Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail
Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail

Water Rights

What it is:

Water rights are the legal permissions to use water in a specific way.

How it works (Example):

For example, let's assume that John buys a house on the famous Yellowstone River in Livingston, Montana. The house is on riverfront property. The county's water rights laws specify that his property is private up to the high-water mark of the river. The public is allowed to use the waterway itself, but they may not "camp out" on the bank. The local water laws also specify that John can use a reasonable amount of the river water to irrigate his crops, as long as he follows local regulations and ensures that no wastewater from his property enters the river.

There are different kinds of water rights. Riparian rights are rights to surface waters such as lakes, rivers, and streams. Littoral rights are rights to oceans or very large bodies of water. Water rights can also apply to groundwater.

Why it Matters:

In general, water belongs to the public. Water rights are permission to use the water; they are not permission to own the water. Water rights do not necessarily give landowners permission to transport water away from the property.

From an investment perspective, water rights are very valuable. Land with water rights is more valuable than land without water rights. 

Every state has its own laws regarding how water rights convey, are acquired, or are forfeited. However, most property owners can establish water rights through their continued actual use of the water (known as "use it or lose it").