Advocate Article: Drafting Key Provisions of a Shared Well Agreement

By: Arthur B. Macomber, Managing Attorney, Bristol George PLLC

Author Bio: For over a decade, Bristol George, PLLC has focused on real property, land use, water and construction law. Prior to attending the University of California Hastings College of the Law, Mr. Macomber enjoyed 25 years in business, real estate and construction. Mr. Macomber’s undergraduate degree in business was accomplished at George Fox University.

Article published in The Advocate, Water Law Section, October 2017

Synopsis: This article addresses key and preferred provisions of domestic shared well Agreements that govern drinking water services for fewer than 15 service connections[1] or 25 or fewer people.[2] These contracts include real property conveyance, maintenance, use, and enforcement provisions that should run with and be appurtenant to the land served. Specialized termination provisions will assure continuing services even if some service connections and user obligations are terminated.

BASICS OF A SHARED WELL AGREEMENT

Shared Well Agreements with one’s neighbors are complex and potentially messy relationships. In Humphries v. Becker, the parties entered into a Shared Well Agreement, but did not properly identify the well.[3] The property was conveyed to a purchaser who, based on representations of the seller, believed that the well subject to the Shared Well Agreement would be sufficient to provide water to both the house and their irrigation system.[4] In reality, the well serving the irrigation system was on a farmer’s adjacent property and was only used with his permission.[5] The farmer cut off the irrigation water usage when a conflict arose between the purchaser and the farmer. As a result, the purchaser sued the seller for misrepresentation.[6] The original parties’ failure to sufficiently identify the well in the Shared Well Agreement caused the seller to incur the expense of costly litigation that could have been avoided.

Drafting a well-written Shared Well Agreement will help your clients avoid common pitfalls and expensive litigation. A Shared Well Agreement is a contract regarding the drilling, maintenance, and use of a well. As a contract, the Agreement’s core provisions must properly identify the parties, properties, well and water distribution system, maintenance liabilities, easements, and registered water rights, if any. Parties must be identified with their full legal names exactly as shown on their deeds. The properties, well, and easement locations subject to the Agreement must be identified using valid legal descriptions and a diagram showing the locations of the well and distribution system attached as exhibits. Failure to properly identify and to specify uses and maintenance liabilities for the well in the Agreement can lead to future misunderstandings and expensive litigation.

PURPOSE OF THE AGREEMENT

To avoid confusion, the parties’ must clearly state their purpose for having a Shared Well Agreement, which is usually a conveyance of a property right in the water. The parties should consider whether their use will be continuous, periodic, or seasonal. Also, the Agreement’s provisions should specify the intended use as exclusively domestic or whether it includes agriculture or commercial use. Clearly expressing the purpose of the well contract can avoid trouble between the present parties and any subsequent owners of land subject to the Agreement.

Parties ought to list the permissible uses in their Agreement. Each use needs both a clear definition and a limitation on its use. Parties should also contemplate whether they want to allow third parties to use their water and if so, under what conditions or limitations (i.e. livestock, guests, contract service providers, firefighters, etc.).

The simplest way for the parties to state their purpose for the well is to expressly limit the well to domestic use only. Idaho exempts domestic uses of groundwater from most permitting and fee requirements.[7] Idaho defines domestic uses as “water for homes, organization camps, public campgrounds, livestock and for any other purpose in connection therewith, including irrigation of up to one-half (1/2) acre of land, if the total use is not in excess of thirteen thousand (13,000) gallons per day.”[8] If, however, the land owner uses the water for multiple ownership subdivisions, trailer parks, commercial, or business it is limited to 2500 gallons per day.[9] For many land owners, limiting their Agreement to domestic uses will fulfill their water needs. If the parties’ use exceeds the statutory definition of domestic use, they will need to acquire a new water right.

Additionally, lenders may require specific provisions for shared water agreements to secure their investment in mortgaged property. Parties should draft the Agreement and any amendments to conform to their lenders’ requirements as well as applicable federal, state, and local laws.

WELL OPERATION

After the Agreement has identified the parties, properties, and purpose of the Agreement, it must outline who is responsible for the installation, operation, and maintenance costs of the well. The water users should be jointly liable for allowable well use and maintenance. Taking time to specify how the parties will split costs of well maintenance, repair, upgrades, and replacement of well equipment, including the timing for payment of such costs can help avoid disputes between the parties’ and subsequent owners.

A well Agreement should clearly establish who pays whom for regular expenses. Methods vary, depending on how many people own the well, and how formal they want the Agreement to be. Some people are comfortable paying a single well owner directly. Often, sophisticated Agreements set up a trust fund with a local bank from which designated parties can withdraw funds. The designated party can account for these funds by providing regular statements to the other parties. Yet, splitting the bill can be tricky when some parties use more water than other parties. An Agreement can mitigate this problem by requiring the installation of individual water and electric meters for every water connection and charging according to their actual usage. Some water well Agreements can work with only a flat fee monthly payment, although provisions allowing modification of the fee are necessary.

When a well requires repair, the Agreement must outline who is responsible for repairing it. Usually each property owner is responsible for pipes serving their own dwellings and must share the costs of repairs to common equipment such as water mains, pumps, or a well house. Who gets bids? How many bids are required? How do parties choose between competing bids? Establishing a maintenance schedule is a useful way of structuring the timeframe, cost, and responsibilities of each party. The Agreement should specify the procedure for deciding and performing repairs. If the repairs affect other parties’ use or parties must apportion costs, then repairs will require the advance consent of the affected parties.

Emergencies are situations that are dangerous to health and safety, but a definition of “emergency” should be expressly stated in the Agreement. In an emergency, a good Agreement allows any party to perform necessary repairs with no notice to other users if consent of the other parties is impossible or impractical. It may specify what actions may be taken to affect immediate alleviation of the emergency.

In a Shared Well Agreement, parties must grant mutual non-exclusive easement rights for other parties to access the well house and the water distribution pipelines for repair, maintenance, disconnection, and other necessary reasons. Hiring a surveyor to map these easements is a good way to ensure location accuracy. Easements should run a minimum of four feet on both sides of the underlying water pipe, so that a tractor or ditch digger can ingress and egress for repairs. After being surveyed and attached as an exhibit to the Agreement, provisions must state that such easements remain intact when one party terminates the Agreement, so long as other parties require them, or unless the parties agree to amend or terminate the easements in writing.

It is best for the parties to consider how costs will be apportioned if the use of the well is expanded in the future. Even if a shared well is only used for domestic uses, an increase of groundwater withdrawn might require a bigger well or increased infrastructure. If one party wants to expand its use of the well and the other does not, it might cause a conflict between them regarding any additional costs associated with expansion. A frequent limitation on domestic wells is a bar to using the water for swimming pools. Other identifiable large-volume uses should be discouraged explicitly in the Agreement, either by naming the use, or by metering water volume uses for each connection.

In addition to costs of maintenance and repair, owners of private wells are responsible for ensuring the water is safe to drink. The Idaho Department of Environmental Quality recommends that well owners test their drinking water at least once per year to make sure that it is safe for consumption. Three of the most common contaminants in Idaho are nitrate, total coliform, and arsenic.[10] To test their water, parties can take water samples themselves and have them tested by a laboratory or have an environmental consultant take a sample for them. Include such water quality testing requirements and the frequency of testing in the Agreement.

CONVEYING A SHARED WELL OWNERSHIP RIGHT

Although most landowners can imagine sharing a well with their current neighbor, few contemplate sharing a well with someone who is not an original party to the Agreement. A well-written Agreement includes provisions governing conveyance of an ownership interest in the well to a buyer of the real property served by the well. Most Agreements are conveyed with the deed to the land, because the right to use the water is appurtenant to the land it serves.[11] Some parties may not want a transferable Agreement. Agreements may be for a specific term, or between specific parties. Whatever the case may be, the Agreement should clearly state whether it is a covenant transferable with title and appurtenant to the land, and under what conditions the covenants and appurtenant status terminate. The best Agreements contemplate neighbors who do not get along: the provisions are easily understood and do not encourage disputes because a given party’s performance is clearly stated as to its subject matter and time for performance with explicit penalties for nonperformance, such as terminating water service after due notice.

Unrecorded Agreements undermine enforceability, because successor property owners will likely be unaware of the shared well Agreement. Such was the case in Koelker v. Turnbull. In Koelker, the seller executed a warranty deed to the purchaser but failed to disclose the existence of a third party’s interest in the property pursuant to an unrecorded Shared Well Agreement.[12] When the third parties attempted to exercise their water right in the purchaser’s well, the purchaser sued to quiet title and for the seller’s breach of an express warranty of title.[13] The purchaser obtained a default judgment against the third parties and the seller.[14] The seller appealed and the court held that the seller had breached the express warranty of title and that the measure of the purchaser’s damages was their attorney fees.[15]

The purchaser in Koelker was able to quiet title to their interest in their well, but it was only by a default judgment. Had the purchaser not done so, they may have been forced to share their well with the third parties. The easiest way to avoid the problem in Koelker is for the parties’ to record the Agreement at the county recorder’s office in the county where the well is located. If any service connections are outside that county, the Agreement should be recorded in the other county too. As with any document governing property interests running with the land, modifications should also be written and recorded.[16]

ENFORCING THE AGREEMENT

Even competently written Agreements can be subject to dispute. Some of these disputes occur because reasonable minds disagree as to the best way to approach a problem, such as if the well pump breaks and there is more than one way to repair it or the repair options vary in their cost and effectiveness. However, other disputes may arise solely due to well users who are unwilling to abide by the terms of the Agreement regardless of its provisions. In either instance, the parties should specify a process for resolving disputes and enforcing the terms of an Agreement when necessary.

One option available to the parties of a Shared Well Agreement is to sue to enforce the Agreement. However, litigation can cost many multiples of the cost for a well repair and take too much time to get water for tomorrow’s morning coffee. For this reason, the parties may want to include a mediation or arbitration clause.  Arbitration is usually less expensive than litigation and is binding on the parties. Make sure there are call-and-response notice and performance provisions requiring communication between and actions by parties to the Agreement to assure timely resolution of disputes.

TERMINATION

Most people make Shared Well Agreements in perpetuity, but there may come a day when the Agreement is no longer necessary or feasible. A well-written Agreement will have termination provisions. Often Agreements require a party to notify other parties thirty to sixty days in advance of their anticipated termination. The Agreement may specify reasons for termination, such as availability of a new water source, change in parcel ownership, inadequate water supply, or contamination. Well owners might consider adding a force majeure clause in the event they can no longer provide water for reasons beyond their control.

Parties may need to suspend cessation of water services under the Agreement in certain circumstances. When a party finds a new source of water, like a new well or municipal water source, she may need time to construct and bring her new water source into operation. Agreements allowing parties to use water for a reasonable time prior to bringing their new systems online are beneficial. Seasonal factors, such as frozen ground in winter, or water for landscaping and livestock in the summer must also be considered.

Termination of the Agreement to share a well should not terminate a party’s debts or obligations incurred on or before the termination date. The terminating party typically pays the cost to disconnect his water from the shared system, as well as any damages he may cause to another’s property or the water distribution system in the process. Finally, if a party leaves the Agreement, any changes in the remaining parties’ percentage of shared liability should be adjusted by a provision inserted at contract formation.

CONCLUSION

A well-written Shared Well Agreement is like any other contract. It should give the parties a clear understanding of their water and easement rights to the well and their obligations under the Agreement. Ideally, the Agreement will avoid misunderstandings between the parties by lacking ambiguities concerning definitions, use, maintenance, and repair of the well. Further, if the parties record the Agreement, future disputes may be avoided.[17] Through good drafting, parties contemplating a Shared Well Agreement can avoid many common problems.

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[1] Idaho Code § 39-362(2) (“Community water system” means a public drinking water system that serves at least fifteen (15) service connections used by year-round residents or serves at least twenty-five (25) year-round residents.).

[2] I.D.A.P.A. 58.01.08.003.110 (2009) (“Public Drinking Water System” means a system for the provision to the public of water for human consumption through pipes or, after August 5, 1998, other constructed conveyances, if such system has at least fifteen (15) service connections, regardless of the number of water sources or configuration of the distribution system, or regularly serves an average of at least twenty-five (25) individuals daily at least sixty (60) days out of the year. Such term includes: any collection, treatment, storage, and distribution facilities under the control of the operator of such system and used primarily in connection with such system; and any collection or pretreatment storage facilities not under such control which are used primarily in connection with such system. Such term does not include any “special irrigation district.”).

[3] Humphries v. Becker, 159 Idaho 728, 366 P.3d 1088 (2016).

[4] Id.

[5] Id.

[6] Id.

[7] Idaho Code § 42-227.

[8] Idaho Code § 42-111.

[9] Id.

[10] See Idaho Department of Environmental Quality, http://www.deq.idaho.gov/water-quality/ground-water/private-wells.aspx (last visited June 13, 2017).

[11] Idaho Code § 55-101(1) and (3).

[12] Koelker v. Turnbull, 127 Idaho 262, 899 P.2d 972 (1995).

[13] Koelker, 127 Idaho at 263, 899 P.2d at 973.

[14] Id.

[15] Id.

[16] Idaho Code § 55-101(1) and (3).

[17] Idaho Code § 55-606.