Colorado’s water courts are the legal forum for adjudicating new water rights & changing existing water rights to new uses, approval of augmentation plans for junior water rights, and determinations that conditional water rights are being pursued to completion with reasonable diligence.

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Decreed water rights function as real property under Colorado law. This means they are transacted as such through deeds. They can also for example be pledged as debt collateral to third parties, much the same as a parcel of land or stock shares.

♦ Diligence reviews. Title insurance companies do not cover anything related to water. This means during the purchase contract’s diligence period, it is incumbent on the purchaser to investigate and determine any issues associated with the specific water right(s) being purchased, or with the water rights/features appurtenant to the parcel of land being purchased. These potential issues are numerous and bear heavily on the real world value of a water right. Some notable examples include things like ambiguous title history or liens on the seller’s part; potential the water right has been abandoned for non-use despite still existing on paper; physical supply limitations; inconsistency between the right’s decreed use and the purchaser’s contemplated use; and the existence of water features such as ponds requiring a decreed water right but lacking a valid one.

Proper review of all these potential issues while under contract requires a lawyer specialized in Colorado water law. I have conducted numerous such reviews, understand all potential issues and how to spot them, and provide reports that convey the pertinent information in a straightforward, efficient and accessible manner.

♦ Conveyances – The only form of insurance existing for purchasers is the type of deed through which a water right is conveyed—quitclaim, special warranty, and bargain & sale deeds are the most common. The type of deed utilized reflects the degree to which the seller agrees to warrant against any title defects or others issues that might arise in the future.

I have experience preparing and reviewing such deeds for buyers and sellers alike, including in the special case of Denver Basin ground water rights. I also possess the skill and knowledge necessary to orchestrate complex transactions involving multiple water rights and third parties like financial institutions, ditch companies and other peripheral stakeholders.

Title matters

Because Colorado water rights are bought and sold much the same as any other real property, the legal validity of a water right under Colorado’s water adjudication and administration laws on the one had, is an entirely separate matter from the question of who legally owns that water right on the other. Hypothetically for example, a seller could market out a perfectly valid water right, but conveniently fail to mention—or even be aware themselves, more likely—that they in fact only legally own half the water right they’re purporting to convey. This obviously creates a major issue in turn for anyone down the line who believes they are acquiring—certainly paying for—the whole thing.

Water rights as a category of real property are particularly vulnerable to title chain issues, for a couple reasons:

♦ In Colorado water rights are entirely separate/severable from land, and conversely land parcels (with limited exception) do not come with any water rights inherently attached. In general, the property interest in a water right can be infinitely fractionalized and sold off to however many willing purchasers might exist—each of whom is subsequently free to sell again, in whole or in part, or to lease, mortgage or otherwise market off specific interests in that title to others. Title chains can become very complex and it is not always possible to comprehensively ascertain from start to finish—and the longer the title history, the higher the likelihood there will be missing links and some inherent unclarity in the chain.

♦ Water right title histories can also often be plagued with deeds along the chain containing vague or ambiguous language, and use of different terminology to describe the same thing evolving over time. Furthermore, any doubts when it comes to what may or may not have been conveyed in a particular deed are resolved in the seller’s favor (i.e. presumed not to have been sold). Therefore, any unclear or otherwise confusing/inconsistent conveyances along the chain represent a potential severed link and vulnerability for the current owner/purchaser.

Comprehensive title chain investigations can become very difficult and time consuming, and are rarely even guaranteed to yield definitive results. Whether the cost of such an undertaking is necessary or warranted—and how thorough of one if so—is unique to the client’s individual situation and requires a careful consideration of many countervailing factors along with a strategically designed scope of work, phased into stages if appropriate.

Mutual ditch companies and stock shares. Mutual ditch companies are incorporated pursuant to statute and governed according to their bylaws. Such entities manage and hold beneficial title to water rights on behalf of their stockholders, i.e. those holding shares in the ditch corresponding to a pro-rata entitlement to the water held by the company. I have experience with many water right transactions involving ditch company shares, along with matters concerning disputes among ditch companies and their stockholders.   

Easements. Ditches often span many miles between the diversion point and the place where the water is actually delivered, and frequently cross private property of all sorts. By law, ditch owners possess an easement in the ditch allowing them to enter private property for purposes of cleaning, maintaining and operating the ditch, and which prohibit private landowners from re-routing, altering or otherwise interfering with any portion of a ditch that crosses their property. I am well versed in ditch easement law and have experience resolving several disputes of this nature.

All wells require a valid permit from the State Engineer’s Office. Depending on where you are, the size of your land parcel and the withdrawal rate/uses contemplated, this permit may be all that is required.

However, most stream systems are already over-appropriated, and in these locations, with limited exception, the state will not issue a well permit unless the applicant first secures a source of augmentation water to offset depletions. Some are covered by “umbrella” augmentation plans run by large regional water districts, and individual users can simply secure a supply contract from such entities as their augmentation source. Where no such regional augmentation plan exists, the prospective well user would have to adjudicate their own private augmentation plan in water court.