real estate

Change water rights into cash

Steve McLindenq_v2.gifDear Steve,
Do the underground water rights of a property still belong to the landowner if the mineral rights have been sold to someone else? Assuming I do own water rights, what exactly are those rights?
-- Curt

a_v2.gifDear Curt,
Typically, water rights and mineral rights are two separate animals. In some instances, energy firms and speculators that bought up mineral rights also bought the water rights. Be sure to check your mineral-lease or mineral-purchase contract to be sure you didn't sell or lease the minerals and the water.

Barring that, underground water rights usually can be sold, leased or transferred separately from the land, just like mineral rights. In some venues, however, where a large segment of the population shares the same groundwater, "groundwater districts," which supersede state laws, have been created to protect water supplies, restricting some ownership rights. There also may be additional water-right restrictions in arid parts of the country and in areas served by environmentally sensitive aquifers. Governing entities in such instances often impose "reasonable use" standards on property owners.

In most instances, owners of private property have the right to make personal use -- and commercial use -- of groundwater that lies beneath their land. As for tapping into a contiguous body of water, the "doctrine of prior appropriations," in which parties who first used available water have a stronger right to continue using it, is more apt to apply in extremely dry areas. In less arid areas, "riparian" water rights allow owners next to a body of water the right to divert water to their properties. But these aren't cut-and-dried rules. Certain riparian privileges may be considered subordinate to the public's welfare in some places. Also, in cases where there's an underground stream that has a defined flow, rules governing above-surface water use apply. For general information on the water rights of each state, visit Watersystemscouncil.org.

If you own a significant amount of acreage and therefore have a lot of money riding on your water rights, it might pay to first see a real estate property attorney if you are considering selling them.

Good luck!

Read more Real Estate Adviser columns and more stories about mortgages.

Steve McLinden, who writes the Real Estate Adviser, has written about the industry for 20 years and is a correspondent for National Real Estate Investor and former real estate beat writer. To ask a question of the Real Estate Adviser, go to the "Ask the Experts" page, and select "buying, selling a home" as the topic.

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