What is a Shared Well Agreement?
What is a shared well agreement? A shared well agreement is a legal document intended to ensure cooperation between the owner of a well and one or more other property owners who share the well. It is common and often necessary in Arizona for multiple property owners to share one well. A shared well agreement provides for operation , maintenance and management issues between owners and/or other users of the well. A well sharing agreement must not interfere with ACOD requirements and some developers may require a shared well agreement for their development.
Legality of a Shared Well Agreement in Arizona
The Arizona Department of Water Resources (ADWR) governs the use and the legal and contractual framework within which shared well agreements (also known as well sharing agreements) are defined and operated. First, an agreement must be in writing. Second, it must include certain mandatory provisions and requirements in order to comply with state law. Failure to include all required terms makes the agreement unenforceable. For example, ADWR requires that the agreement define the rights and responsibilities of each of the well owners so that in the event that a disagreement arises, the parties have a remedy clearly spelled out in their agreement. Therefore, the more comprehensive the agreement, the better.
At a minimum, a shared well agreement must include:
In addition to the above requirements, a shared well agreement must also include the following provision:
It is essential to the enforceability of a shared well agreement that these mandatory terms be included. But going even further with your well sharing agreement is beneficial in several ways. For example, although ADWR does require that a shared well agreement be in writing, the statute does not require that such an agreement be recorded with the County Recorder. However, recordation is recommended for several reasons, including one party selling his or her property. With the shared well agreement recorded with the County Recorder, a prospective purchaser of such property will have notice of the well sharing agreement and the obligations it creates.
Benefits of a Shared Well Agreement
There are numerous benefits to entering into a Shared Well Agreement. Most notably, these agreements help to clarify remediation responsibilities. In many cases, for example, the well owner pays for the annual permits and reports required by the Arizona Department of Water Resources ("ADWR"). However, these expenses can be shared among the well owners for wells identified in the agreement. Typically, an annual estimate of these expenses is provided to the well users with each annual payment. A third party accountant or bookkeeper may be designated as the responsible party for collecting all the fees from the well users and submitting all the fees and reports to ADWR. Additionally, the agreement may contain a provision that all well users should also share the costs if repairs or upgrades to the well system are required.
Agreement provisions should be established for common problems as well. It is very important that the agreement spell out the procedures to resolve disputes among the well users. It’s a good idea to designate a mediator – either a third party or an existing co-owner – who can help resolve issues without the need to seek a court order. Additionally, it is also a good practice to designate a third party to make decisions about any issues related to prior to the problem arising (as well as in the event of a dispute). This way, the co-owners won’t have to waste time trying to get everyone to agree on something later on when there is a problem. Finally, written consents should always be obtained from other well users and kept on file (for instance, if a well user sells their home, that person may have to obtain their neighbors’ consent that initials the sale of their portion of the well system to the buyer of their home). Or, if there is a transfer of shares, written consents should be obtained before any changes are made to the well.
Disputes and Obstacles
Most commonly, a dispute over water usage arises if one party taps into the water with more pipes than other parties connected to the well. If you feel that one party is draining the well too much and you are unsure of the amount of water being consumed in the first place, you can always hire a professional to test the present amount of water in terms of gallons per minute. The party consuming too much water may be brought before an arbitrator to settle the disagreement, and an arbitrator can be chosen depending on the region where the well exists.
Disputes over the maintenance of a shared well are likely to come up. If a party is not paying for the cost of maintenance, for example, you can possibly file suit against that party to enforce the contract. In some cases, a judge may have to decide the problem.
Another issue is whether the water yield is enough to meet the demands of all the well owners. So-called "long-term" drought conditions can cause worries about water yield. If some are allowed to use more water than others do, because they are allowed to have more pipes or whatever, it is possible that not enough water will be left for everyone’s needs. When that happens, an arbitrator may have to decide the outcome.
Some agreements will wisely state that if no agreement can be reached as to the proper yield per day, the arbitrator may allow only a certain amount per owner per day, if needed, in order to keep the water supply fair for everyone.
If not written up properly, a water right may be lost. Water rights can be forfeited if used improperly, or not at all. In some cases, you could be subject to penalties and much more.
Creating a Shared Well Agreement
Shared Well Agreement FAQs: What You Need to Know in Arizona
Water Source
Identify the location and description of the well, i.e., the physical address that the well will be located and any identifying description. For example, "Irrigation Well #1 on the Property."
Describe how the water will be delivered to the various parties if the well is located on the land of one of the parties. For example, "The water will be pumped up via pump jack and received at the troughs."
Describe the type of system that will be used, whether buried pipe or above ground piping, and how water will be delivered to the properties in question.
Utility Costs
Identification of who will be responsible for payment of utilities such as electric bills, gas, or water.
Will someone have to maintain a special electrical service contract to deliver the water? If there’s a problem with the well, will the neighbors be required to pay that electric bill quotient, despite not being able to use the well at the time? That may take time to work out.
Well Maintenance
Who is going to be responsible for maintenance of the well itself, such as cleaning, checking pump, flow conditions?
Make clear what maintenance responsibilities each party has under the agreement so there are no resentments or arguments over who is to do what.
For example: "Each party shall have a duty to share the costs equally for the well to the extent that the costs exceed a certain amount, $1,000 for instance. If the costs shall be less than $1,000, then each party shall contribute half of 50 percent of the cost. If the repair costs exceed the $1,000 limit according to the above, then each party’s 50 percent shall be divided into the number of parties involved."
Except where the services are voluntary, it may be good to make equal contributions to help avoid misunderstandings.
Easement and Approval
Neighbor A cannot be allowed to interfere with Neighbor B who plans to build a well in an agreed upon location .
Does the neighbor have to allow a person with a valid authorization to enter onto his or her property to do well drilling?
Any reasonable restrictions should be appended.
Water Rights Distribution
The parties may be able to determine the water shares for parties and the rights each have in the water that the community well produces.
How are the other parties to determine what share or shares of the water is theirs? Does this involve a formula or a percentage? Or does it involve a method of measurement after the water is delivered to a reservoir?
When will this be done? Will it be weekly or monthly?
What happens when a party wants to go offline?
What if the well is disrupted? Will the parties share equally?
Dispute Resolution Process
Imagine the parties have worked out various issues, but a dispute arises regarding the proper interpretation of the agreement. The pumper may feel a part of the well amounts of electricity usage are excessive for the amount of time assigned to be operated by his parties in the agreement. Disputes over infrastructure damages may arise. The parties may want to have an internal process for resolving the issue quickly, so as not to endanger the cooperative efforts.
Change in Ownership
A change in ownership of a property may affect the shareholders in the well. New parties may not be agreeable to the existing arrangement.
What happens when someone sells or gifts their property in the future? Does the buyer have to reach an agreement with the other parties?
Is the agreement assignable?
The parties should be able to agree as to whether the agreement is transferable and under what circumstances exceptions may be made.
Indemnification
Who is liable in the event of an accident?
What happens when one party’s negligence allows the governor to call for a shutdown of the well? Is that party liable for damages to the other parties?
Modifying or Terminating a Shared Well Agreement
As we have seen in our previous discussion on how the Arizona Department of Water Resources (ADWR) can administratively correct issues regarding well proportionate shares, there are times when well proportionate shares need to be modified. Proportionate shares can be modified due to legal changes, such as when a well’s legal description changes based on boundary adjustments. Changes to the property may also trigger the need for a modification. If an existing lot was reconfigured or a 20 or 40 acre parcel was split into two smaller pieces, there would be a need for a new share agreement. New subdivisions (whether commercial or residential) will need to record new shares to be filed with ADWR to address the new subdivision. In the case of the new subdivision, it may need to be recorded to allow the lot owner(s) to receive the same proportionate share to their existing well if they have historic use of water at that well.
Modifications of shares can be more complex. If the intent is to exclude one or more parties under a shared well agreement, then the consent of all parties will need to be obtained and an exemption from the ADWR must be sought (in addition to the change to the legal description). It should also be noted that ADWR may only grant an exemption where there are no unintentional impacts from the elimination of one or more parties.
Under ADWR’s regulations, the following actions must occur:
1. All parties under the original shared well agreement must consent to the amendment of the existing well use agreement, or enter into a new well use agreement.
2. The parties must submit a Shared Well Agreement Exemption Application to ADWR. The application must include:
o A copy of the recorded Well Use Agreement or the proposed amendment and a legal description of the well.
o The number of acres within the subdivided parcel(s) served by the well.
3. Once ADWR approves the exemption, a new well proportionate share must be recorded with the Register of Deeds.
While the rules for modifying or terminating an agreement are easy enough to describe, in practice they can be more difficult. Every situation is unique and will be handled on a case by case basis by ADWR (and to a lesser extent the Arizona Attorney General). This can be further complicated where conditions other than changing the legal description are involved, such as the presence of inholdings in the historic well agreement.
Securing Legal Help for a Shared Well Agreement
Collaborative resources that can be consulted to help a shared well association avoid legal problems include the U.S. Forest Service and the Arizona Department of Water Resources (ADWR). At the same time, however, a qualified water rights attorney can help landowners create valid well agreements or assist in the transition of ownership of a well from one landowner to another.
Shared well agreements are typically straightforward in nature, but these agreements may be subject to state law or ADA regulation. Working with an attorney can thus be valuable for several reasons. For example, a well agreement often needs to be recorded with the county as part of the legal title for individual properties in a shared well association. In some cases, a county can deny the ability to record a well agreement if it has not been approved by ADWR. A lawyer can also be of assistance if a shared well association is trying to collect from a non-paying member.
A lawyer with experience in water rights and real estate can provide much needed leadership , as well as resources and contacts in many different areas. While many people do not believe they need a lawyer to handle a shared well, there can be unforeseen complications. Experts who deal with water issues throughout the U.S. recommend consulting with a water attorney even if they only provide a little general advice on shared well water issues.
Lawyers who specialize in water issues have an inherent understanding of water areas, groundwater basins and streams, and can provide crucial help in developing rules, understanding operating procedures, negotiating with other officials, and determining what types of records associated with a well are beneficial to creating a good shared well agreement. To find a water lawyer that is right for you, personal referrals from other attorneys, family, colleagues or friends can be helpful. In addition, local bar associations often refer clients to lawyers in their areas.