How Landowners Can Protect Property Before Development Takes Over

Keith Fountain (00:00)
the biggest issue in Florida is this. So we, ⁓ we have a program or a funding mechanism that went to the Florida voters in 2014. And it was a constitutional amendment to provide that one third of our documentary stamp tax revenues. So that’s the, that’s the tax on deeds and other conveyances, a real property that one

One third of that revenue, which is substantial in Florida, ⁓ would go into ⁓ land conservation in some way, shape, or form.

Michelle Kesil (02:07)
everybody, welcome to the Real Estate Pros podcast. I’m your host, Michelle Kesil, and today I’m joined by someone I’m looking forward to chatting with, Keith Fountain, who has been involved with conservation, real estate, and strategies throughout the Florida area. So really excited to have your expertise around the legislative and conservation approaches that people can take.

Thank you for coming on the show today.

Keith Fountain (02:39)
Thank you for the invitation, Michelle.

Michelle Kesil (02:41)
Great,

let’s dive in. First off, for those not familiar with you and your work yet, can you share what your main focus is these days?

Keith Fountain (02:50)
So I am ⁓ a small one-person law firm that has a very niche practice here in Florida in that I only do conservation real estate transactions, ⁓ which means that the vast majority of my clients are either agricultural operators, oftentimes agricultural families, or what I would characterize as more wealthy

individuals that own

recreational or natural or agricultural type lands in Florida. ⁓ I’ve been doing this for over 33 years now, not always as an attorney. ⁓ I’ve had a very circuitous professional path, ⁓ but I’ve wound up in a place where I feel I’m very, very fortunate. I tell people that I’m one of the luckiest attorneys I know and that I love my practice. My practice has outcomes that are good.

for Florida and its citizens and I really like most all my clients. So I don’t know that many attorneys can say that. ⁓ My background includes probably 19 years in the nonprofit sector, not as an attorney, but as a deal maker in conservation. And that’s really where I cut my teeth and made my name known and got to know the contacts that I utilize today for my clients.

Michelle Kesil (04:16)
Yeah, amazing. Can you explain more about what conservation means and what type of specific clients or transactions this involves?

Keith Fountain (04:32)
Well, so everything that I do is geared towards conservation or towards protecting long-term and perpetuity lands of environmental significance or lands of agricultural significance here in Florida. And again, I’m a Florida attorney, so this conversation is going to be very Florida-based today. Here in Florida, we’re very, very fortunate since 1990 to have,

and political leadership and citizens in the state of Florida that are very, very supportive of robust funding programs to protect Florida’s environment and agricultural lands. And we have two, what I would call marquee programs here in the state of Florida. One of them is called Florida Forever. And that is a program that is geared towards buying land and buying conservation easements on lands in the state.

that have high environmental value. And then we have a second program which originated in the first decade I guess of the 2000s which is called the Rural and Family Lands Protection Program and it is geared towards protecting agricultural lands that are threatened by conversion to other uses. Here in Florida that means residential development as we have more and more people coming into this state.

Florida is the third most populous state in the Union and we continue to grow rapidly. So that program is geared towards saving agricultural land. That program also only does conservation easements. In this conversation kind of breeds the question for your audience, what is a conservation easement? In terms of what we’re doing here in Florida, it is where a landowner grants a partial interest, not the entire fee sample interest like when you

you sell your house or you sell your office building, but a partial interest to a qualified organization, which is typically a state agency or a nonprofit organization, which is stripping the land of your ability to do development that’s going to damage the agriculture or environment. this instrument is stripping away your ability to do industrial, non-agricultural commercial uses, what I like to call retail. ⁓

residential development, DR Horton type developments, is keeping the landowner retains ownership of the property and they retain the ability to do certain types of agriculture that are negotiated during the Eastman acquisition process. They usually are continue to be able to ⁓ hunt on their property, fish on their property, do what I would call light outdoor recreation and things like that.

And for our legislative leaders, the other thing that’s very important is this. So if you’re looking at environmental lands in the state, if you buy the lands, they come off the property tax rolls, and government has to pay to manage those lands. With these conservation easements, the landowner retains ownership of the land. It remains in economic productivity. And the landowner is responsible for paying property taxes and managing the natural resources.

Michelle Kesil (08:51)
Amazing. And so I know when we chatted before you also mentioned the tax benefits of such strategies. Can you dive deeper into what that looks like?

Keith Fountain (09:05)
Yes, so what I’ve been describing, and most of my clients are trying to sell these conservation easements. And first of all, with regard to my practice, I would say 95 % of my clients are doing conservation easements. They’re not looking to sell their land or donate their land.

But most of my clients are trying to sell these easements and get money. And we can talk about the money reasons next. But ⁓ a properly crafted conservation easement that complies with the IRS code and Treasury regulations, and I cannot emphasize that enough, ⁓ may be eligible for an income tax deduction, a charitable contribution on your income tax return. And I do have clients. I have one or two every

it seems like, that want to donate a conservation easement, mainly because, typically because they have land that is just of such, they have such passion for its environmental characteristics that they want to see it protected forever in perpetuity. So they’re doing it to protect the resource, but then they’re also looking to get the charitable contribution benefits. And when we were talking before we started on this, I think I told you that the largest transaction I have ever

done in terms of value and acres was a charitable contribution. It was the gift of a conservation easement to a nonprofit organization.

and then the gift of the fee simple interest or the underlying ownership of the property to the University of Florida Foundation. And the simple background on that project was that the landowner wanted this 27,000 acres to be managed by the university as an agro-ecology research platform.

But you give a gift like that, people are often suspect, well, how do I know that the school will use it for that purpose forever? And so one way to guarantee that is to encumber it first with this conservation easement, which guarantees those uses in perpetuity. And that was my largest transaction ever.

Michelle Kesil (11:56)
Well, amazing. And yeah, you mentioned more about the taxes and the financial pieces and components of these ⁓ easements. Can you dive deeper into that?

Keith Fountain (12:11)
Yeah, so I often tell people I give a lot of presentations on conservation easements around the state. And what I find is most all of my clients, virtually all of my clients, are doing these transactions for a combination of two reasons. And I lump these reasons into two categories. ⁓ Financial and the latter is what I call legacy. So you’re asking about the financial side. So what are these families doing?

They’re selling these easements. And I’m just going to throw out a very generic number here. But if you’ve got a property that’s worth $10 million, you may be able to sell this easement for $5 million. So what are they doing in these transactions? Well, for these agricultural operations and families, they’re using the money. Sometimes they’ll use it to pay off debt. Sometimes they’ll use it to expand their agricultural operations. A lot of them do 1031.

deferred tax exchanges and they’ll go buy more ag land for their operation or they’ll diversify and go buy other types of investment property like commercial real estate. They’ll take these proceeds and they may go buy out disinterested or untrusted family members. One of the things we see with some of Florida’s ranching families and these are legacy families, you know, they’re in their fifth, sixth, seventh generations of ownership. And you know, as you’re passing this property down through success,

generations, ⁓ you’ve got more more children that aren’t interested in doing this. And so they’ll use the proceeds from these transactions to buy out some of those people that are now often shareholders or members in the family business entity. And of course, the income tax deduction can be a financial reason.

Michelle Kesil (14:04)
Yeah, that makes sense. And so why are you like most focused on solving throughout this process?

Keith Fountain (14:18)
So, you know, as far as the challenges that I have and some problems I’ve solved and some I haven’t solved, but one of the big challenges is, so I personally consider myself a conservationist and that I believe Florida is so threatened by development that we should be saving all the natural resources that make sense and that we can. And we’ve got these robust, excuse me, programs for doing this. So, but one of my challenges is

Many of my clients are agricultural operators. So you’re trying to balance their ability to have some flexibility in agriculture with protecting the environment. And I mentioned Florida’s two programs. One of the programs is the Florida Forever Program. And back a few years ago, I spent two or three years just working with client after successive client, trying to break through barriers in conservation.

Eastman negotiations with them to improve that flexibility. I’ll give some examples. You know, we had battles over things like allowing a Florida rancher to be able to put down wells on the property to create watering troughs.

Now, to me, watering troughs are far more efficient and more environmentally sensitive for watering your herd of cattle ⁓ than digging, you know, big watering holes, which may dry out, you know, in a drought.

or something like that. ⁓ Battles to allow landowners to use mechanical means to treat natural areas that are grazed by cattle. And I’m talking specifically about areas like Florida’s pine flatwoods. You’re not treating it mechanically to where you’re destroying it. It’s a management method. And it’s actually good for that natural resource. Allowing ranchers to cut their pasture grass

hey, instead of just letting the cows graze on it. that’s been a big part of it, is making that environmental easement buying program more sensitive and flexible for my agricultural clients without jeopardizing ⁓ the protection of the conservation values.

One of the other battles that I fought a couple of years ago, and I was only momentarily successful, but it’s not successful right now, is trying to get the state to modify their conservation easement so that it is compatible with the IRS, so that a landowner can take a form of charitable contribution known as a bargain sale transaction. And what I mean by that is essentially this, is if the state were to come in

and buy your easement for a million dollars, but you could demonstrate to the IRS that it was worth 1.3 million at the time of the closing, then you potentially have a $300,000 tax deduction there. If the easement is technically sufficient, the state doesn’t allow that. They’ve got a template. They want to use it for everyone, one size fits all. ⁓ Interestingly, from my perspective, another reason that I advocate for this is that the change is required to be compliant with the IRS.

will make the perpetuity of the easement more solid, which means a better outcome for the conservation values you’re trying to protect. So those are just, you know, those are some of the battles that I fight. Here in Florida, you know, a big issue that I deal with with virtually every client is the appraisal process, because in this state, the way we are growing, every piece of land, I’m convinced, in Florida has some residential value component.

to it and that’s what these easements are essentially paying for.

Michelle Kesil (18:58)
Yeah, absolutely. And what are some of the biggest issues or complications throughout this type of transaction or practice?

Keith Fountain (19:12)
Well, think, know, one, I’ve mentioned the IRS issue, which I’m always looking for an opening to work on there. I think

the biggest issue in Florida is this. So we, ⁓ we have a program or a funding mechanism that went to the Florida voters in 2014. And it was a constitutional amendment to provide that one third of our documentary stamp tax revenues. So that’s the, that’s the tax on deeds and other conveyances, a real property that one

One third of that revenue, which is substantial in Florida, ⁓ would go into ⁓ land conservation in some way, shape, or form.

And unfortunately, in Florida, ⁓

Well, fortunately for South Florida residents, but unfortunately perhaps for the rest of the state is that our marquee conservation effort here in Florida is Everglades restoration. So a lot of that money goes to Everglades restoration. And it just seems like it’s an annual battle to try to get what the voters want, which is I’d say many of the voters want at

two or $300 million a year going to Florida forever and the rural and family lands protection.

program and the legislature is just not doing it. looks like, well last year, rural and family lands got about, I think I recall, $250 million. Florida Forever got nothing. ⁓ I’m not going to speculate on the reasons why. And this year it looks like we’re almost headed towards a repeat where

family lands will get maybe 250 million and Florida forever is maybe going to get anywhere from zero to a hundred million dollars and believe me Florida forever needs more because they’re buying land in fee simple and conservation easements. you know that’s that’s probably the biggest battle we’ve got going forward is just getting our legislature to fund these programs to the extent that that the Doc Stamp revenue allows so that we can protect these environmental

and agricultural resources now before they get developed. I mean in Florida we are racing against time. You know our population is growing, people are continuing to move here. I haven’t seen the latest figures but it was up over there for a while, over thousand people a day and you know 15-20 years from now these areas that we’re trying to protect they’re not going to be available so we’ve got to do it now.

Michelle Kesil (21:46)
Yeah, absolutely. And how does that work? Like are there certain conservations that don’t qualify for this type of legal action or they’re all covered?

Keith Fountain (22:06)
Well, so there’s, I’m gonna respond three things here if I can remember them all. So with the Florida Forever Program, they are going after Florida’s most environmentally sensitive lands. you know,

it pays to have…

a larger property in the right place or certainly a property in the right place. If you’re five acres surrounded by urban residential, that program’s not going to be interested in your property. ⁓ The Rural and Family Lands Protection Program, they’re looking at bona fide agricultural properties. So that’s not going to work with land that doesn’t have agriculture on it. ⁓ And so those were important things to consider.

You know, one of the marquee efforts that we have in Florida right now is we have a term that was coined about four or five years ago called the Florida Wildlife Corridor. And so there are people that have mapped out what is necessary for the state to ensure that wildlife and water resources have a path to move throughout the state of Florida. And so that seems to be our most important environmental effort at this time other than ever.

blades restoration. so the properties have to fit into that. ⁓ If you’re going to do a charitable contribution, that’s the third example. You have to fit within the conservation purposes of the IRS code. not everything doesn’t apply. Everything doesn’t work. So you have to fit within the requirements of the code.

Michelle Kesil (23:50)
Absolutely.

Thank you so much for sharing.

Well, before we begin to wrap up here, if someone wants to reach out, connect, or learn more, where can people find you?

Keith Fountain (24:05)
So they can find my website, which is keithfountainlaw.com, ⁓ and that has my phone number and my email address. And they can reach out to me. If you’re in Florida, ⁓ I can certainly represent you and help you. If you’re in another state, I actually have a consulting company that sometimes has helped people on issues in other states.

I’m not a tax attorney, but I do have a lot of training and I have experience with easements and the requirements for easements that are going to be deductible under the IRS code. So that’s important. I represent a lot of clients, a lot of Florida cattlemen, lot of timberland owners, and you and I were talking before, and then some wealthy people that own these types of property throughout Florida. So yes, find me at keithfountainlaw.com.

Michelle Kesil (25:00)
Perfect. Appreciate your time and your story. Thank you for being here.

Keith Fountain (25:04)
Well, thank you for the opportunity. I enjoyed it.

Michelle Kesil (25:07)
And for those tuning into the show, if you got value, make sure you have subscribed. We have more conversations with operators like Keith who are building real businesses and we’ll see you on the next episode.