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Diving into Water Rights: A Primer for Land Agents

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“Water is the ultimate zero-sum game; the volume of water used by one right holder sourced from our common pool of water ultimately diminishes, to some degree or other, the volume of water available to other water right holders.”

– Dr. Charles Porter, 2014

Nothing is more basic to successful human congregate settlement than the management and sharing of freshwater resources; the way in which Americans manage their freshwater resources defines the overall quality of life. Today’s REALTORS® must gain a working knowledge of water rights in their geographic area of practice.

Who Owns the Water?

The first question that arises – who owns water in the United States, the public or the individual citizen? The answer is an eternal favorite – it depends – on the geological container in which the water resides. Ownership of water varies from state to state but is always categorized in three geological containers in which water resides, surface water, diffused surface water, and groundwater.

Surface water is water that exists naturally in a river, creek, or stream. Most states own their surface water and describe it as water in a “watercourse” that is generally defined as:

…a channel, comprising well-defined bed and banks, a current of water, and a permanent source of supply. The flow of water need not be continuous, and the channel may be dry for long periods of time.

There are two state-by-state variations of surface water rights in the United States, riparian rights and appropriative rights. Riparian water rights are based upon ownership of land appurtenant to surface water; riparian rights tend to be the basic water law in states east of the Mississippi River. Riparian rights are usufructs only, or rights that allow use of the water but not ownership of the water. Appropriative rights are based upon a grant or license from the state to use the water for a certain purpose. Appropriative rights tend to apply to those states west of the Mississippi River. In most western states, appropriative rights are further permitted based upon first-in- time, first-in-right, a concept referred to as prior appropriation.

The United States “Americanized” the traditional English Common law riparian concept in 1826. According to Professor of Law T. E. Lauer the origin of the American riparian doctrine was rendered by a United States District Court in Tyler v. Wilkinson:

The origin of the American riparian doctrine of water use, whereby each owner of land upon the banks of a watercourse has the right to make a reasonable [emphasis added] use of the water, is customarily placed shortly after the year 1825. Traditionally, the creation of the riparian doctrine has been ascribed to two of the greatest early American jurists, Joseph Story and James Kent.

water rights

The introduction of the reasonable use idea is the driving concept in the permitting of surface water in most states and in some states, even applies to legal uses of privately owned groundwater. As opined by Jurist James Kent in 1828, the American definition of the reasonable use of water is:

All that the law requires of the party, by or over whose land a stream passes, is, that he should use the water in a reasonable manner, and so as not to destroy, or render useless, or materially diminish, or affect the application of the water by the proprietors below on the stream.

What constitutes a reasonable use of water is regularly a matter of hot debate between up-streamers and down- streamers. The situational aspect of reasonable use is subjective and determined in the eyes of the beholder; the same specific use can be usually be argued for or against easily and credibly. Most states broadly define reasonable use of water as water used for irrigation, municipal, domestic and livestock, and industrial purposes.

“Today’s REALTORS® must understand the human-water interface and the foundational role water plays in the quality of life of their communities.”

The second geological container is “diffused” surface water, or water that runs across the surface of the land either from rainfall, snow melt, condensation, or caused by other atmospheric conditions. Diffused surface water is owned by the private landowner in some states such as Texas, but not so in other states.

Private ownership of diffused surface water ends when the water enters a surface water watercourse or in some states, when it disappears into the ground and becomes groundwater.

The third geological container is groundwater. Groundwater is “water that exists underground in saturated zones beneath the land surface.” Groundwater rights are owned by the public in many states but owned by the private overlying landowner in other states. Private and absolute ownership of groundwater is recognized in Connecticut, Indiana, Louisiana, Maine, Massachusetts, Mississippi, Rhode Island, and Texas.

ground water well

In other states with no comprehensive groundwater regulations, ownership is ill- defined in their statutes or in their state constitution. Some states may claim to own the groundwater yet allow unlimited withdrawals without any liability to neighbors, making the practical matter of ownership in those states moot. The geological containers of water exist conjunctive in the hydrologic cycle.

Surface water, diffused surface, and groundwater are, have been, or will ultimately be in union with one another. Diffused surface water feeds both surface water and groundwater.

Groundwater feeds surface water both in the underflow and via natural springs. As water flows downhill above or below ground, the containers feed and deplete each other visibly and invisibly. A single molecule of water is like a chameleon as to its ownership, changing legal status as it flows through the hydrologic cycle.

Another fact of water is that it ignores political boundaries. Setting workable public water policy based upon surface political boundaries and not upon the natural boundaries of the water itself is problematic. A shared common pool water existing in several political boundaries risks conflicts between regulatory agencies weakening prudent management of the resource.

Yet another fundamental concept in water rights is ‘beneficial use’ which is generally accepted to be the use of:

… the amount of water which is economically necessary for a purpose authorized by this chapter when reasonable intelligence and reasonable diligence [emphasis added] are used in applying the water to that purpose and shall include conserved water.

A vexing question arises – what is reasonable intelligence and reasonable diligence? Of course, my use of water, and yours likely as well, is always based on reasonable intelligence and reasonable diligence, right? Beneficial use varies from state to state, clearly defined in some but loosely defined in others. The California legislature so clearly defined beneficial uses of water that their list is five pages long!

water fall

Why Land Agents Should Know Water Rights Basics

Why is it so important that real estate licensees in the United States have a working knowledge of water rights in their practice area? First, land with water is more valuable than land without water. The sales price we recommend to our clients to ask and offer is significantly impacted by water rights and water availability.

Second, it is our duty to assist our clients in determining the characteristics of any given tract they are selling or are interested in buying. We, of course, cannot provide legal advice, engineering advice, or hydrologic advice to our clients unless we hold licenses in those professions. A prudent REALTOR®, though, assists clients in finding the professional help they need.

Third, often overlooked but of high importance to our overall civic duty, is the significance that water has on the fair market value of land and its resulting impact on the ad valorem tax base that is so important to the quality of life of any community. In most of the United States public school education through the 12th grade is the most cherished social value, and most often is funded by ad valorem taxation. Some hospitals and other critical public services derive their funding from ad valorem taxation as well. As the water resources in a rural city are sold or leased to an urban area, now more than ever a battleground of conflict nationwide, the ad valorem tax base in the rural city inevitably declines leading to a decline in public school funding and other public services. This, in turn, creates a downward spiral of quality of life in the community.

underground water

Frustratingly, there is no “one size fits all” water law or policy that can be applied to a country with such wide geographic diversity as ours. The federal, state, and local governments all have and/or claim some jurisdiction over water, with policies and jurisdictions that exist in open conflict. The route to understanding water rights is challenging, but essential to the value REALTORS® add to their clients’ transactions.

REALTORS® should begin their search by reviewing their state’s constitution and seeking help from the state and local agencies responsible for water use permitting. Some states have county agriculture extension agents that are a great source for water rights information as well.

Many states such as Texas recently created statutory duties requiring real estate license holders to become “geographically competent” in the region or area in which they work; competence in water rights therefore is now the law. Today’s REALTORS® must understand the human-water interface and the foundational role water plays in the quality of life of their communities.

This article was originally published in the REALTORS® Land Institute Summer 2020 Terra Firma Magazine.

Charles Porter NLC20 SpeakerAbout the author: Charles Porter, Ph.D. is an award-winning author, speaker, testifying real estate expert in over 600 cases nationwide, and has served in various faculty teaching roles at St. Edward’s University since 2008. In 2016 he earned a Ph.D. in Economics and Business from the Universitat Jaume I in Spain with “Cum Laude” distinction. He is also a well- recognized water rights expert. He was recently appointed to the Education Standards Committee of the Texas Real Estate Commission. If you have any questions related to the content in this article, Charles can be reached at crporter@sbcglobal.net

This article was originally published in the REALTORS® Land Institute Summer 2020 Terra Firma Magazine.

private ranch property

Landownership Basics: Private Property Rights

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“The best investment on earth is earth.” -Louis Glickman

Fee simple landownership comes with some fundamental private property rights no matter what kind of land you own and where you own it. Understanding your private property rights from the start, even before owning a property, will ensure you get the most enjoyment from your property without violating the rights of others.

Fee simple “refers to real estate or land ownership. The owner of the property has full and irrevocable ownership of the land and any buildings on that land. He is free to do whatever he wishes on the land subject to local zoning ordinances. Fee simple and fee simple absolute are the same thing. Fee simple is the highest form of property ownership.”

“Private property rights are one of the pillars of capitalist economies, as well as many legal systems, and moral philosophies,” according to an article defining property rights.

Right to Possession

Once you fully own your own piece of land and hold the title, you retain possession and control its rights. If you have a mortgage, then the lender probably holds your land title until the loan and its interest is paid in full. Until then, you will have limited possession rights and potentially limited private property rights for use. Depending on where you live and the terms of your loan agreement, the lender could take the property quickly once you stop making payments.

land real estate private property

Right to Control

Assuming that you do not live in a neighborhood or city with zoning regulations or other laws that forbid certain activities, you can participate in any legal action on the land you own.

Keep in mind though that neighborhood associations and similar organizations often have covenants that restrict certain activities, so you’ll want to ensure none apply to your property. Covenants may include relatively harmless demands like requiring you to maintain grass that’s visible from the road. Other covenants may restrict activities like raising animals, operating a business, or using chemical fertilizers.

Always read local covenants and laws closely before purchasing land. Using a land expert in your area is the best way to learn about your property rights.

Right to Use and Enjoyment

The right to use and enjoyment means that you can engage in any legal activity on your property. The word “legal” carries a lot of weight in that sentence. For example, owning land does not mean that you can open a casino there without a state license. You must comply with local, state, and federal laws at all times. In fact, the Department of Justice can seize property that they think has been used to commit crime. Federal forfeiture law lets the government take ownership even without proof that it was connected to a crime.

You’ll also need to gather information on any zoning regulations that are tied to your property. According to legal experts, “Zoning regulations and restrictions are used by municipalities to control and direct the development of property within their borders,” and therefore restrict, limit, or otherwise define the uses of a property.

agritourism apple picking

Right to Allow Others a Right to Use

As a landowner, you can give other people access to your property. In fact, it is for many one of the most lucrative aspects of owning land real estate. You can choose to let others access the land for free, or you can charge for access. For example, investors may purchase farmland so they can earn money by leasing it to farmers. Recreational landowners may charge for access to hunt their properties. Agricultural landowners may charge visitors to access for agritourism like fruit picking, pumpkin patches, or corn mazes.

private property signRight to Privacy and to Exclude Others

No one has the right to access your property without permission. You have the right to tell other people that they cannot come onto your private property.

There are only two caveats to the right to privacy and exclusion. Law enforcement can come onto your property while pursuing a suspect. They do not need to stop their pursuit to seek your permission. Law enforcement can also access your property without consent by getting a judge to issue a warrant. If a judge has reason to believe that illegal activities take place on your property, then it only takes one document for officers to investigate.

Additionally, people who have been granted legal rights to use the property for access or another use by previous owners should be considered.

Right to Transfer Ownership

When you own land, you have the right to transfer ownership as you see fit. You could give the property to a relative or friend as a gift. You could include the land in a will or trust. You can also transfer ownership by selling the estate to someone.

Right to Use Property as Collateral

Your land has value that you can use as collateral when using a mortgage to purchase other properties. Collateral may help you qualify for a mortgage or other loan, and you may get a lower interest rate because your land offsets some of the lender’s risk. Keep in mind that failing to repay the mortgage could mean losing rights to your property.

Air Rights

For the most part, you own the right to use the air space that’s above your land. There are limitations to your air rights, though. You could potentially build a skyscraper on your property as long as doing so doesn’t prevent other owners from enjoying their land or violate any zoning laws as mentioned above.

You also don’t have the right to build horizontally across someone’s land. You can only construct vertical buildings that follow your property lines. If the building hangs over the property line, then the neighboring owner could demand that you remove the structure. Air rights especially come into play when it comes to developing on commercial land or residential land in urbanized areas.

What Landownership Rights Do Not Include

Owning land gives you considerable rights over its use, which is one of the biggest draws for land buyers in all markets. Surface rights, however, do not ensure that you control access to the ground below your feet or the air above your head. Before purchasing land, it makes sense to perform an extensive title search or Mineral Rights Search. You may discover that someone else already owns the minerals, oil, and other valuables under the surface of your property.

Understanding Your Private Property Rights

Landownership gives you exceptional rights, but private property rights can have limits. Make sure you understand your private property rights before you purchase a piece of land. Doing so could influence where you choose to buy property and how you use it.

When it comes to learning about your property rights, Accredited Land Consultant Matt Davis with Cushman & Wakefield in San Diego, CA, says “In addition to the personal enjoyment you and your family may receive from spending time on your property, owning land is a tried and true way of preserving and growing wealth. By leveraging the expertise of a land professional early in your property search, you can be confident you know what you are buying, what rights others may have that impact the property, and that you will be able to use the property the way you desire, for generations to come.”

The best way to learn about your property rights or to learn about the property rights of a property you are interested in purchasing is to Find A Land Consultant, like an Accredited Land Consultant, in your area with expertise in the land market.

sunset oil land

Getting It Right: Mineral, Oil, and Property Rights

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When you buy land, you might assume that your property rights give you ownership of everything below your feet. That’s not always the case, though. While you have surface rights, someone else may have mineral rights to its metals, oil, natural gas, and other commodities.

If you currently own land, then you may need to have someone research its previous ownership rights to determine whether you own the mineral rights or not. Ideally, though, you will know your surface rights and mineral rights before you buy land.

Owning Land Doesn’t Always Mean You Own What is in the Land

When surface and mineral rights get separated, you need to know it affects your property and ownership.

Surface Property Rights

Surface rights only apply to the surface of the land. When you purchase a piece of property, you always get surface rights for the plot of land. Surface rights do not apply to anything below the surface of the property.

Mineral and Oil Rights

Mineral rights apply to ownership of anything below a property’s surface. It often refers to more materials than minerals like copper, gold, and silver. It can also refer to oil and gas rights.

When someone owns mineral rights, they get to access and harvest commodities below the land’s surface. Drilling, mining, and other harvesting options often disrupt the surface. That may not seem fair to the person who buys property. Still, the owner of mineral rights can, within reason, make changes to the surface while accessing sub-surface minerals.

In some cases, companies can access commodities without disturbing the surface. For example, a company may use horizontal drilling to extract oil and gas from the land.

property rights

Leasing and Selling Mineral Rights on Your Land

It’s possible to earn money by leasing or selling your land’s mineral rights. In 2013, landowners made about $22 billion from their mineral rights.

When selling mineral rights, you give someone or a company absolute ownership of the commodities in your land. Unless you have the opportunity to repurchase the rights, your property rights will never include ownership of oil, coal, and natural gas. Depending on the terms of your sale, you may get a lump sum from the buyer or receive a percentage of the money earned when the owner sells the oil, natural gas, or other commodity.

Some people assume that leasing their mineral rights gives them more advantages than selling the rights. The benefits and disadvantages depend on the terms that you and the other party reach.

After you lease mineral rights, the new owner may extract everything of value. If that happens, then you may lose future opportunities to make money from the mineral rights. Leasing can also mean that you don’t get any money unless the new owner finds and makes money from commodities in your land.

By leasing, you get your mineral rights back after a determined amount of time. You also run the risk of making less money and losing the opportunity to earn money from the land in the future.

Things to consider before selling or leasing mineral rights include:

  • How it will affect your taxes.
  • How accessing the minerals, oil, or natural gas will affect your land.
  • Whether removing the commodities will make your land’s surface sink.
  • Whether drilling or digging will affect wildlife or water near your property.
  • Clauses that define things like where drilling can occur and who will pay to repair any damage caused to the land’s surface.

Before you agree to lease or sell rights, make sure to work with a qualified land consultant in your market who can refer you to a lawyer with plenty of experience in these areas. You will need an expert to explain the details and help guide your decision.

Ideally, You Should Know Your Property Rights Before You Buy Land

When you buy land, earlier property rights agreements still apply. If a previous owner sold the mineral rights, you are stuck with the conditions of that deal.

You can learn more about your rights before buying property by performing a title search or Mineral Rights Search. Plenty of title companies offer services that will help you understand your property rights.

It’s important to remember that title searches don’t always find all of the information relevant to your land. Some experts recommend assuming that you don’t own mineral rights when you buy property. If anyone has sold the rights in the past, then you will not own the mineral, oil, gas, and other commodities beneath your feet. When land gets sold to dozens or even hundreds of different people, it’s easy to miss an instance when one of those owners sold the rights.

If you want to buy a piece of land, start by finding a land consultant in your area who can give you accurate information about surface and mineral rights in your state. The rules in one area aren’t always the same as those in other places.