Bulletin: UT000017

Dear Associates:

The standard regional exceptions remove from the coverage of the policy any claim made due to 'water rights, claims or title to water.' Historically, the Company has not typically included coverage for either adjudicated water rights as they exist in Utah, nor certificated rights to appropriate the public waters of the State of Utah. The actual title to the water by statute is vested in the State of Utah in trust, but landowners may put to beneficial use such water based upon such adjudicated or certificated rights.

In the past, the issue has frequently been raised of how to remove this exception from policies, particularly loan policies. The process to remove the exception has been subjectively made. When title examiners review the topic of water rights, some issues surface with respect to rights of a land owner in adjoining land or portions of the described land found within rivers, lakes or streams. Those topics are treated elsewhere, but in any event appropriate exceptions should be taken. This bulletin focuses on the rights arising from either adjudicated water rights or certificated water rights with a point of diversion located upon the insured land or crossing the insured land. A holder of these rights is authorized to place water into beneficial use on the insured land or on some nearby land. The right has typically not been insured and routinely appears as an exception in owners and lenders policies. Even though the right has not been insured, many insured desire to have the exception removed from the policy.

The principal issue raised relating to adjudicated or certificated water rights is the effect of records filed with the State Engineer or the Utah Division of Water Rights. Under UCA §73-1-10 & 12 every deed not recorded with the County Recorder and not filed with the State Engineer is void as against a purchaser who took without notice of the deed in good faith. Since many deeds were silent on the issue of water rights and many adjudications or certificates have never been recorded, the public records are typically silent on the presence or absence of water rights. By the same token, there are numerous examples of where such a certificate has been indexed, but not dealt with by the title examiner since water rights were excepted from coverage in Schedule B.

The ability to search for such water rights has been tenuous at best. However, there is no longer a need to solely rely upon gut reactions to whether such rights exist. The Utah Division of Water Rights has placed all decrees of adjudication and all certificates in a web site that is available for inspection. The address of this site is: http://nrwrt1.nr.state.ut.us . Persons who want to find either an adjudicated right or certificated right simply has to visit the site. A review of that site together with topographic maps of the area should allow a person to effectively ascertain the presence or absence of water rights affecting the land under examination.

There are two areas that need to be searched on the web site to determine whether rights exist in third persons affecting the land described in the policy. The first is found on this web site following the 'adjudication' hyperlink shown on the main page. The second is by following the hyperlink to 'water rights records'. On the adjudicated rights, reference is typically made in the documents generally to named water sources with general references to the points of diversion. On the certificated rights, the point of diversion is usually tied to a section corner. The examiner will typically have to convert the section tie in some fashion to find its impact point in a subdivision. In any event many certificated rights do no reflect the current owners name. The conveyances intervening from the date shown on the certificate should be forwarded to the Division of Water Rights to properly update their records, including the current deed of trust or mortgage to be insured. This act of updating their records helps protect against an assertion that the rights were transferred to someone else not in our chain of title.

From a review of many of decrees of adjudication, the majority refer to high priority rights to take water from naturally occurring streams and rivers. The first indicator to look for on the land under examination is then whether any such natural streams are found or whether any stream found pours into a stream named in such a decree. Since the names of streams, rivers and lakes may have changed over time, the examiner should also be wary of the names of the organizations who appear to claim such rights. The names of these organizations will probably have changed as well, but should be familiar to the typical examiner.

Next, the examiner must look for wells. The certificate contains the location tied to a section corner. These ties could be approximate. It is therefore possible to find a tie that mathematically places the well on land not belonging to the owner of record. Finding such a location may necessitate an inspection or requiring a surveyor to place the location on the survey.

Once the review is completed and intervening conveyances, if any, are forwarded to the Division of Water Rights, it should then be safe to remove the exception from the policies to be issued. Alternately, if no water rights are found, it is also safe to remove the exception.