Written by Jenna McCarty, ARA
Whether you’re on the farm in Yuma; bucking hay bales in North Park; fly fishing the Gunnison; sipping wine in Palisade, drinking craft beer in Fort Collins; or enjoying the afternoon in the Mile High city, distinctive vistas abound.
It’s no wonder real estate is complex and buyers are discerning in the state of Colorado. Regional farm and ranch markets are vast and values vary considerably depending on a multitude of factors, perhaps most significantly, water.
Like many western states, Colorado is privy to prior appropriation water law. Water is a public resource which right-owners have the ability to utilize based on priority of beneficial use. This first-in-time, first-in-right principle is the crux of our water resources and often, its subsequent valuation.
The state of Colorado is divided into seven Water Divisions—the South Platte, Arkansas, Rio Grande, Gunnison, Colorado, Yampa/White, and San Juan/Dolores, for each of the major river basins, and 80 smaller Water Districts. Within each district are several ditch and reservoir systems (i.e. surface water) with varying delivery, method of conveyance, and consumptive use factors. Wells (i.e. ground water) within a district can be tributary, requiring an augmentation plan, or considered non-tributary.
Rights can be absolute or conditional, appurtenant or transferrable, developed or imported, over-appropriated, under-appropriated, exchanged, changed, leased, subject to a dry-up covenant, and more. Understanding how water rights affect land values requires expertise and a familiarity with water right valuation. Should you need to purchase or sell land in the west, you should choose a professional appraiser that has expertise in understanding and valuing this very limited resource. Choosing a rural property professional with an Accredited Rural Appraiser (“ARA”) designation can provide you with a lifeline when dealing in prior appropriation states. The American Society of Farm Managers and Rural Appraisers (“ASFMRA”) has a distinctive network of knowledgeable and competent specialists who have a strong professional code of ethics and are a premier resource to the agricultural community.