Water may not be water. Real property law treats it as three different things: groundwater, surface water or waste. Each can belong to a different owner under different rules.
In June 2025, the Texas Supreme Court ruled in Cactus Water Services v. COG Operating that the water produced from oil-and-gas wells on 37,000 acres in the Permian Basin was waste. Under the leases, it belonged to the mineral lessee, not the surface side, even though the leases never mentioned water.
That waste, as produced water, can be worth more than the minerals beneath the same land, which is why two companies litigated for years over who owned it.
This is more than a rural concern. Groundwater supplies close to half of the nation’s drinking water, and more than 43 million Americans get theirs from private wells. Texas just made the conversation mandatory: On July 1, 2026, a new TREC form, the Water Notice on groundwater and surface-water rights, requires sellers to disclose what they know about the water tied to a property.
Owning the dirt may exclude the water
Don’t assume the water comes with the land when representing buyers or sellers. Although produced water is rare, groundwater is the more common stick in the bundle of rights. A buyer’s well water, the aquifer under the land, and the right to drill are all real property that can be conveyed, reserved, leased or severed from the surface, just as minerals can.
Who gets the water (rights) in your state?
The common buyer assumption that “I bought the land, so I get the water” is often wrong, and the correct answer is state-specific:
- In the riparian East, century-old mineral severances still bind later buyers, and states like Florida and North Carolina already require standalone subsurface or disclosure forms.
- Florida, for example, has required a subsurface-rights disclosure concerning severance since 2014 (§ 689.29), applying only to new construction of residential property.
- North Carolina has required since 2015 a Mineral and Oil and Gas Rights Mandatory Disclosure Statement, with direct severance questions a seller must answer before the sale.
- In the prior-appropriation West, including Arizona, Colorado, Idaho, Montana, Nevada, New Mexico, Utah, Wyoming, and water is separate property under “first in time, first in right,” and a senior holder can outrank your buyer in a drought even when the deed looks complete.
- California, by contrast, is a hybrid of riparian and appropriative rights, under its 2014 Sustainable Groundwater Management Act.
Confirm with your managing broker how your state handles real property surface versus subsurface rights.
Available water and subsurface rights affect the offer
Buyers have more leverage concerning water and subsurface rights before offers are presented, so secure legal advice early on. Once sellers accept, the price is set and the deadlines run. Whether minerals were severed, water was reserved, and what the deed actually conveys are questions of title and contract law. Managing brokers routinely refer them out to real estate lawyers.
7 questions to build better offers
Before presenting an offer on rural, ranch, agricultural, recreational or water-dependent property, build these questions into buyer consultations and listing intake. Verify specifics in your state this week.
- Recommend a real estate lawyer before the offer goes out. Title, severance and water-rights questions are legal questions. A pre-offer review can shape price, contingencies, and document requests, rather than fixing problems inside a binding contract.
- Collect water sources early on. An existing well, a planned well, district or municipal service, surface water or a shared arrangement each carries a different set of rights and risks.
- Flag the deed for “surface only” and reservation language. Ask the real estate lawyer whether deed or title documents show mineral or water reservations and exceptions. A deed silent on these issues may convey less than the buyer expects.
- Check for active leases. Oil, gas, mineral, water, wind, solar, pipeline or access leases shape what the buyer controls. In Cactus Water, leases silent on water sent the drilling’s output to the operator, not the surface owner.
- Identify the regulatory district. Ask whether the property sits in a groundwater conservation district or similar authority, and what its rules require. Spacing, permitting and production limits can defeat a plan to drill a new well.
- Confirm a shared well in writing. Shared wells are common and often undocumented. Ask who owns the well, whose land it sits on, whether a recorded easement covers access and water lines, and whether a written cost-sharing agreement exists. A handshake seems sufficient until someone stops cooperating.
- Incorporate water rights in the offer strategy. If the buyer’s land use depends on water, put it in the offer: a price adjustment, a title and water-rights contingency, a document request, a seller representation, a reservation, or a decision not to present an offer at all.
Before the offer, verify what buyers will own
Buyers can purchase the ranch and still not own water rights that provide separate, significant value. Sellers may not know what an older chain of title severed or reserved, and a disclosure form only covers what the seller actually knows.
Water rights are property rights, and in a drought-pressed, fast-growing market they can drive value as much as the minerals or the dirt. But managing brokers and agents do not need to become water lawyers. They do need to spot when surface, mineral or water rights may affect the deal, and recommend that buyers confirm those rights, with legal counsel, before presenting the offer.
In applicable states, adding surface, mineral and water rights queries to buyer and seller presentations shows why informed and prepared licensed agents matter even more for land transactions.
Kelly Lise Murray, J.D., is a Harvard-trained attorney and former Vanderbilt Law faculty member. She cofounded VettingTheHouse.com and DivorceThisHouse.com. Get connected on YouTube and LinkedIn.
