You Bought It, But Can You Build on It?

Coeur d’Alene, Idaho, May 18, 2017. Imagine: you’ve saved up diligently for years and are now ready to buy that picturesque land out in the country you’ve been yearning for. You make your down payment, sign the papers, get the loan, and everything checks out at closing. Success! Now it’s time to start building that dream house. So you go down to the County office, get your building permit application, and start moving forward. But wait: suddenly you hear there’s a problem. The County can’t give you a permit because it has determined water is not “legally available” for the house you’re building. You’re left with nothing but a vacant lot and a monthly mortgage payment.

This seeming nightmare scenario is all too real for many Washington State landowners following the Washington Supreme Court’s recent decision in Whatcom County v. Hirst, Futurewise, et al., 186 Wn.2d 648, 381 P.3d 1 (2016). This decision will have a great impact on owners of rural Washington land served by wells—whether the well requires a permit or is permit-exempt.

The Court’s opinion is relatively lengthy and touches upon various complex areas of land use and environmental law. But the gist of it is that under Washington State’s Growth Management Act (Revised Code of Washington chapter 36.70A), counties and other local government entities with the power to grant building permits are required, before granting a permit, to ensure there is an adequate water supply for the building’s intended use.

The Court’s opinion stated an “adequate” water supply does not simply mean that there is water under the ground—i.e., that water is factually available.  Rather, the Court’s decision requires the county or other local government entity to determine that water is also legally available.

The distinction between “factual availability” and “legal availability” of water is crucial. As the Court reasons, determining whether water is “legally available” involves analyzing whether senior (i.e., prior in time) water rights would be impaired if the application for a new well is granted. Importantly, a previous Washington Supreme Court decision held that senior water rights can include earlier-passed rules setting minimum instream flows for surface water. Postema v. Pollution Control Hr’gs Bd., 142 Wn. 2d 68, 81, 11 P.3d 726, 735 (2000).

In other words, if a government agency in Washington State puts out a rule for minimum instream water flows in a certain area, that rule has the same status as a water right as if someone drills a well on their property for their own use. And just like a private individual’s water rights, government regulations on minimum instream flows have priority in Washington over later-filed water rights.

So, to the extent drilling a new well can decrease surface water flows, a new well on rural land can effectively violate the senior water right of the minimum instream flow rules. As a result, under the Court’s decision, water from a new well may not be deemed “legally available.” And it is now up to the counties and other local entities to determine, on a case-by-case basis, whether rural properties to be served by a well have “legally available” water.

This new Court-mandated system will be a significant burden on Washington counties, who now have to find the administrative and technical resources and expertise to make these determinations. And Washington State rural property owners who want to develop their land will now have to hire professionals such as engineers and surveyors to analyze the “legal availability” of water on the land, which certainly will not come cheap. These increased burdens on landowners will most likely be a blow to rural property values, potentially upsetting family financial and retirement planning.

The sweeping nature of the Court’s ruling and the broad scope of the potential consequences have led to a strong opposition. Various industry groups, such as Washington REALTORS, have expressed their opposition to the ruling. And the Washington State Legislature has responded in the form of Senate Bill 5239. This bill would attempt to alleviate the impact of the Court’s ruling by making changes to the Growth Management Act and other Washington statutes. The bill passed the Washington State Senate 28-21 on February 28, 2017. The bill was introduced in the Washington State House of Representatives on March 2, 2017 and has been referred to the Agriculture & Natural Resources Committee. Both property owners and real estate professionals in Washington will be watching the progress of this bill closely.

For now, however, the Court’s decision remains Washington law. Unless the legislature passes and the Governor signs a bill overturning the decision, owners of rural property will face significant roadblocks to developing their land. And prospective buyers of those properties will need to be very careful if they plan to build.

~~~

Note: This post is not legal advice, and should not be relied upon as such. Different sets of facts will likely lead to different legal conclusions. If you need assistance with real property matters, call Bristol George, PLLC for a one-hour, no charge consultation to see if we can help.

~~~