A person submitting a deed for recordation to a county recorder’s office in Utah is required to also submit an attached Water Rights Addendum, as of July 1, 2011. This becomes part of the deed and is recorded along with it. The form for this is provided by the Utah Division of Water Rights (which is often referred to as the State Engineer’s Office). Deeds and other instruments affecting the title to water rights should be recorded with the county recorder in the county where the water is diverted. In the case of the water being used in a different county, the deed and attached addendum should also be recorded in that county.
The purpose of the Water Rights Addendum is to identify and describe the water rights, if any, that are being conveyed. For this reason, there are two types of addenda in use: one for land deeds and another that is exclusively for the conveyance of water rights. The first type allows a seller of real property to specify the water rights that are being conveyed in a land deed. This should be filled out even if there are no water rights being conveyed. The second type is the Water Rights Addendum to Water Deeds, which allows the seller to include additional comments and information about the water rights, or portion of rights, conveyed. Both these forms are available through the Utah Division of Water Rights.
As a tool for clarifying the water rights conveyed by a real estate transaction, this addendum serves an important purpose in Utah, where water is a key element to residential and commercial development. By specifying the water rights conveyed, disputes associated with unclear ownership should be diminished. If a deed does not mention the transfer of water rights, any water rights pertaining to the land are deemed to pass to the grantee. The grantor can avoid this presumption by expressly reserving the applicable water rights in the deed and by submitting a Water Rights Addendum.
In Utah, 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. If used to convey water rights only, any of these deeds will have the same function and effect as if they were conveying real property.
A water right can be conveyed in whole or in part. If the conveyance document includes the whole water rights, the beneficial uses associated with those rights do not need to be described on the Water Rights Addendum. However, if only parts of the water rights are being conveyed, it is necessary to describe the beneficial uses of the rights that are being conveyed. Usually, this is described in terms of acre-feet and will generally consist of (1) the number of families for domestic indoor uses, (2) the number of acres irrigated, and (3) the number of livestock being watered, expressed in units. If there are any other uses being conveyed, these should also be described.
The elements of a water right include the priority date, the source of supply, the point of diversion, the place of use, and the natural use. The priority date is essential in determining the value, as the party who first made beneficial use of the water is entitled to the first right to use the water with a preference over those who came later.
It is important to note that the mere purchase of a water right does not automatically guarantee that the water right is in good standing with the Utah Division of Water Rights or that the owner has clear title to the water right. Purchasing water rights also does not guarantee that the Utah Division of Water Rights will recognize the ownership change or that the Division will approve proposed changes or extensions regarding the water right. All purchasers should conduct proper due diligence research into any water right before the final purchase takes place.
Once the Water Rights Addendum has been recorded with the county recorder in the appropriate county, the grantee is responsible for preparing a Report of Water Rights Conveyance, which is also available from the Utah Division of Water Rights. The Utah Division of Water Rights is also responsible for filing this form. The Report of Water Rights Conveyance allows the Division’s records to be updated with the current ownership and address information, allows for the filing of applications on the water rights, and allows the submitting party to receive notifications regarding deadlines and other information that may be essential to the water rights. If the Report of Water Rights Conveyance is not filed promptly, the grantee is at risk of losing the water rights that have been conveyed.