Water Right Assignment and Ownership Updates

By: Sarah Liljefelt & Tara Jackson

Water in the western United States is scarce. Most surface waters are fully appropriated, and reliance on groundwater sources is continuously growing. In order to sustain water resources in the face of growth, it is important to make efficient use of water. A key component of efficient use is creating and maintaining clear ownership interests in water. Clear property rights in water are instrumental for avoiding costly and time consuming conflicts between owners. In addition, clear ownership is necessary for determining when rights have been forfeited and thus reverting to the ‘pool’ and becoming available for re-appropriation.

One of the ways in which states keep clear water right records is through recording requirements. Water right permits and certificates are issued by the states to applicants seeking to appropriate water. Generally, water rights are appurtenant to the land upon which the water is applied. When the land is transferred to a new owner, the new owner will acquire the water rights as well, unless the grantor specifically reserves the water rights. This type of transfer, however, will not update county or state water department ownership records. Therefore, states require that certain types of conveyances be recorded upon transfer. Failure to record a change in ownership will have different consequences, depending on the state at issue.

Oregon

In Oregon, water rights are appurtenant to the land upon which the water is applied.[1] Water rights transfer automatically with the transfer of land, unless expressly reserved by the seller. Interests in water right permits, licenses and certificates may be assigned to a third party.[2] The assignment, however, will only be valid between the assignor and assignee, unless a “request for assignment” is filed with the Oregon Water Resources Department (“OWRD”).[3]

It is important to file a request for assignment with the OWRD in order for the assignment to bind subsequent third party purchasers and mortgagors of the real property. For the assignment to be valid the parties to the assignment must give notice to all property owners who are not a party to the assignment. Proof of such notice must be filed contemporaneously with the request for assignment.

Certain interests in water are not transferable without prior approval. For instance, permits and licenses for hydroelectric development are not transferable without the prior written approval of the Oregon Water Resources Commission.[4] It is important to keep in mind and research any special transfer restrictions relevant to your particular type of water right.

Finally, only a holder of a water right may apply to the OWRD to transfer use, place of use, or point of diversion for a permitted or certificated right.[5] A new owner may not be permitted to make such a transfer if an ownership update is not filed with the OWRD prior to, or in conjunction with, the application for transfer. It is important to file an ownership update because only the record owner of the water right may apply to conduct such changes.

Nevada

In Nevada, water rights are regarded as real property interests, and interests in water are transferred by deed.[6] Once a deed of conveyance is executed for an interest in water, the deed must be “acknowledged” by recording the deed in the office of the county recorder in the county in which the water is applied to beneficial use and in the county in which the water is diverted from its natural source.[7]

Recording and acknowledging the deed is important because it is the recording that gives notice to subsequent purchasers and mortgagors of the existing interest in the real property.[8] This means that the purchaser who records will be protected from divestment due to fraudulent future transfers or encumbrances. The recording is also important for establishing a priority of interests in case of future bankruptcy proceedings.[9] An interest must be recorded in order to save a creditor’s place in line.

Grantees of interests in water must file a “report of conveyance” with the State Engineer and must pay the appropriate fees.[10] Attached to the report of conveyance, the grantee must file an abstract of title, copy of the deed, and any other information the State Engineer may request. If a grantee does not file the report of conveyance, any important notices, such as a notice of cancellation, will not be sent to the grantee, but rather the owner of record at the Division of Water Resources. This could result in loss of the water right without the true owner ever knowing about the cancellation proceedings, and thus without ability to protect their interests.[11]

Additionally, if the grantee fails to file a report of conveyance the State Engineer will not take any actions regarding the water right requested by the grantee, such as a change in place of use, purpose of use, or point of diversion. Interestingly, since the grantor is still the record holder of title, he may be deemed to hold an equitable duty to maintain the use to prevent cancellation of the water right.

Washington

In Washington, permits and applications are not treated as perfected property rights. Interests in permits and applications for water use may still be assigned, but the assignment is not valid unless filed with the Washington Department of Ecology (“DOE”).[12] The assignment must be filed for record with the DOE, or the party must receive the DOE’s written prior consent for the assignment to be valid and binding.

On the other hand, water right certificates and water right claims are appurtenant to the land upon which the water is applied and transfer automatically with the land.[13] They are treated as a part of the property’s legal record,[14] and thus do not require assignment or change application through the DOE.

Idaho

In Idaho, water rights pass to a new owner with the conveyance of land to which they are appurtenant.[15] Any change of ownership – whether for a licensed, decreed, or permitted water right, or water right application – must be filed with the Idaho Department of Water Resources (“IDWR”).[16] Notice is required within 120 days of any change, including even minor changes to contact information.[17] If a person files after the 120 day time period, late fees must accompany the filing. Evidence showing the basis for the change of ownership must be filed with the notice. Interestingly, any person with a security interest in a water right may make a request to the IDWR to be notified whenever the water right holder files a notice of a change of ownership.[18]

Appropriators who use water for power generation are treated differently than other appropriators. If such an appropriator wishes to assign or sell his right to use water, then he must file with the Director of IDWR a copy of the deed, bill of sale, assignment, mortgage or other transfer document together with proof that the grantee meets state requirements for holding an interest in water for power generation.[19] Compliance with this process is important because a water permit may be cancelled for failure to conform.[20]

Utah

In Utah, water rights are appurtenant to the land on which they are applied, and are automatically transferred with the land unless they are specifically reserved, only partially conveyed in the document, or the water rights are conveyed in a separate document prior to or contemporaneously with the land conveyance.[21]Like in Nevada, water rights are transferred by deed.[22] The deed must be recorded by the owner in the county recorder’s office in the county where the point of diversion is located, and in the county where the place of use is located.[23] A deed that is not recorded is void against subsequent purchasers, in good faith and for valuable consideration of the same water right, if the subsequence purchaser records his/her deed of water right first.[24]Therefore, it is very important to record ownership of a water right.

Perfected water rights may be transferred by deed, as stated above, but applications may only be transferred by assignment.[25] These assignments are generally only submitted to the State Engineer, and may or may not be recorded in the county recorder’s office. Thus it may be difficult to assess whether an unperfected right has been assigned.

In order to update water right ownership records, the owner must submit a report of water right conveyance to the State Engineer.[26] Reports of water right conveyances must be made on provided forms, and may only be prepared by either 1) the water right owner, or 2) a professional, including: attorneys, engineers, title insurance producers, or land surveyors.[27] If conflicting reports of conveyance are filed with the State Engineer, then all actions before the State Engineer, including change applications and time extensions, will be held until resolved.[28]

Schroeder Law Offices, P.C. – Water Right Ownership Update Service

Schroeder Law Offices can assist clients in Oregon, Washington, Idaho and Nevada to update their ownership records. Don’t wait until a dispute arises. File your ownership updates now!

Our office has completed the ownership update process for many, sometimes updating the State Engineer’s records to recognize a century of ownership changes. We handle the update from start to finish. Depending on the state’s ownership update requirements, the process may include:

• Consultation with the State Engineer to determine the extent of the required update;
• Research of the appropriate county records to compile the necessary title documents;
• Drafting of any documents needed to address holes in the transfer of ownership;
• Completion of the required forms to update ownership; and
• Follow-up to facilitate prompt processing.

Our most comprehensive ownership update project was for a family ranching operation. After much research and review of county and client records, we were able to update the State Engineer’s ownership records for over 200 water rights that were appurtenant to the client’s ranch. These updates reflected the changes in ownership between family members dating from the 1920s to 2007. Completion of this project safeguarded these clients from the loss of valuable water rights and potential reductions of associated grazing rights.

We can help with water right assignment and ownership questions. Call us at (503) 281-4100 or use our convenient inquiry form.

[1] Oregon Revised Statutes (“ORS”) § 540.510.

[2] ORS § 537.220.

[3] Id.

[4] ORS §§ 543.250, 543.440.

[5] ORS § 450.510.

[6] Nevada Revised Statutes (“NRS”) § 533.382.

[7] NRS §§ 533.382, 240.161 through 240.168.

[8] NRS § 533.383.

[9] Id.

[10] NRS § 533.384.

[11] Division of Water Resources v. Foley, 121 Nev. 77, 82 (2005).

[12] Revised Code of Washington (“RCW”) § 90.03.310; Washington Administrative Code (“WAC”) § 508-12-200.

[13] RCW § 90.03.380.

[14] Washington Department of Ecology, Changing or Transferring an Existing Water Right, page 1, available at:http://www.ecy.wa.gov/pubs/981802wr.pdf.

[15] Idaho Code (“IC”) § 42-220.

[16] IC § 42-248.

[17] Id.

[18] Id.

[19] IC 42-207. Idaho’s requirements for holding a water right for power generation are stated in IC 42-206.

[20] Id.

[21] Utah Code (“UC”) 73-1-11(1).

[22] UC 73-1-10(1)(a).

[23] UC 73-1-10(1)(b).

[24] UC 73-1-12.

[25] Utah Division of Water Rights, Training Manual for Preparing a “Report of Water Right Conveyance,” at 3-2, available at:http://www.waterrights.utah.gov/titleInfo/trainman.pdf.

[26] UC 73-1-10(3)(a).

[27] UC 73-1-10(3)(b)&(c).

[28] Utah Division of Water Rights, supra, note 24 at 12-2.