Liquid Assets: Understanding Utah Water Rights vs. Water Shares

by Lori Collins

In the arid landscape of Utah, water isn't just a utility—it's a "drop of gold." Whether you are eyeing a ranch in Heber Valley or selling a family home with a large garden in Cedar City, understanding the distinction between Water Rights and Water Shares is critical.

As your local Realtor® at loricollins.com, I want to ensure you navigate these waters (pun intended!) with confidence. Here is everything buyers and sellers need to know about Utah water law.

1. Water Rights: Direct Ownership from the State

In Utah, all water is technically "public property." However, the state grants individuals the right to divert and use that water for beneficial purposes. This is known as a Water Right.

Key Characteristics:

Real Property: A water right is treated like real estate. It has a specific "Priority Date" based on the doctrine of "First in time, first in right."
The State Engineer: These rights are regulated by the Utah Division of Water Rights. Every right has a specific "Priority Date." Utah follows the doctrine of “Prior Appropriation,” meaning the older the right, the more protected it is during a drought.
The Deed Process: To transfer a water right, you must execute a Water Deed and record it with the County Recorder.
"Use It or Lose It": If a water right is not put to "beneficial use" for seven consecutive years, it can be subject to forfeiture.

2. Water Shares: Membership in a Company

A Water Share is different. Instead of owning a direct right from the state, you own a "share" of a larger right held by an irrigation, canal, or ditch company.

Key Characteristics:

Personal Property: Legally, shares are often treated more like a stock certificate than a piece of land.
The Certificate Process: Transferring shares usually requires getting a new Stock Certificate issued by the company’s secretary. It does not always happen automatically when you sign the house deed.
Assessments: Share owners typically pay annual fees or "assessments" to the company for the maintenance of canals and headgates.

Comparing Water Rights vs. Water Shares

Feature Water Rights Water Shares

Legal Status Real Property (Land) Personal Property (Stock)

Managed By Utah Div of Water Rights Private Company Board

Transfer Method Recorded Deed Stock Certificate Transfer

Recording Location County Recorder's Office Company Books

Primary Risk Forfeiture for non-use Non-payment of assessments

3. Critical Steps for Buyers

Before you close on a property, don't assume the water is coming with it. Unlike a fence or a shed, water can be "severed" from the land and sold separately.

Perform Due Diligence: Always verify the status of the water right or share. Is it in good standing? Are there unpaid assessments?
Check the "Place of Use": Ensure the water right is legally registered to be used on the specific parcel of land you are buying.
Review the REPC: Ensure the Real Estate Purchase Contract (REPC) explicitly lists the water right numbers or number of shares being transferred.

Don't assume that because a property has a green lawn or a pipe in the field, the water is included. In Utah, water rights can be "severed" from the land. This means a previous owner could have sold the water rights while keeping the land. Always perform "Water Due Diligence" to ensure the rights or shares are valid, in good standing, and actually being transferred to you at closing.

4. Advice for Sellers

If you are selling a property with water interests, transparency is your best tool for a smooth closing.

Gather Your Paperwork: Find your stock certificates or water deed records early. If the records at the Division of Water Rights aren't in your name yet (even if you've owned the land for years), you may need a "Report of Water Right Conveyance."
Disclose Everything: Be clear about what is—and isn't—included. If you plan to keep your water rights but sell the land, this must be disclosed upfront to avoid legal disputes later.

If you are selling a property with water, organization is key. Find your stock certificates or your water right numbers early. If your certificates are lost or the names don't match your current deed, it can cause major delays at the title company.

The Utah Water Due Diligence Checklist

To help you get started, I have put together this essential checklist for every Utah buyer and seller. Use this to ensure no drop of water is left behind.

If it’s a Water Right (State Managed):

[ ] Verify Ownership: Does the seller’s name match the name on file at the Utah Division of Water Rights?
[ ] Check the "Place of Use": Is the water legally tied to the specific parcel you are buying?
[ ] Review Priority Date: Is it a "senior" right or a "junior" right? (Crucial for drought years!)
[ ] Verify Beneficial Use: Has the water been used in the last 7 years to avoid forfeiture?

If it’s a Water Share (Company Managed):

[ ] Inspect the Certificate: Ask the seller for a copy of the physical Stock Certificate.
[ ] Contact the Secretary: Call the Canal/Irrigation company to confirm the seller owns the shares and that all assessments (fees) are paid in full.
[ ] Ask About the "Turn": When and how do you get your water? Is it via a ditch, a pipe, or a pump?
[ ] Transfer Fees: Find out what the company charges to issue a new certificate in your name at closing.

Why It Matters

In Utah, the value of land is often tied directly to its access to water. A beautiful 10-acre lot without water rights is a very different investment than one with 5 acre-feet of senior water rights. Navigating these complexities is part of why having an experienced Realtor in your corner is so vital.

Whether you're looking to buy your dream home or sell a historic family property, I’m here to help you understand every detail of the transaction—down to the last drop.

Utah Water Rights Explained This video provides a great visual overview of how water rights are prioritized and the history behind Utah's unique "first in time" system.