Water Rights Due Diligence: What to Check Before Buying Rural Property

1. Verify the rights exist and are active

Start with the state water rights database for the relevant state. Search by seller name and property location. Confirm that:

• The water right numbers cited in the purchase agreement appear in the database
• Their status is "approved" or "active," not "lapsed," "cancelled," or "rejected"
• The place of use in the record matches the property you're buying

2. Confirm the rights are included in the transaction

Water rights can be, and sometimes are, severed from the land and held separately. The deed or purchase agreement must explicitly list the water right certificate numbers being conveyed. "Including all appurtenant water rights" is acceptable general language but should be backed up by a specific list of right numbers.

3. Check the priority date and reliability

Look up the priority date and assess how it ranks relative to other users on the same source. For irrigation water, ask: in a dry year, does this right get curtailed? Review the watermaster's records (Idaho), state engineer's records (Utah), or division engineer records (Colorado) for curtailment history on that source.

4. Assess actual delivery reliability

Ask:

• Has water actually been delivered in most years, or were there frequent curtailment years?
• If water is delivered through an irrigation company or district: what is the company's delivery record in dry years?
• Is the physical infrastructure (ditch headgates, laterals, pumps) in working condition?

5. Review pending change applications

Change applications are formal requests to modify an existing water right, such as changing the point of diversion, place of use, or type of use. A pending change application on a water right you're buying can affect its future value and usability. Check for pending applications in the state database and water court records.

6. Identify all water sources for the property

A property may rely on multiple water sources: a decreed surface water right, a well permit, and irrigation district service. Map all of them. Each has different legal status, different priority, and different reliability.

If any of the property's irrigation water comes through a canal or irrigation company, add these steps:

• Obtain the share certificates: Request the physical paper certificates representing ownership in the company
• Confirm the company's water right is in good standing: Look up the company's state water right in the database and confirm it's active
• Review the company's most recent financial statement: Canal companies can be financially healthy or in distress. Delivery may depend on the company's ability to maintain infrastructure
• Ask about transfer restrictions: Some companies limit how shares can be transferred or require board approval for sale
• Check for delinquent assessments: Unpaid annual maintenance assessments can encumber shares at closing

For routine transactions in well-documented systems, self-research using state databases is a reasonable starting point. You should engage a water rights professional when:

• The property relies on significant water rights (generally over 50 acre-feet per year of irrigation)
• The water rights have unusual features: multiple sources, change applications, augmentation obligations
• You're in Colorado, where the water court system adds meaningful complexity
• Any part of the seller's representations about water isn't fully documented in the state database
• You're planning to change the use or location of the water rights after purchase

Water rights attorneys and certified water rights appraisers are available in most Mountain West cities. Need help with pre-close due diligence without full legal representation? Wai AI provides professional water rights research reports covering the documents, database records, and basin conditions relevant to your specific property. Contact us at team@waiai.ai.