David is selling his Eastern Washington orchard to Linda. The property has a senior water right permit dated 1943 that allows diversion of water from Ahtanum Creek for irrigation. During due diligence, Linda's attorney discovers that the water right certificate has never been formally transferred to David's name from the prior owner, even though David has owned the property for 12 years. What is the most significant risk this creates for Linda as the buyer?
Correct Answer
B) The water right may not be legally recognized as part of the property conveyance, creating uncertainty about Linda's ability to use the water after purchase.
If the water right certificate has never been formally transferred to David's name, there is a break in the chain of title for the water right. This creates significant legal uncertainty: Linda may not be able to prove she has a valid, properly conveyed water right after closing, which could expose her to challenges from third parties or the Department of Ecology. Brokers should ensure that water right transfers are properly documented and that the Department of Ecology's records reflect the correct current holder of the right. This is a material title issue that should be resolved before closing.
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Related Topics & Key Terms
Key Terms:
Related Concepts
FREC has the authority to impose fines and other disciplinary actions on licensees who violate real estate laws and rules.
A group boycott is an illegal antitrust practice in which two or more competing real estate businesses agree to refuse to work with a specific person, company, or entity in order to harm that party's ability to compete.
In real estate, the distinction between an independent contractor and an employee determines tax treatment, liability, and the level of control a broker may exercise over the agent's daily activities. Most real estate agents operate as independent contractors.
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