Nevada Water Rights Transfer – Use A Nevada Water Lawyer
Posted by: Bud Stoddard on Mon, Aug 06, 2012Share this post
Whether it is authentic or not, the quote attributed to Mark Twain that “whiskey is for drinking, but water is for fighting over” could not be more true in our experience dealing with western water law issues – particularly in parched Southwest states like Nevada and Utah where water users’ land value – particularly in farming and ranching operations – is directly tied to the right to use water, and given that some industries require large amounts of water for commercial purposes in parts of the state not served by public utilities.
Countless are the experiences we have encountered with parties who retained us to review water issues in purchase and sale, as well as finance, transactions, only to find that – shockingly – the water rights themselves are either not owned by the seller at all or are unintentionally encumbered by mortgages, deeds of trust or other title problems, the parties knew nothing about. Sometimes this is true even where the seller has been using the water for years.
Even though water is transferred by deed (like land) and has a number of similarities to other real estate types of transactions, it cannot be treated the same as land. Rather, it must be treated carefully and with knowledgeable, professional involvement of a water law attorney. Here are a some reasons why:
For one, there are very few title insurance companies that are even willing to research the status of title to water rights (you will note that in your standard real property title policy, there is a very common exclusion of coverage with respect to water rights), much less provide any form of insurance or other assurance regarding title to the water involved.
The reason for this is that, in our experience, we have rarely, if ever, seen a transaction involving water that has not had serious difficulties with title. The reasons for this are many, but one which seems to be pretty common is a failure of many water owners to understand that when a water right owner sells the land where they have been legally using the water, they often do not realize that, unless there is a specific reservation of their water rights in the deed itself, their water rights are automatically transferred to the buyer – even if the buyer did not know it was getting them or pay for them! We have even heard of situations where the contract used in the deal itself specifically reserved the water, but the deed did not – this can be a complicated problem for sure.
Under Nevada law, at NRS 533.040(1), the general rule is that, “Except as otherwise provided in [this statute] any water used in this State for beneficial purposes shall be deemed to remain appurtenant to the place of use.” As a result, the general rule in Nevada is that when land is sold to a buyer and there are water rights legally being used on that land, those “appurtenant” water rights transfer automatically with the land unless those water rights are specifically reserved to the grantor.
Generally speaking, the standard Nevada form of “Grant, Bargain and Sale Deed” contains express language stating that the land is transferred “together with all tenements, hereditaments and appurtenances thereunto belonging or otherwise appertaining.” Water is an appurtenance to the land because water remains “appurtenant” to the place of use unless specifically reserved by the deed. Further, while a typical quitclaim deed does not have this language, expressly conveying “appurtenances” to the land, such express language does not appear from the statute to be necessary to automatically convey the water with the land.
Consider the many ways in which this rule can create problems. Assuming that the water rights have been owned by several different owners over the course of several decades, it would take a major leap of faith to assume that the water has, historically, been transferred appropriately throughout that time period (you must assume it has not – because experience tells us it likely has not). You should also understand that most mortgages and deeds of trust specifically encumber all appurtenances to the land, such that title problems arising from financing can also create title problems that parties to a water transaction were not aware of.
In order to get comfortable enough to buy water rights (or, as a seller, to be able to convey marketable title to them), a full search must be conducted in the real property records (using a reputable title company) and in the records of the Nevada State Engineer, which also keeps records of water rights transfers. All of these records must be reviewed and understood in order to identify the problems with title, and to ensure that they are cleaned up as part of the transaction. Otherwise, the deed you paid for may not be worth the paper it is written on.
This latter point raises interesting concerns many not dealing regularly with water rights do not understand. While water rights are conveyed by deed and indexed in the County recorder’s office in Nevada, water rights transfers are also filed (by the filing of a “report of conveyance”) with the Nevada State Engineer’s office (at the Nevada Division of Water Resources). Such reports are valuable water right records because they include information such as an abstract of title, the granting deed, and such other information as the State Engineer requests.
Such reports are often neglected by those not fully aware of the process for transferring water rights, which can have serious consequences. For example, official notices, including requirements regarding deadlines for filing a proof of beneficial use of the water, completion of diverting works, and other filings required to avoid cancellation (including, of course, a threat of cancellation of the right itself), will be sent to the record owner of the right. Grantees who have not updated their records will never receive these notices. This is yet another very important consideration that requires the involvement of a Nevada water rights attorney.
The lawyers at Albright, Stoddard, Warnick & Albright understand the extremely complex nature of water right title issues and stand ready to assist you in ensuring that you can have confidence in the water you are purchasing. Further, to the extent you have questions about title to rights you own or may own, we invite you to contact us to set up a consultation.
About the Authors: The law firm of Albright, Stoddard, Warnick & Albright is an A-V Rated Nevada-based full-service law firm having attorneys licensed in Nevada, California and Utah. Our firm’s practice includes a strong emphasis on corporate, business and real property matters, including natural resources such as water and mineral materials. We actively handle water law and other natural resources issues in the states where we are licensed to practice. Our water law practice focuses on protecting the rights of real estate and water purchasers and sellers, as well as well owners and well associations.
Note: This article, and any other information you obtain at this website, is not offered as legal advice, nor should it be relied upon as such, nor is it a solicitation for legal services. Only a licensed attorney can advise you with respect to your specific legal needs. We welcome your contacting our firm to discuss such representation. Contacting us does not create an attorney-client relationship. Please do not send any confidential information to us until such time as an attorney-client relationship has been established.
About the Authors: The law firm of Albright, Stoddard, Warnick & Albright is an A-V Rated Nevada-based full-service law firm having attorneys licensed in Nevada, California and Utah. Our firm’s practice includes a strong emphasis on personal injury accidents. Call us at 702-384-7111.