PROBLEMS WITH WELL WATER

By Albert G. Marquis, Esq.

There are many residential properties in the Las Vegas Valley and surrounding areas that are served by well water. Naturally when a buyer purchases such property, he is also purchasing the right to pump water from the well for his personal use. But the fact that the water is flowing is no guarantee that the buyer has the right to continue pumping—or that his water rights will not be cancelled in the future without any notice to him. When this occurs, the REALTORS® involved in the transaction may very well be drawn into the litigation, so it is important to understand the basics about Nevada water law.

A case on point is Department of Conservation v. Foley , 121 Nev. Adv. Op. 8, decided by the Nevada Supreme Court on April 14, 2005. In the early 1990's, Baal subdivided his property into four separate lots and applied for a community water permit. The permit was granted, but Baal was required to file documentary proof within a specified time, demonstrating that the water had been put to a beneficial use. The Division of Water Resources notified Baal multiple times that his permit would be cancelled unless he provided the required proof. Baal failed to respond to the notices. Ultimately, the State Engineer cancelled his permit on August 5, 1999.

Five years earlier, before the cancellation, Baal had sold two of the subdivided parcels to Foley. In 2001, after the cancellation, Foley sold one of the parcels to Foster. While deeds were recorded with the Clark County Recorder, neither buyer filed a Report of Conveyance with the State Engineer. It wasn't until Foley sold to Foster that they learned of the cancellation.

The Nevada Supreme Court held that neither Foley nor Foster was entitled to notice because neither of their interests appeared on record in the offices of the State Engineer. Consequently, their water rights were cancelled, and there was nothing they could do about it.

Under Nevada water law, water rights can be sold with the property. Often these water rights are enumerated in the deed itself. Such a conveyance is legally sufficient as between the buyer and the seller.

However, in order for the buyer's rights in the water to be perfected, the buyer must file a Report of Conveyance with the Division of Water Resources. Unless and until such a report is filed, the Division is under no obligation to provide any type of notice to the buyer. Consequently, a buyer's water rights can be cancelled years after the property is purchased without any notice whatsoever to the buyer.

Therefore, when water rights are involved in a real estate transaction, the REALTORS® involved needs to pay a visit to the Division of Water Resources. There should be a chain of title of water rights from the original applicant through to the seller. If such a chain of title does not exist, it needs to be created before the real estate transaction closes.

Finally, as part of the closing the buyer needs to sign a Report of Conveyance of the water rights, and this document needs to be filed with the State Engineer. Only in this way can the buyer's rights to the water be protected. Unless REALTORS® ensure that these steps are taken, they may find themselves in deep water with the buyer.

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Albert G. Marquis is a partner with the Las Vegas law firm of Marquis & Aurbach. He can be reached at (702) 382-0711 or visit the firm's web site at www marquisaurbach.com