Utah Water Law and Water Rights

The Utah Division of Water Rights has announced a public meeting on September 5, 2023 to discuss a proposed increase to the fees associated with Reports of Conveyance. The current fee is $40 per Report of Conveyance, and a separate Report of Conveyance is required for each water right. There is no mention about how much the proposed fee increase will be.

The following information comes from the notice of the public meeting:

PUBLIC MEETING CONCERNING THE INCREASE OF TITLE FEES FOR THE SUBMITTAL OF A REPORT OF CONVEYANCE WITH THE DIVISION OF WATER RIGHTS

Who:     Holders of water rights within the State of Utah that update title.
When:   September 5, 2023, 4:00 p.m. to 5:00 p.m.
Where:  Virtually
Video call link: https://meet.google.com/tfz-xuuv-uur
Alternatively, dial   (US) +1 620-359-7451  PIN:  709 247 587 #

Purpose: The State Engineer is not the official office of record of title for water rights. However, once a water right holder updates title with the appropriate county recorder's office, said holder must also update title with the State Engineer, aka the Division of Water Rights. A water right holder updates title with the Division of Water Rights via a Report of Conveyance, which has an associated fee. In an effort to represent the true cost to process certain documents the State Engineer is proposing to increase the fees collected for the submission of a Reports of Conveyance.

A recording of the public meeting will be viewable on-line at http://www.waterrights.utah.gov/meetinfo/oldmeet.asp.  Questions and comments may be sent via email to waterrights@utah.gov with the subject line Title Fees. For more information, please contact the Utah Division of Water Rights at 801-538-5282.

Agenda for September 5, 2023 Public Meeting
1. Welcome and Introduction
2. Overview of Current Title Fees
3. Proposed Changes and Rationale for Fee Increase
4. Open Forum for Public Comments & Questions
5. Closing Remarks

In accordance with the Americans with Disability Act, individuals needing special accommodations should notify Marianne Burbidge at (801) 538-7370 at least three (3) days prior to the meeting.

Information from the meeting will be posted on the Utah Division of Water Rights website at http://waterrights.utah.gov as a resource for those who are unable to view the meeting live or require additional information.

For more information about the meeting, click here.

The Utah Division of Water Rights has made some changes to its Report of Conveyance form for a partial conveyance of a water right. The primary change is that the portion form now includes a cover page where you list the new owners name and contact information, fill out information regarding the portion being conveyed to the new owner, and fill out information regarding the portion being retained by the old owner(s).

The Report of Conveyance portion form can be filled out online by clicking here.

The Division of Water Rights will be hosting a training session on ownership and conveyance of water rights. The training will be held on Wednesday, August 15, 2018 at the Department of Natural Resources Building in Salt Lake City (1594 West North Temple) in Room 1040 from 9:00 am to 12:00 pm. Please RSVP to Chris York at cyork@utah.gov if you would like to attend or for further information.

The Division of Water Rights will be hosting a training session on ownership and conveyance of water rights. The training will be held on Wednesday, August 30, 2017 at the Department of Natural Resources Building in Salt Lake City (1594 West North Temple) in Room 1040 from 9:00 am to 12:00 pm. Please RSVP to Chris York at cyork@utah.gov if you would like to attend or for further information.

Representative Curt Webb will introduce House Bill 29 (HB 29), entitled "County Recorder Index Amendments."  The bill only makes one change to the statute defining the duties of the county recorders: it requires the county recorders to keep an index of water right numbers that are included in deeds after May 13, 2014.

To read the full text of the bill, as introduced, click here.

Update: This bill was passed on February 24, 2014, and will now go to Governor Herbert for signature.

In Utah, you are permitted to divide your water right into smaller portions through a process called segregation.  Think of segregating water rights like subdividing land--taking one large parcel (water right) and splitting it into two or more smaller parcels (water rights). 

Generally, segregation occurs when a person sells a portion of a water right to another person.  For example, assume A owns a water right for 10 acre-feet.  A sells 5 acre-feet of the water right to B.  Generally, B will then segregate his 5 acre-feet to a new water right number, thereby separating his 5 acre-feet from A's 5 acre-feet.  B can then file a change application or take other action on his water right without needing the permission or signature of A.

To segregate a water right, you need to file a "Request to Segregate a Water Right" form with the Utah Division of Water Rights, along with a $50.00 fee.  You can access the segregation form online by clicking here.

Representative Curt Webb has introduced House Bill 326 (H.B. 326), entitled "Division of Water Rights Amendments."  The bill seeks to make several changes to the Utah Water Code. 

First, the bill seeks to amend Utah Code section 73-1-10 by including a provision to clarify that a recorded Water Rights Addendum will act as a Report of Conveyance to update water right ownership information with the Division.  The Division has already been doing this as a matter of policy, but this statutory amendment gives clarification and confirmation of this practice. 

Second, the bills seeks to amend Utah Code section 73-1-11 to allow the Division to update water right ownership information based on deeds and other documents relied on by county recorder offices to update title to land.  This corrects an existing problem that arises when a county recorder's office has updated its tract index based on a recorded deed or document, but the Division has an issue or concern with that same deed or document, thereby making it difficult to update ownership information for water rights appurtenant to the land. 

Third, the bill seeks to amend Utah Code section 73-1-11 to shares in a water corporation (canal company, ditch company, irrigation company, etc.) are not appurtenant to land, and are transferred only under Chapter 8 of the Uniform Commercial Code.  The currently language states that shares "shall not be deemed appurtenant to land," but courts have interpreted this language to mean that there is only a "rebuttable presumption" that shares are not appurtenant, which has caused confusion and dispute about when shares are and are not appurtenant.

To read the full text of the bill, click here.

For an update on this bill, click here.

Last week, the Utah Court of Appeals issued its opinion in Hardy v. Eagle Mountain City.  The opinion addresses issues of appurtenance of water rights and trust deeds.

The plaintiffs in the case were lenders who loaned money to a development company.  The loan was secured by a trust deed and promissory note.  The trust deed secured two parcels of land and "all water rights . . . and appurtenances thereunto belonging."  The development company later conveyed a 160 acre-foot water right to a sister company, who in turn conveyed the water right to Eagle Mountain City and received "banked water entitlements" in exchange.  When the development company defaulted on its loan, the lenders attempted to foreclose on the 160 acre-foot water right, asserting that the water right was encumbered by the trust deed.  This lawsuit followed.

The district court ruled in favor of the lenders, and issued a decree of foreclosure under which the lenders were allowed to foreclose on the remaining banked water entitlements.  Eagle Mountain City appealed the decision to the Utah Court of Appeals.

One of the primary arguments put forward by the City was that the trust deed was ambiguous, and that the trial court therefore should have considered extrinsic evidence regarding the parties' intent.  The Court of Appeals began its analysis by noting that a trust deed is a conveyance document for purposes of the relevant code section: Section 73-1-11.  The Court then determined that none of the exceptions listed under 73-1-11(1) applied in this case.  The City had argued that because the promissory note had specifically mentioned other water rights that were put up as collateral, that the exception for "convey[ing] a part of the water right" should apply.  The Court rejected this argument on two bases.  First, the Court held that the trust deed--and not the promissory note--was the relevant conveyance document, and the trust deed had conveyed all appurtenant water rights.  Second, the Court held that even if the promissory note could be considered a conveyance document, the exception still would not apply because the promissory note listed other, separate water rights, and not a portion of the 160 acre-foot water right.  The Court also determined that the language in the deed covering "all water rights . . . and appurtenances thereunto belonging" was unambiguous.  Accordingly, the Court rejected the City's argument of ambiguity, and interpreted the trust deed based on its unambiguous language.  The Court of Appeals also upheld the district court's determination that the water right was appurtenant to one of the parcels of land listed in the trust deed.

The Court of Appeals also upheld the district court's alternative determination that the conveyance from the development company to its sister company was a fraudulent transfer, as no value was given by the sister company.  Furthermore, the Court of Appeals upheld the district court's determination that the City did not qualify as a good-faith transferee for value. 

In the end, the Court of Appeals affirmed the district court's decision in its entirety and upheld the lenders' ability to foreclose on the banked water entitlements.

To read the full opinion, click here.

Beginning July 1 of this year, a person submitting a deed to a county recorder's office may also submit an attached "Water Rights Addendum" (also commonly referred to as a "Deed Rider"). These Water Rights Addenda were originally approved by House Bill 314, passed by the Utah legislature in 2010, which added Section 57-3-109 to the Utah Code.

There are two different forms. The Water Rights Addendum to Land Deeds allows the seller of real estate to specify what water rights (if any) are being conveyed with the land. The Water Rights Addendum to Water Deeds allows the seller of a water right to include additional specification about the water right (or portion of water right) conveyed.

The Water Rights Addenda will be an invaluable tool in clarifying water rights conveyed as part of a real estate transaction. Oftentimes in real estate transactions, there is little or no thought given to the water rights conveyed. Many of the water rights disputes I deal with could have been prevented if the buyer and seller had thought about and specified the water rights conveyed (or not conveyed). The Addenda will go a long way in reducing disputes associated with appurtenance and unclear ownership of water rights--if the Addenda are used correctly.

Even though the Addenda are not required, any buyer or seller of land or water rights will want to use the Addenda, and all real estate agents, title agents, and others involved in real estate transactions should understand and utilize the Addenda. If you are buying or selling land or water rights, it would be wise for you to insist on a Water Rights Addendum being included with the deed.

As a note, an additional bonus of the Addenda is that they can save you the cost of a Report of Conveyance. Under the statute, each county recorder is to forward recorded Addenda to the Division of Water Rights' title department. If the water right owner on the Division's records is the same person as the grantee in the Addendum, the Division will update title without having to file a Report of Conveyance.

Below is an article that I recently wrote for Western AgCredit's FenceLines magazine. A PDF copy of the full magazine can be seen by clicking here.

As an attorney whose practice focuses primarily on Utah water law, I often receive phone calls and questions about water rights. The most common questions I receive are about title to water rights: How is a water right properly conveyed? How do I know if the water right I am buying is valid? Is there paperwork I need to fill out with the Utah Division of Water Rights? The purpose of this article is to provide five general rules to remember when purchasing a water right (or land that includes a water right) in Utah.

1. Research Title to the Water Right
Before purchasing a water right, you should research the true ownership of the water right. In other words, does the seller really have title to the water right that they are trying to sell you? A printout from the Division of Water Rights’ database or a copy of the deed the seller received from a prior owner are not sufficient to establish ownership. Title research must be done in the records at the county recorder’s office and at the Division of Water Rights. If proper title research is not done, you run the risk of paying the seller for something that he/she does not own.

2. Consider Purchasing Water Right Title Insurance
When purchasing land, people almost always buy title insurance. However, people don’t generally think of buying title insurance for water rights. Water right title insurance is now available in Utah, and may be an option to consider if you are spending a lot of money to purchase water rights and/or want some assurance regarding the title to the water rights.

3. Research the Status of the Water Right
You should research the water right’s status and history. In other words, is the water right a valid, recognized water right that will allow you to use it in the manner represented to you? There are a lot of potential issues that a water right may have that can only be discovered by a thorough review of the documentation, maps, decrees, etc. on file with the Division of Water Rights.

4. Have the Water Right Conveyed by DeedThe proper way to convey a water right is by deed. As a buyer, you should request that the deed be a warranty deed rather than a quit-claim deed. If you are purchasing land and the water right, both can be conveyed in the same deed, but the deed should clearly state the water right that is being transferred. I prefer to use language such as: “Together with Water Right No. 33-1452, as identified of record with the Utah Division of Water Rights, including all change applications and other applications pertaining thereto.” You may also use the Water Rights Deed Addendum form, which is available on the Division of Water Rights’ website. The deed must be recorded with the County Recorder’s Office in the county where the water is diverted and the county where the water is used (which are generally the same).

5. File a Report of ConveyanceAfter the deed has been conveyed, you need to update the title with the Utah Division of Water Rights by filing a Report of Conveyance. The Division maintains a database of all water rights and associated information, which includes the name(s) of the owner(s) of each water right. Any notices or correspondence that affect a water right will be sent to the owner of record on the Division’s database. The Division does not, however, actively monitor any transfers of water rights; rather, the Division relies on each water right owner to file a Report of Conveyance to notify the Division when ownership transfers.

Water rights are a valuable asset and a vital resource in most farming operations. Unfortunately, however, people purchasing water rights oftentimes do not spend the time necessary to research and evaluate the water rights prior to the purchase. Following the five steps outlined in this article can go a long way in ensuring that you get what you pay for in your next water rights
purchase.

The Utah Supreme Court recently issued its opinion in the case of Haik v. Sandy City. The case centered on a title dispute to a water right. As the court noted in the first line of the opinion, the case illustrates the importance of promptly recording a deed for a water right.

In 1977, Saunders-Sweeney Inc. and Sandy City entered into an "Agreement of Sale," under which Saunders-Sweeney agreed to sell a water right to the City. The City recorded the Agreement of Sale with the Salt Lake County Recorder. Shortly thereafter, the City received a quitclaim deed for the water right from Saunders-Sweeney, but the City did not record the deed.

In 1978, Saunders-Sweeney conveyed the property to which the water right was appurtenant to Judith Saunders. Several years later, the property was conveyed to Lynn Biddulph. In 1999, Saunders-Sweeney also quitclaimed the water right to Ms. Biddulph. Shortly thereafter, Ms. Biddulph filed a change application on the water right. The City protested the change application, but did not claim ownership of the water right. In 2003, Ms. Biddulph conveyed the water right to LWC LLC. Later that same year, LWC LLC conveyed the water right to Kevin Tolton, who then conveyed the water right to the Haik parties. All of the deeds in this chain of title were properly recorded with the Salt Lake County Recorder.

In 2004, the Haik parties filed a change application. In preparing a protest of the change application, the City conducted research and discovered the unrecorded deed from 1977. The deed was finally recorded in April 2004. The City then sought to update title with the Division of Water Rights, but the City's request was denied.

The Haik parties filed an action to quiet title to the water right. The district court ruled that the Haik parties were the legal owners of the water right. The City filed an appeal with the Utah Supreme Court.

The Supreme Court began its analysis by noting that Utah is a race-notice jurisdiction, meaning that a subsequent purchaser for value prevails over a previous purchaser if the subsequent purchaser (1) takes title in good faith and (2) records before the previous purchaser. There was no question that the Haik parties recorded their deed before the City, so Court's analysis focused on whether the Haik parties took title in good faith, i.e., whether the Haik parties had actual or constructive notice of the City's prior, unrecorded interest.

The City contended that the 1977 Agreement of Sale imparted constructive record notice of a conveyance of the water right to the City. The Haik parties, on the other hand, argued that the Agreement of Sale did not provide record notice because it was impossible to know whether the sale was actually finalized and whether a deed was delivered to the City.

In the end, the Court sided with the Haik parties. The Court concluded that the Agreement of Sale did not subvert the Haik parties' claim of having purchased the water right in good faith because (1) the Haik parties reasonably believed they had a clear chain of title to the water right; (2) the City failed to record its deed for nearly 27 years after receiving the deed; (3) the Haik parties' predecessors-in-interest had maintained the water right and filed a change application on the water right in 1999; and (4) the City failed to contest ownership when it protested the 1999 change application. Thus, the Supreme Court upheld the district court's judgment that the Haik parties are the legal owners of the water right.

To read the full text of the opinion, click here.

If you have submitted a Report of Conveyance ("ROC") to the Utah Division of Water Rights, you can check its status by clicking here. If the ROC has not yet been processed, it will be in the “Pending” tab. If the ROC has been processed and approved, it will be in the “Completed” tab. If the ROC has been processed but has been rejected, it will be in the “Returned” tab.

As discussed in a previous blog post, water rights in Utah are generally transferred either by deed or through appurtenance. Thus, true ownership of a water right is determined by researching the deeds at the county recorder’s office. The Utah Division of Water Rights maintains a database of all water rights and associated information, which includes the name(s) of the owner(s) of each water right. The Division does not, however, actively monitor any transfers of water rights; rather, the Division relies on each water right owner to file a Report of Water Right Conveyance (more commonly referred to as a Report of Conveyance or a "ROC") to notify the Division when ownership transfers. Thus, the purpose of a Report of Conveyance is to notify the Division of Water Rights of the true ownership of a water right.

It is important that a water right owner update title with the Division of Water Rights. Any notices or correspondence that affect a water right will be sent to the owner of record on the Division of Water Rights' database. There have been many unfortunate occasions where, because title was not updated with the Division, a water right owner has not received communications regarding important deadlines that affect their water rights. Furthermore, until title is updated with the Division, a water right owner cannot file proof, file a change application, etc.

There are two different Report of Conveyance forms: a 100% conveyance form and a portion conveyance form. The 100% conveyance form is used if the grantor (seller) is conveying all of his/her interest in the water right. The portion conveyance form is used if the grantor (seller) is conveying only a portion of his/her interest in the water right.

In certain situations (e.g., when a water right has passed by appurtenance), the Report of Conveyance must include a certification by a licensed attorney, professional engineer, title insurance agent, or professional land surveyor. Copies of all relevant deeds must be included with the Report of Conveyance, as well as maps if the water passed by appurtenancy. For a helpful guide for determining if your Report of Conveyance will meet the Division's standards for processing, you should refer to the Report of Water Right Conveyance Review Checklist. This is the same checklist the Division's title department will use when reviewing the Report of Conveyance to see if it is complete.

To review the Utah Administrative Code rules regarding Reports of Conveyance, click here.

In the many conversations I have had with others regarding water-related issues, the most common mistake I hear is the confusion between "water right" and "water share." Hopefully the following discussion will clarify the distinction.

In Utah, all water is owned by the public. The Utah Code provides that "All waters in this state, whether above or under the ground are hereby declared to be the property of the public, subject to all existing rights to the use thereof. " The Utah Division of Water Rights administers the water on behalf of the public. In order to legally use water, a person must have a water right; in other words, the person must have permission from the Utah Division of Water Rights to use some of the public's water.

Many water rights are owned or held by mutual water companies (e.g., canal companies, ditch companies, or irrigation companies). The company issues stock to shareholders. By owning stock, a shareholder is entitled to use a portion of the company's water right. For example, if a ditch company owns a water right for 1,000 acre-feet of water and the company has 1,000 shareholders, each share represents the right to use 1 acre-foot of water from the company's water right.

The two terms are not interchangeable. Water shares ARE NOT water rights. The distinction between water rights and water shares is important for many reasons. For example, the manner of transferring water rights and water shares differs drastically. To transfer water rights (which are generally considered real property), a seller must convey the water right by deed, the deed must be recorded in the proper county recorder's office, and a Report of Conveyance must be filed with the Division of Water Rights. (Click here for more information.) Water shares are transferred according to the Utah Uniform Commercial Code and the water company's rules and regulations--generally by the seller endorsing the back of the share certificate and then having the company secretary issue a new share certificate to the buyer.

For additional information on this topic, click here.

Under Utah law, water rights can be transferred in two ways.

First, water rights can be transferred by deeding the water right and recording the deed in the county (or counties) where the water is diverted and used. Utah Code section 73-1-10.

Second, water rights can pass by appurtenance, which occurs when land is conveyed and an appurtenant (i.e., “attached”) water right automatically passes with the land. Utah Code section 73-1-11.

Thus, true ownership of a water right can be determined only by researching the deeds at the county recorder’s office.

The Utah Division of Water Rights maintains a database of all water rights and associated information, which includes the name(s) of the owner(s) of each water right. The Division does not, however, actively monitor any transfers of water rights; rather, the Division relies on each water right owner to file a Report of Conveyance to notify the Division when ownership transfers.

Sometimes, individuals are conveyed a water right through a properly recorded deed or through appurtenance, but do not notify the Division of the conveyance. Thus, there can be a discrepancy between the true ownership (based on recorded deeds) and the Division’s database of ownership.

Title insurance policies can be purchased for water rights in Utah. There are two title companies in Utah that currently provide water right title insurance:

• First American Title Insurance Company. Contact Brad Dobson at 801-578-8820.
• Titan Tile Insurance Agency. Contact Rodney Dean at 801-300-0755.

In a previous post, I explained how to look up water rights on the Utah Division of Water Rights’ website. Each water right has an owner (or owners) listed at the top of the water right printout, with a corresponding mailing address. Many times, I find that the mailing address listed is incorrect or out-of-date. It is important that water right owners keep this address current. Any notices or other correspondence related to the water right will be mailed to the address on file with the Division. The Division will not actively ensure that the address is correct; rather, the Division relies on the water right owners to notify the Division of any changes.

The procedure to change an address is very simple and can be done online. Once you have pulled up the water right on the Division’s website (see instructions here), click on the drop-down menu in the top left corner and select "Modify an Owners Address." A list of owners will appear. Click the circle next to the owner whose address is to be modified. A new screen will appear where you can fill in the new address. It will also ask for a telephone number and email address to complete the submission.

It is important to note that the address modification procedure can be used only to update the address of a current owner. If the owner has changed (e.g., the water right has been sold, transferred to a trust, etc.) or if the owner’s name has changed (e.g., through marriage), this information must be updated by using a Report of Conveyance.

The Utah Division of Water Rights maintains a very useful website that contains information about every water right in Utah. There are several different ways to search for information on a water right on the website.

The easiest way to search is by water right number. If you know the water right number, simply click here, enter the water right number, and hit “Submit Query.” This will bring up the database summary for the water right.

If you don’t know the water right number, but you do know the name of the water right owner, click here, enter the owner name, and click “Display Results.” If the owner is an individual, enter the last name first, then the first name (separate the last name and the first name with a comma). If the owner is a business entity, enter the entity’s name.

If you don’t know the water right number or the owner name, but you know the name of the river, stream, spring, or other source, you can search by the source name. Click here, select “Text Search on Source of Supply,” enter the source name, then click “Display Results.”