Angela and Bob are under contract to purchase a mountain property near Steamboat Springs. The CREC contract includes a water rights contingency because the property relies on a decreed water right for irrigation. During due diligence, Angela and Bob discover the water right has a very junior priority date and has been repeatedly curtailed during drought years. They want to terminate. Which statement best describes their rights under Colorado law?
Correct Answer
B) Angela and Bob may terminate based on the water rights contingency if the condition of the water right is unsatisfactory within the contingency deadline
Under Colorado's prior appropriation doctrine (C.R.S. § 37-92-101 et seq.), water rights with junior priority dates are at high risk of curtailment during drought conditions under the 'first in time, first in right' principle. The CREC contract's water rights contingency allows buyers to evaluate the adequacy and condition of water rights — including priority date and historical reliability — within the contingency period. If the water right is unsatisfactory for the buyer's intended use, the buyer may timely exercise the contingency to terminate and recover earnest money. A junior priority date that causes recurring curtailment is a legitimate basis for dissatisfaction.
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Related Topics & Key Terms
Key Terms:
Related Concepts
A counteroffer is a response to an original offer that changes one or more terms of the offer, effectively rejecting the original offer and creating a new offer. The party who makes the counteroffer becomes the new offeror.
Earnest money is a deposit made by the buyer at the time of the offer or shortly after to demonstrate good faith and serious intent to purchase the property. It is also called a good faith deposit.
Equitable title is the buyer's interest in a property after a purchase contract is signed but before closing, giving the buyer the right to acquire legal title in the future. The seller retains legal title until the deed is delivered at closing.
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