It has long been the law in Utah that water rights that are appurtenant to land pass automatically to the grantee of a deed unless they are specifically reserved by the grantor. Utah Code Ann. § 73-1-11. A year and a half ago, the Utah Supreme Court ruled in the Little v. Green & Weed case that this law applies only to perfected water rights such as certificated water rights because only perfected water rights can become appurtenant to land. It appeared therefore that non-perfected water rights would have to be specifically identified and addressed in conveyance documents in order to transfer such non-perfected water rights. However, a late 1993 Utah Supreme Court decision found that language in a trust deed was sufficient to convey to the lender non-perfected water rights that were not even contemplated at the time that the trust deed was executed.

In Loosle v. First Federal S&L, the Loosles financed the purchase of some property through a loan and trust deed with First Federal S&L. In the course of occupying the property, the Loosles filed an application with the State Engineer to appropriate spring water on their property for culinary and irrigation use. They later filed an application for a well and had proceeded on that application to the point where proof of appropriation had been filed. However, no certificates of appropriation had been issued yet. The Loosles then defaulted on their loan and First Federal S&L foreclosed and acquired the property pursuant to the trust deed. Both the Loosles and First Federal S&L claimed ownership of the non-perfected water rights.

Because neither of these rights was perfected yet, the water rights were not appurtenant to the land and could not be automatically conveyed with the land. However, the Supreme Court stated that the general references in the trust deed to all "water and water rights" in addition to all "appurtenances" evidenced an intent of the parties to convey water rights that had not yet become vested or appurtenant. Therefore, it ruled that the trust deed, upon foreclosure, conveyed all water rights associated with the land including unspecified, non-perfected water rights arising after execution of the trust deed.

In routine conveyances of non-perfected water rights, it is still best to specifically identify the subject water rights. However, water users should carefully consider the possible impact of the broad language in trust deeds when financing land purchases. This is particularly true where there is the potential for developing water rights that need not become appurtenant to, or are in excess of those needed on, the mortgaged land.

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