HB 494

02-25 14:00  1st Sub. (Buff) H.B. 494
                           Scott H. Chew proposes the following substitute bill:
1Transfer of Water Interests
                                        2026 GENERAL SESSION
                                              STATE OF UTAH
                                       Chief Sponsor: Doug Owens
                                     Senate Sponsor: Derrin R. Owens
2
3   LONG TITLE
4   General Description:
5This bill addresses water rights, shares in water companies, and their relationship to land
6   conveyances.
7   Highlighted Provisions:
8This bill:
9▸ modifies provisions related to the transfer of shares in water companies;
10▸ addresses that ownership of a share of stock is not maintained on the records of the state
11   engineer;
12▸ addresses the nature of water company shares and the relationship to water companies;
13   and
14▸ makes technical and conforming amendments.
15   Money Appropriated in this Bill:
16None
17   Other Special Clauses:
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18None
19   Utah Code Sections Affected:
20   AMENDS:
2116-6a-606, as last amended by Laws of Utah 2017, Chapter 358
2273-1-10, as last amended by Laws of Utah 2013, Chapter 363
2373-1-11, as last amended by Laws of Utah 2025, First Special Session, Chapter 17
24
25   Be it enacted by the Legislature of the state of Utah:
26Section 1. Section 16-6a-606 is amended to read:
2716-6a-606 . Transfers.
28   (1) Except as provided in Subsection (3), and unless otherwise provided in the articles of
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29incorporation or the bylaws, a member of a nonprofit corporation may not transfer:
30(a) a membership; or
31(b) any right arising from a membership.
32   (2) Except as provided in Subsection (3), where transfer rights have been provided in the
33articles of incorporation or the bylaws of a nonprofit corporation, a restriction on
34transfer rights may not be binding with respect to a member holding a membership
35issued before the adoption of the restriction, unless the restriction is approved by the
36affected member.
37   (3)(a) For a water company, unless otherwise provided by the articles of incorporation or
38bylaws[,] :
39(i) [ ]ownership of [shares] a share is transferrable[.] ; and
40(ii) notwithstanding Subsection (3)(a)(i):
41(A) a shareholder may not transfer a share on or after May 14, 2013, except in
42accordance with Title 70A, Chapter 8, Uniform Commercial Code - Investment
43Securities; and
44(B) a share is not appurtenant to land.
45(b) [Any ] A restriction on the transfer of ownership under Subsection [(3)(a)] (3)(a)(i):
46(i) shall be reasonable;
47(ii) shall be adopted in good faith and for a legitimate purpose;
48(iii) shall be adopted in the best interest of the water company and [its] the water
49company's shareholders; and
50(iv) may not discriminate against [any] an individual shareholder or class of
51shareholders, but in a water company where there are classes or divisions of stock,
52restrictions may differ between the classes or divisions.
53(c) A person who receives a water company share transferred under this section assumes
54the obligation for any unpaid assessment related to the share.
55(d) When a water company's articles of incorporation or bylaws authorize the water
56company to designate a specific unit of land or location on the unit of land to which
57the water company will deliver water, the designation obligates the water company to
58deliver water only to the unit of land or location so designated unless the water
59company consents in writing for the water to be delivered to a different unit of land
60or a different location.
61[(c)] (e) Nothing in this section is intended to alter any right or remedy a shareholder
62may have under Sections 16-6a-612, 16-6a-808, 16-6a-809, 16-6a-822, 16-6a-824,
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63and 16-6a-825, or any other applicable law.
64Section 2. Section 73-1-10 is amended to read:
6573-1-10 . Conveyance of water rights -- Deed -- Exceptions -- Filing and
66   recording of deed -- Report of water right conveyance.
67   (1)(a) A [water right] person shall transfer a water right by deed in substantially the same
68manner as real estate, whether the water right is evidenced by:
69(i) [ ]a decree[,] ;
70(ii) [ ]a certificate of appropriation[,] ;
71(iii) [ ]a diligence claim to the use of surface or underground water[,] ; or
72(iv) a water user's claim filed in general determination proceedings[, shall be
73transferred by deed in substantially the same manner as is real estate].
74(b) [The deed must be recorded ] A person shall record the deed described in Subsection
75(1)(a) in the office of the recorder of:
76(i) [ ]the county where the point of diversion of the water is located; and[ in ]
77(ii) the county where the water is used.
78(c) A recorded deed of a water right shall from the time of [its] the deed's recording in
79the office of the county recorder constitute notice of [its] the recorded deed's contents
80to all persons.
81(d)(i) Beginning July 1, 2011, a deed under Subsection (1)(a) may include a water
82rights addendum as provided in Section 57-3-109.
83(ii) The state engineer shall consider a water rights addendum that is recorded and
84forwarded to the state engineer by a county recorder, in accordance with Section
8557-3-109, as a submitted report of water right conveyance under Subsection (3).
86   (2)(a) A transfer of ownership of a share of stock in a water company, as defined in
87Section 16-4-102, is accomplished only in accordance with Section 16-6a-606.
88(b) The records of a water company, and not the records of the state engineer, determine
89a person's ownership of a share of stock in the water company.
90   [(2) The right to the use of water evidenced by shares of stock in a corporation shall be
91transferred in accordance with the procedures applicable to securities set forth in Title
9270A, Chapter 8, Uniform Commercial Code - Investment Securities.]
93   (3)(a) To update water right ownership on the records of the state engineer, a water right
94owner shall submit a report of water right conveyance to the state engineer.
95(b) The report of water right conveyance shall be on forms provided by the state
96engineer.
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97(c) The report shall be prepared by:
98(i) or prepared under the direction of and certified by, any of the following persons
99licensed in Utah:
100(A) an attorney;
101(B) a professional engineer;
102(C) a title insurance producer; or
103(D) a professional land surveyor; or
104(ii) the water right owner as authorized by rule of the state engineer.
105(d) The filing and processing of a report of water right conveyance with the state
106engineer is neither an adjudication of water right ownership nor an opinion as to title
107or validity of the water right.
108(e) The state engineer shall [adopt] make rules, in accordance with Title 63G, Chapter 3,
109Utah Administrative Rulemaking Act, that specify:
110(i) the information required in a report of water right conveyance; and
111(ii) the procedures for processing [the reports] a report of water right conveyance.
112Section 3. Section 73-1-11 is amended to read:
11373-1-11 . Appurtenant water rights pass to grantee of land -- Exceptions --
114   Conveyance of a portion of irrigated land -- Right to the use of water evidenced by shares
115   of stock -- Appurtenant water rights -- Evidence -- Where appurtenant -- Partial
116   conveyances of water and land.
117   (1)(a) A water right appurtenant to land [shall pass] passes to the grantee of the land
118unless the grantor:
119(i) specifically reserves the water right or any part of the water right in the land
120conveyance document;
121(ii) conveys a part of the water right in the land conveyance document; or
122(iii) conveys the water right in a separate conveyance document [prior to] before or
123contemporaneously with the execution of the land conveyance document.
124(b) If a county recorder records a document that conveys a water right appurtenant to
125land as described in Subsection (1)(a) and relies on the document to maintain a tract
126index described in Section 17-71-302, the state engineer shall rely on the document
127as an effective conveyance of a water right appurtenant to land.
128   (2)(a) If the water right has been [exercised] beneficially used in irrigating different
129parcels of land at different times, it shall pass to the grantee of a parcel of land on
130which the water right was [exercised] beneficially used next preceding the time the
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131land conveyance was executed.
132(b) Subsection (2)(a) applies only to land conveyances executed before May 4, 1998.
133   (3) In any conveyance, the grantee assumes the obligation for any unpaid assessment
134described in Subsection 73-5-1(3).
135   (4)(a) [The right to the use of water evidenced by shares of stock in a corporation ] A
136share of stock in a water company, as defined in Section 16-4-102:
137(i) is not a water right;
138(ii) unless specifically provided for in Section 16-6a-606, is not appurtenant to land[.] ;
139and
140(iii) is transferred only as provided in Section 16-6a-606.
141(b) A person may not use a share of stock in a water company, as defined in Section
14216-4-102, for which the water company designates a specific unit of land or a
143location on a specific unit of land where the water company delivers water in
144accordance with Section 16-6a-606 as the basis for transferring ownership of or
145changing title to a water right belonging to the water company.
146[(b) On or after May 14, 2013, unless provided otherwise in a corporation's articles of
147incorporation or bylaws, the right to the use of water evidenced by shares of stock in
148a corporation shall transfer only as provided in Subsection 73-1-10(2).]
149   (5)(a) This Subsection (5) governs land conveyances executed on or after May 4, 1998,
150and has no retrospective operation.
151(b) For purposes of land conveyances only, a water right evidenced by any of the
152following documents is appurtenant to land:
153(i) a decree entered by a court;
154(ii) a certificate issued under Section 73-3-17;
155(iii) a diligence claim for surface or underground water filed pursuant to Section
15673-5-13;
157(iv) a water user's claim executed for general determination of water rights
158proceedings conducted pursuant to Title 73, Chapter 4, Determination of Water
159Rights, or pursuant to Section 73-3-16;
160(v) an approval for an application to appropriate water issued under Section 73-3-10;
161(vi) an approval for an application to permanently change the place of use of water
162issued under Section 73-3-10; or
163(vii) an approval for an application to exchange water issued under Section 73-3-20.
164(c) For purposes of land conveyances only, the land to which a water right is appurtenant
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165is the authorized place of use of water as described in the:
166(i) decree;
167(ii) certificate;
168(iii) diligence claim;
169(iv) water user's claim;
170(v) approved application to appropriate water;
171(vi) approved application to permanently change the place of use of water; or
172(vii) approved exchange application.
173(d) If a grantor conveys part of the water right in a land conveyance document pursuant
174to Subsection (1)(b), the portion of the water right not conveyed is presumed to be
175reserved by the grantor.
176(e) If the land conveyed constitutes only a portion of the authorized place of use for the
177water right, the amount of the appurtenant water right that passes to the grantee shall
178be proportionate to the conveyed portion of the authorized place of use.
179   (6) Beginning July 1, 2011, a deed conveying fee simple title to land may include a water
180rights addendum as provided in Section 57-3-109.
181Section 4. Effective Date.
182   This bill takes effect on May 6, 2026.
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