In Colorado, water rights can be owned and regulated separately from land. Here’s what homebuyers need to know before signing.
The property seemed ideal — 20 acres in Weld County, with a house on a well and a ditch adjacent to it. A potential buyer was excited; it was a good fit for their horses. Then they discovered the water rights had been
sold off separately, and the well for the house was restricted to in-home use. They couldn’t legally fill a horse trough from the ditch through their land.
“They had to walk away from it,” says Michael Weber, who is both a real estate agent and a water resources engineer with Maverick Solutions. “Whenever people are buying a house without [municipal] water — so something in the mountains or in the country — their struggle is actually understanding how water can be applied to that house.”
Homebuyers and land buyers, and the realtors working with them, face varying complexities with water, based on the kind of property purchased, as well as local differences among cities, counties and river basins. If water is taken care of through a municipal water provider, it makes for fewer worries, but not none. For some new houses, homes on wells, or land purchased with an intent to build, the list of concerns grows. Buying land in Colorado requires at least an understanding that water rights can be owned, transferred and regulated separately from land.
Real estate deals in Colorado require a “source water addendum” which tells some, but not all of the story, and the property disclosure document — among the many details on past damage, roof age, sprinkler system — also lists where water comes from for a property.
“For realtors, it’s really finding that first piece of, what is the source, and then if that source needs more detail, diving deeper into those resources that are available to us,” Weber says. That can include plowing through the Division of Water Resources and county databases, for a fuller understanding of what’s going on.
Colorado real estate buyers should confirm that there is water to meet their needs on a property — if they’re hoping for land to support horses, they should ensure that there are water rights or well water for horses included in the deal.
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Homes that get their water from a municipal water provider often have a more secure water supply, but some municipalities have more robust supplies than others, and in years with a drought, some developments fare better than others, says Bill Wombacher, an attorney with Nazarenus, Stack & Wombacher, who teaches a water law class for real estate agents. Scott Clark, an attorney with Clark Hill in Denver who focuses on water issues, suggests checking on the history of the local government or special district that’s supplying a home — determine how long it has been around, understand its water rights, and assess whether existing property owners have had issues with water delivery or restrictions. As subdivisions have moved into previously rural areas, sometimes irrigation ditches run through suburban backyards. The backyard property owner may not have any right to use that water or alter that ditch, including piping or moving it, but the water rights owner will have the right to use the water — and access the property to clean and maintain the ditch. Or perhaps the property owner is a shareholder in the ditch company — a partial water rights holder of the ditch — even that doesn’t mean that they have jurisdiction over the ditch that runs through the backyard.
Stories of water gone wrong abound: The landowner whose private property included a streambank that people were accustomed to spending time on as part of an adjacent park. Or homeowners who were unable to move in because a town denied new water taps for their new homes.
“You could buy a beautiful piece of property that has no water rights with it, thinking you can drill a well, but you could be in an over-appropriated water system, and then you’re having a discussion with the water resources engineer to say ‘I want to drill a well,’ even though there’s no ability to drill a well there,” Weber says. He’s seen that in Larimer County, where the water table is too deep.
Sometimes, real estate agents seem motivated to close the deal, rather than diligently verifying that the purchase is right for everyone, he says. But he has noticed people starting to get curious and ask more questions, rather than stumbling into problematic water situations because they didn’t think to check the details before buying.
“The news has heightened the idea of drought, and of the arid West that we live in, and that the water supply is a scarce resource,” Weber says. “So, I think there’s a more heightened awareness of what’s going on.”
Historic water use on a property doesn’t guarantee that use is legal. Watch out for ponds, in particular. Thousands of illegal ponds exist in the state. Wombacher has seen landowners required to buy $50,000 water rights from somewhere else to offset an illegal water use in a decorative pond or landscaping. He has been called in on numerous transactions where something tripped an alarm and prompted a call to an attorney, and, he says, none of them seemed to have a seller intentionally misrepresenting what was going on: “People just don’t know, because the rules are so nuanced and it’s very challenging, even if people try to do their own research, to get the information right.”
Ponds can be attractive property features, but buyers should confirm whether the water use is legal before closing.
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In Wombacher’s worst-case scenario story, a landowner in the Arkansas Basin discovered that a 70-foot-tall earthen dam storing a huge quantity of water on his property had been illegally built and had no water right — and no outlet. That owner had to spend $100,000 to put a hole in the dam to let water flow downstream.
“That’s an extreme example, but these ponds are everywhere,” Wombacher says. “The last thing you want to do is spend hundreds of thousands of dollars to buy a problem that you have to spend more money to fix.”
A University of Denver Water Law Review article estimates that more than 15,000 illegal ponds exist in the Arkansas River Basin alone. There could be many thousands more across the state, Wombacher says. What the attorneys will tell you, time and again, is to hire a water rights attorney to have a look. A few hundred dollars for their time might save thousands down the line.
“It’s so much easier to fix these problems in the course of a pending transaction than to try to fix it after the fact, and all the costs are borne by the buyer after the fact,” Wombacher says.
Independent journalist Elizabeth Miller has written about environmental issues around the American West for publications including The Washington Post, Scientific American, Outside, Backpacker and The Drake.
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