You own a home with a well, some acreage with a spring-fed pond or a large agricultural operation with livestock and acres of irrigated hay. You are positive you own water rights, but a search of the state website does not list any water rights in your name or the ranch name. Does this mean you don’t own any rights? Why aren‘t your water rights listed in the state database?
The good news is that you probably do still own water rights. Water rights are appurtenant to the land where they are used, meaning that when land is sold to a new owner, the right to use water on the land automatically transfers to the new landowner unless it is specifically severed in the deed. There are likely several reasons why you can’t find your water rights. First, the record for your water right may have a typo or a misspelled word in your name. Second, the water rights were not transferred when you transferred the land to a trust or corporation. Third, the Montana Department of Natural Resources and Conservation (DNRC) takes an average of three months to update water right ownership records, but it can often take much longer. Closing agents have had problems with stale-dated checks issued to the DNRC for ownership updates, which means many updates are taking more than six months to complete. Fourth, no one correctly updated the ownership records when you bought the property.
Montana water users are fortunate that the DNRC updates water right ownership, unlike some states that leave water rights in the name of the original owner forever. The system just needs to work better.
The change in ownership for both land and water rights legally occurs as soon as the deed is signed by the seller, but the DNRC records are not updated until the deed is filed at the County Clerk and Recorder’s Office and a water right fee log is filed and processed by the DNRC. County land records are updated when the deed is recorded, but the lag in water right transfers has raised concerns at both the Montana Legislature and the Montana Water Court. One reason for their concern is the ongoing adjudication of water rights. Without current ownership records, the Water Court ends up with either the wrong owners or no owners participating in water rights cases. If the actual water right owner is not served until a Water Court case is decided, the Court and the parties have to start the process over, wasting Court and private resources. Imagine your distress when you discover you lost your water right because no owner appeared at the Water Court to defend it. A second reason is that water users could lose out on the chance to correct errors in Water Court decrees and to receive notice of proposed permits, change applications, and DNRC examinations.
Water right ownership updates have presented an ongoing problem that the Legislature tried to resolve in 2007. The 2007 law requires the seller to disclose whether water rights transfer with the land on the Realty Transfer Certificate. If so, the DNRC must update the ownership record based on land owner information received from the Department of Revenue (DOR). DNRC tracks place of use by 10-acre squares while DOR tracks land parcels by geocode, a unique number referring to a tract of land created by a survey or subdivision. They are like apples and oranges, making it difficult to track a water right by geocode. In addition, the fee structure is based on the number of water rights being transferred, so a DNRC water specialist must review the ownership update to make sure the fee, the geocodes, the seller’s name and the water right numbers are all correct. Because DNRC staff is often overwhelmed with matters that have statutory deadlines, ownership updates may languish for weeks or even months before being reviewed. If the DNRC finds any discrepancies in the fee or the documentation, staff must take additional time to contact the new owner to clear them up. The second shortcoming of the 2007 law is that it only requires the parties to complete and sign a disclosure and certification that water rights will be transferred in order to be able to record the deed. It does not require the parties to submit documents and fees to the DNRC, which the parties often neglect.
To overcome these deficiencies, I propose that the Legislature simplify the water right ownership update process as listed below:
- Change the per water right fee structure to a flat fee.
- Replace the current system by requiring a form transferring, severing or reserving the water rights to be submitted to the Clerk and Recorder in order to record the deed. The buyer must also include a check payable to the DNRC for the fee along with a stamped envelope addressed to the DNRC Regional Office.
- The Clerk and Recorder forwards the documents and check to the DNRC.
- The DNRC Regional Office adds the new owner’s name to the water right and notifies the previous owner of the change in ownership and a deadline to dispute the ownership change.
- Unless the previous owner protests, his or her name and contact information will be removed from the water right.
- The transfer of a single domestic well with a house could be further simplified by noting the Water Right Number on the Realty Transfer Certificate and forwarding it to the appropriate DNRC Regional Office along with the fee.
Montana law requires the recording of deeds for land as soon as they are filed at the County Clerk and Recorder’s Office. This instantaneous recording of deeds is mandated because current land records protect the record owner from missing property tax payments or being held liable for liens against the previous owner. Don’t water right owners deserve the same protection?