Rachel is buying a 15-acre irrigated farm in Cascade County, Montana. The seller has a deed of trust on the property with an outstanding balance. The seller also holds documented water rights under a 1952 appropriation date, which are appurtenant to the land. At closing, the seller's deed of trust is paid off and released. Which statement BEST describes how the water rights should be handled in this transaction?
Correct Answer
B) The water rights must be separately conveyed by a water rights assignment deed and disclosed in the transaction, as they are appurtenant but separately transferable under Montana law.
Under the Montana Water Use Act (MCA Title 85, Chapter 2), Montana follows the prior appropriation doctrine. Water rights are appurtenant to land — meaning they are attached to the land and ordinarily transfer with it — but they are also separately transferable and must be specifically documented and disclosed in a real estate transaction. A water rights assignment or quitclaim of water rights is typically executed as part of the closing documents to properly convey the water rights. Disclosure of water rights is required under the Montana Seller Disclosure Act. The DNRC administers water rights adjudication and records.
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