Water Shares Vs. Water Rights - What You Need To Know

Water Shares Vs. Water Rights - What You Need To Know

Water is very important to keep in mind when looking to buy a property. If you buy a property without doing research on the water that comes with it, you may not be able to use the property in the way you intend.
There are two types of water ownership in Utah, water rights and water shares. All of the water in Utah is allocated by the state. When the state allocates the use of water to a person or entity, it is called a water right.

Water Rights

A water right, as defined on the Utah Water Rights website “…is a right to divert (remove from its natural source) and beneficially use water.” the beneficial use of water could be for a home, livestock, crops, and more. There are also a variety of sources that can be diverted such as springs, creeks, lakes, wells, canals, and so on. Specific information about a water right can be found on the State of Utah Division of Water Rights website by entering the water right number in the search box.
The priority date, or the date that the water right was first created/recognized by the state, is an important aspect of a water right. According to the Water Rights website, “Those holding water rights with the earliest priority dates, and who have continued beneficial use of the water, have the right to water from a certain source before others with water rights having later priority dates.”
It is important to know the other people who have water right from the same source and if they have an earlier or later priority date. In order to coordinate the use of the water, you will work directly with those with rights to that source. There is no company or entity controlling or regulating its use besides the state and the distribution coordination is managed by the people with the rights to the water.
One water right is equal to 1 acre-foot of water. You need to know how many water rights are being sold with the property you are purchasing, and how many acre-feet of water you will need to fulfill your intended purpose with the property. Water rights are considered personal property and in some cases, they may be connected to a property, but it is also possible in some cases that they may be sold separately as personal property.

What to Verify When Buying a Property With Water Rights

  • The water right is under the name of the seller.
  • Verify with the state that the seller truly does own the number of water rights claimed.
  • Confirm with your title company that the water rights will be transferred to you at settlement.
  • Where is the diversion or how is the water to be accessed?
  • The estimated market value of the water rights.
  • This will depend greatly on the location and accessibility of the water.

Water Shares

Water Shares are a different type of water ownership, which is not direct ownership of a water right from the state but involves water that has been appropriated by the state to an entity, not an individual.
When an entity, such as a city/town, ditch company, irrigation company, canal company, etc., is given water rights by the state, that entity will typically have a president, water board, and other leadership positions to manage the entity.
A specific number of acre-feet of water is assigned to each share and the shares of water are held by individual shareholders who typically pay a monthly or yearly assessment.
The entity takes care of specific physical parts of the water distribution system, management of the system, hires a watermaster, specifies the responsibility of the shareholders, and directs the distribution (use) of the water. The ‘use’ of the water is typically referred to as water turns and will specify the amount of water a shareholder may use and for what duration. This control should help in times of drought to keep water usage as fair as possible.

What to Verify When Buying a Property With Water Shares

  • What company or entity are the shares part of?
  • How many acre-feet of water are included per share?
  • Verify with the entity that the seller owns the number of water shares claimed and if there is an outstanding assessment due.
  • What is the geographic location of the entity?
  • May water shares are transferred for subsurface diversion (a well).
  • The market value of the water shares.
Remember: Summary to remember for water Utah is that a water right is water ownership given directly from the state to an individual or entity, while a water share is ownership of a share of water within an entity that has been given water rights by the state.
If you have any questions please contact me and I work to increase your confidence and reduce your risk in selling or buying real estate.

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