Experienced Representation
For Arizona’s Businesses

How water rights affect commercial real estate transactions

On Behalf of | Nov 23, 2023 | Real Estate & Development

In Arizona’s arid landscapes, water is not just a commodity. It is a crucial factor that influences the dynamics of commercial real estate. A property with secure and ample water rights may command a higher value due to the assurance of a sustainable water supply. This is a critical factor for various industries, including agriculture and manufacturing. The availability and management of water rights can also make or break real estate deals.

The foundation of water rights in Arizona

Arizona follows the doctrine of prior appropriation for water rights. This means the first entity to use water for beneficial purposes has the senior right. It is a “first in, first served” approach.

But, for businesses relying on water, like manufacturing, this can be tricky. If they start using water later, it might cause uncertainties. Without enough water, keeping a steady production schedule becomes tough.

Securing water for commercial ventures

The Arizona Department of Water Resources (ADWR) plays a central role in regulating water rights. For businesses considering commercial properties, they must be aware of ADWR’s regulations to ensure compliance.  They must do thorough research to figure out how much and how secure the water rights are for a property. This means:

  • Looking into how water was used in the past
  • Figuring out when the rights were established
  • Checking if there are any limits on transferring those rights

It is a detailed process, but understanding these aspects is vital for anyone looking to invest in commercial real estate in terms of water use.

Transferability and limitations

Businesses must also be aware of any potential limitations on water usage, especially since this could impact their operations. Water rights are not always freely transferable. Some rights may be tied to specific uses or geographic areas. It is essential for buyers to assess the transferability of water rights associated with a property. They must also check for any constraints that might affect their intended commercial activities.

Mitigating risks

Given the complexities of water rights in Arizona, engaging legal counsel is advisable for commercial property transactions. A lawyer well-versed in water law can guide investors through the due diligence process. They can help ensure a comprehensive understanding of water rights and potential risks.

Water rights in Arizona are a nuanced aspect of commercial real estate. It can affect property value and usability profoundly. Businesses aiming to thrive in this dynamic environment must secure a sustainable and legally sound water supply for their ventures.