apply to all future owners.

The covenant is held by a conservation organization such as the Pender Islands Conservancy or Islands Trust Conservancy. This organization is legally responsible for monitoring the property regularly to ensure the natural features remain protected. If a future owner violates the covenant terms, the conservation organization has the legal authority to enforce compliance.

Flexibility in Coverage

You can choose to place a covenant on your entire property or only on specific portions of it. This allows you to protect natural areas while retaining the ability to use or develop other parts of your lot as you wish.

Financial Considerations

Conservation covenants involve both costs and potential benefits. There are costs associated with establishing the covenant, and landowners should research the specific financial implications for their situation. Resources are available from Island Trust Conservancy, Habitat Acquisition Trust, and the Land Trust Alliance of BC that provide detailed information about these financial considerations.

Donating Your Land

What Land Donation Means

Land donation involves transferring ownership of your property to a registered land trust such as the Pender Islands Conservancy or Islands Trust Conservancy. Once donated, the land trust becomes the legal owner and is responsible for protecting and managing the property according to a conservation plan.

Key Differences from Covenants

Unlike a conservation covenant where you retain ownership, donating land means you transfer ownership entirely. The land trust takes on responsibility for the property's long-term stewardship. If you have ecologically significant land that you want permanently protected but no longer wish to own or manage, donation may be an appropriate option.

Conservation Planning

When land is donated, a conservation plan can be developed to guide how the property will be managed in the future. This plan reflects the donor's vision for the land while ensuring its ecological features are maintained.

Where to Learn More

Detailed information about land donation processes is available from Island Trust Conservancy. the Government of Canada's Ecological Gifts Program and we are always happy to talk with you about the process.

Understanding Tax Benefits

The tax implications of land protection can be complex. Here is how the process generally works in British Columbia:

Step 1: Appraisal

The land must be professionally appraised to determine its current fair market value. BC assessors are required to consider any conservation agreements when determining property value, which means a covenant may affect the assessed value.

Step 2: Charitable Tax Receipt

If the land qualifies as capital property, the donor can receive a charitable tax receipt. The receipt amount can be any value between what you originally paid for the land and its current appraised fair market value.

Step 3: Capital Gains

When you donate land (other than your principal residence), you may trigger a capital gain. A capital gain is the difference between what you paid for the land and its current value. For regular land donations, 50% of the capital gain must be included as taxable income in the year you make the donation. For donations that qualify under the federal Ecological Gifts Program, only 25% of the gain is included as taxable income.

Step 4: Applying the Tax Receipt

The charitable tax receipt can be used to offset your taxable income. For regular donations to registered charities, you can offset up to 75% of your income in the first year. For Ecological Gifts, you can offset up to 100% of your income. Any unused portion of the receipt can be carried forward and applied over the next five years.

In most cases, the tax benefit from the charitable receipt exceeds the tax owed on the capital gain.

Step 5: Other Tax Implications

In British Columbia, there is no land transfer tax when registering conservation covenants or donating land to registered charities. Land held by charities may also qualify for property tax reductions.

Land donations may affect other tax credits and benefits such as GST credits, pension income calculations, and nonrefundable tax credits. It's important to understand these implications before proceeding.

Estate Planning Note

Charitable donations made in the year of death (through a bequest in your will) can be used to offset up to 100% of the deceased's income, which can provide significant tax benefits for the estate.

Important Considerations

Tax rules are complex and change over time. The information provided here is general in nature. Before making decisions about land protection, consult with a qualified tax professional or financial advisor who can assess your specific situation and provide advice tailored to your circumstances.