The physical land you’re looking to purchase isn’t the only thing you should evaluate during your first visit to the property. Just under the surface could lie a large water reserve, which can significantly impact the value of the land and the way you inevitably use your property should you decide to purchase. Water rights can be sold or leased on their own, and in some cases for huge sums of money. This makes the rights to this natural resources more lucrative and appealing to investors.
The two types of water that affects landowners are surface water or groundwater. The classifications seem clear enough, surface water occurring above ground (in the form of a pond or stream), and groundwater found below ground. As a would-be landowner, your interests may in fact lie deeper under the ground.
Most of the drinking water comes from groundwater through wells and springs, so groundwater is also a key aspect you must keep in mind when buying land. Both surface water and groundwater have distinct rights associated with them, for which you need to have knowledge of prior to signing a purchase agreement.
Water rights make for a more complex transaction and without professional guidance, many landowners will have difficulty understanding issues with water rights. There is a complex interplay of state, federal laws and municipal laws that govern all aspects of water in every region. Wading through the specifics of staying compliant with the law can be time-consuming.
Know The Basics
A water right is authorization to use water in a prescribed manner, not to own the water itself. It boils down to how the water is inherently being used. Because every state experiences different weather conditions and contain different ideologies regarding the use of water, the laws differ greatly. For instance, some states effectively treat surface water and groundwater as the same thing, which gives landowners more leeway in the right to exercise their use of water as they see fit. On the other hand, states that are more arid and are more susceptible to droughts typically have more stringent laws, and landowners must seek approval from the state government before asserting their right to water.
All water is not created equal. There are senior water rights and junior water rights. The most senior right is entitled to water first, followed by the next most senior right, and so on. When water supply is limited or in a dispute, the most junior rights may not be fulfilled. Bob Regester, Managing Broker at Mossy Oak Properties Colorado Mountain Realty in Divide, Colorado, noted appropriation dates prior to 1900 are considered senior, while those after 1900 are junior.
The date that an owner is granted water rights is known as the appropriation date, and other users of the water must defer to the rights of the original appropriator.
Further the rights between groundwater and surface water are also regulated more heavily in states that deal with scarcity, particularly those in the West.
“In most all cases, if the land has surface water, the water rights are not available as most are owned by municipalities in multiple states for their city water,” said Regester. “You may not dam or divert from a stream or use it for your home. You can fish, wade or let your animals drink from it – and that is usually the only water use you would have.”
If you are wondering what water rights go with land you are considering purchasing, you have to perform a title search of the records for your county and speak directly with a state official just in case. Like with mineral rights, a prospective buyer should obtain as much information as possible about the water right to ensure that the seller actually has title to the water right that they purport to own. A professional can help support you in this endeavor, as many times, water rights may have been previously abandoned on your land.
Water Rights During a Sale
When buying land, you’ll want to make sure all information regarding water rights is fully disclosed. In general, water rights are property rights and may be transferred as part of the sale of land on which they are used or apart from the land.
Regester pointed out that there are three general types of deeds that can be used to facilitate the conveyance of water rights: a general warranty deed, a special warranty deed, and a quitclaim deed. In general, water that has an earlier appropriation date (the date decreed by the court that the water was first put to the decreed beneficial use) is much more valuable and will make the property more expensive to purchase.
Potential land buyers should also investigate drilling rights, as certain wells can be drilled under close state supervision. Wells that produce higher levels of water are inherently more valuable. In some areas, like Colorado, drillers have a 90 percent success rate of hitting water, according to Regester.
Familiarizing yourself with the history of well production in the area can help you gauge just how much your groundwater rights may come into play. A land broker can gather information about neighboring properties and let you see how other owners are using their water rights and for what specific purpose. This knowledge can help you become more confident in your decision to close the deal, on which water rights are transferred immediately.
“It is important for a buyer to check well production rates of neighboring properties with wells in place,” Regester stated. “If a buyer is purchasing a property with a well, they should have it tested for production rate and quality of potable drinking water.”
Respecting Water Rights
Water supply and demand, especially in the West, is entering a critical juncture. Water rights should be taken very seriously, especially considering water is the most precious resource we have. As such, not staying up to date on your rights and the details of those rights cannot only diminish the value of your land and get you in trouble with state authorities, but can also lead to certain health risks.
Even if you currently have a safe, pure water supply, regular testing can be valuable because it establishes a record of water quality. Water should be tested for excessive contamination and presence of minerals. Water that is high in bacteria can serve little purpose if it is not properly cleaned and chlorinated.
The key is to be aware of your local laws and prove the use of your water is in accordance with all regulations.
Further, a Mossy Oak Properties Certified Land Specialist can help you understand and obtain water rights. Additional assistance can be sought from water attorneys and municipal regulators.
Article contribution by Mossy Oak Properties. The Mossy Oak Properties land brokerage network was launched in 2003 and has since grown to over 100 franchised brokerages in 30 states throughout the country.
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