Click here to read Kara Godbehere’s post. Here’s an excerpt:
The standard Colorado Real Estate Commission form “Contract to Buy and Sell Real Estate” covers water rights under Paragraph 2.7 (“Water Rights, Well Rights, Water and Sewer Taps”). It’s important for real estate attorneys and brokers to understand what these provisions mean, and when the advice of a water attorney could be helpful (and maybe even save some time and money).
A water right is a conveyance in real property, generally conveyed in the same manner (see CRS 38-30-102). However, water rights records in my experience are notoriously unreliable. Title insurance companies DO NOT INSURE water rights, so the conveyancing documents are up to the seller or their attorney, and are often not specific. Sometimes they aren’t recorded at all, and often they contain vague language such as “any and all water rights.” It can be difficult to know what you are getting based on the language in a real estate contract or even the seller’s deed.
So what do attorneys and brokers need to be aware of in a typical real estate transaction? Let’s start with Paragraph 2.7.1, “Deeded Water Rights.” I advise broker clients to call me if they see deeded water rights, especially ditch company rights (all of the following information/recommendations regarding Paragraph 2.7.1 are equally applicable to paragraph 2.7.4, “Water Stock Certificates”). For deeded water rights you want to verify title in the seller with the ditch company’s records (or records of the managing entity – irrigation district, water company, etc.) and the county clerk and recorder’s records. Remember, ditch stock conveyances do not have to be recorded, and because they aren’t insured, they will not be included in your title commitment – nor will they be insured by your title policy! I have had remorseful buyers and even agents tell me, “but this water issue didn’t show up in the title commitment! How could we have known!” and the answer is, you should have performed your own due diligence or hired an attorney to do it for you. Always independently verify title to deeded water rights and investigate any decrees associated with the rights. You’ll also want to review the bylaws/rules/regulations of any ditch company or special district that may have administrative authority over the rights, and make sure any requirements of those entities are met during the conveyancing process.