Water is a precious commodity in the American West and is subject to unique laws and regulations in Colorado. In Colorado, water rights are based on the “prior appropriation” doctrine, which is a “first in time, first in right” system of water ownership and use (as opposed to the “riparian” system in other states). Water rights are decreed by Colorado’s courts with a priority date based on the date of historical appropriation and use of the water in conjunction with the date on which the right is decreed. Senior water rights trump junior water rights when there are water shortages; there is no system for equitable sharing when water runs short. Thus, it is important to understand the type and amount of water available to any property you are considering buying.

Water rights are “severable” from land, meaning not every property comes with a water supply even if there is a water source located on the property. Further, a property’s water supply may be limited in amount or in the purposes for which it can be used. If you plan to live on the property, you will need to ensure that the property has a water supply for drinking water and other household uses. If you plan to farm or ranch on the property, at a minimum, you will need irrigation water. And if you are using the property for office, retail, recreational, commercial, or industrial purposes, you will need a water supply that can be lawfully used for those purposes.

Here are five water-related questions you should inquire about and address before buying property:

Municipalities, water districts, and similar entities typically provide treated, potable water to properties within their boundaries via water taps. This water is normally available to properties within established cities, towns, and other more populous areas. In this situation, the water provider most often holds the water rights and manages the diversion and treatment of that water, then charges the customer monthly fees based on usage. If the property is located within a water provider’s boundaries, but is not connected to the water system, you may be able to connect to the system following payment of a tap fee. Before you buy, it is important to determine if there is a water provider that serves or can serve the property, and understand the costs associated with that service. You may also need to obtain a “will serve” letter from the entity to confirm water service as part of your due diligence.

Colorado courts adjudicate water rights in both surface and ground water. A water right typically allows the water to be used directly (i.e., immediately upon diversion or pumping), but may also allow the water to be stored. The nature and extent of a water right is defined by the terms and conditions of the applicable water rights decree. Before purchasing a property, you need to understand whether the seller is including any water rights as part of the transaction, and then conduct due diligence on those water rights to understand their decreed purposes and amounts, the extent of historical use, and other factors that may impact the use or value of the rights.

There may also be structures, pumps, or other water-related equipment located on the property. That does not mean, however, that you have a right to use the water associated with those structures or the related equipment, as they may be owned by water users on neighboring properties.

Before purchasing the property, you need to understand whether any water rights will be transferred to you as part of the purchase, what obligations may be included with those rights, or whether you will need to obtain new water rights for your intended use of the property.

Many properties—particularly homes in rural or mountainous areas—have a water well located on them. A well may be operational or abandoned. Wells may be associated with a decreed ground water right and are also permitted by Colorado’s Division of Water Resources. Consequently, you will need to: (1) determine the operational status of the wells; (2) determine whether you are obtaining the well and any associated ground water right with the property; (3) identify and evaluate the well permit and any water court decree for the well to confirm that the well’s operation and use are consistent with the permit and decree; and (4) evaluate the quantity and quality of any available well water to ensure that the well is sufficient for your intended use of the property. You may also need to investigate the need to permit construction of a new well.

Property owners are often surprised to learn that they may not own or control an irrigation ditch or pond running through or across their properties. It is important to determine whether you are purchasing any rights to use the water from a pond or ditch with the property, and to identify what the parameters of those rights are. If the purchase of the property does not include any rights to use the water from the pond or ditch, be aware that you are prohibited from interfering with or altering the pond or ditch and that the structure’s owner has the right to enter the property to maintain, repair, and alter the ditch or pond. For more information about irrigation ditches read BHGR’s Answers to Frequently Asked Questions About Irrigation Ditches.

The U.S. Environmental Protection Agency (EPA) defines “wetlands” as “areas where water covers the soil, or is present either at or near the surface of the soil all year or for varying periods of time during the year, including during the growing season.” [1] Wetlands are often home to fish, wildlife, and a variety of trees and plants that are protected by the EPA or the Colorado Department of Public Health and Environment. Federal and state regulations may prohibit you from conducting certain activities in and around wetlands and/or may require you to reclaim any disturbed areas in and around wetlands.

For more information about Colorado’s recently updated regulations read BHGR’s article on 2024 Conservation Laws Affecting Construction Projects.

Property owners are often surprised to learn that they may not own or control an irrigation ditch or pond running through or across their properties. It is important to determine whether you are purchasing any rights to use the water from a pond or ditch with the property, and to identify what the parameters of those rights are. If the purchase of the property does not include any rights to use the water from the pond or ditch, be aware that you are prohibited from interfering with or altering the pond or ditch and that the structure’s owner has the right to enter the property to maintain, repair, and alter the ditch or pond. For more information about irrigation ditches read BHGR’s Answers to Frequently Asked Questions About Irrigation Ditches.

SOURCES

[1] https://www.epa.gov/wetlands/what-wetland

BHGR’s Water and Conservation Group routinely advises buyers on water and conservation issues in real estate transactions. Contact us today at (303) 402-1600.