Securing a Title Opinion for Your Water Rights Purchase

shutterstock 1411259204Water in Colorado belongs to the people of the State. The State manages the resource for the benefit of its citizens. Colorado’s system of prior appropriation for managing water rights has its foundations in mining law. This system gives users of surface water a priority based on the date their water right is placed to beneficial use. Under this system, the rights granted are ‘usufructuary’ in nature, meaning that a water right holder owns the right to use water but does not own the water outright. A water right established through this system is limited in time, place, and manner of use. Further, water rights are established and often held separately from the land upon which the water exists or is used.

Generally, water rights with older priority dates can divert and use their water before water rights with newer priority dates. Much of the State’s surface water has been appropriated to the point that establishing a new water right would yield a low probability of use. With an increasing population, low rainfall, and a finite amount of water, acquiring older water rights are often necessary to have useable water. Colorado State University has additional resources available here for those curious about Colorado’s general operation of water rights.

A title opinion or title insurance are essential steps in risk mitigation during the process of purchasing real estate. See Real Estate Title Standards for more information. A title opinion demonstrates that the seller has the right to convey and illustrates any title defects. Such defects can be an unrecorded transfer, a duplicative transfer, or inaccurately described property. Any of these defects weaken a claim of ownership and can create avenues to challenge ownership, and in extreme cases, disposes the holder of the interest in favor of the owner of record. As a buyer, you want to be in the most informed position to determine if the purchase risks are worth moving forward with the transaction.

For real property, a myriad of companies will research title and issue title opinions and title insurance. Most title companies will not issue title opinions for water rights, and even less will issue title insurance for water rights. Without a title opinion or title insurance, an entity purchasing water is left extremely vulnerable. Given the need, cost and value of water, forgoing this process is not an acceptable risk in many transactions. As compared to title opinions for land, water title opinions can be much more complicated.

If you are interested in purchasing water rights and want to make sure that your seller has a clear and marketable title, you are not out of luck. Lyons Gaddis’s team of water attorneys has an in-depth system of searching for water rights ownership and transactions. We can help you to identify blemishes to the title. We can identify liens and encumbrances in the title and conduct record title examination through the clerk and recorder’s office. In certain instances, we can also offer a form of title insurance. Contact us today for more information!