Background
Having access to water makes a big difference to the value of farm land. Water permits can be essential to a farm or vineyard’s operations. Water permits can therefore be extremely valuable, and when buying a property it is important to make sure there is a valid water permit in place and that it can be transferred.
Restrictions on water use
The Resource Management Act 1991 (“RMA”) prohibits water being taken, used, dammed, or diverted, unless that is allowed by a national environmental standard (established by regulations made under the RMA), by the applicable regional plan, or by a resource consent.
An exception is that fresh water may be taken for reasonable domestic needs or for animals’ drinking water if there is no adverse effect on the environment. However, in most cases, water permits will be required where significant amounts of water are required for farming activities.
Buying a property
Details of water permits will not be included in a LIM from the local council, as it is the regional council which issues water permits, rather than the local council. Therefore, when you are buying or leasing a property, you should obtain copies of water permits for the property from the regional council, and check the regional plan.
You should check the terms and conditions of the water permits to make sure they can be transferred to you, and that they allow you to use a volume of water sufficient for your needs. You also need to make sure that the person selling the land also owns the water permit.
The sale or lease agreement should contain a requirement for the owner to also transfer the water permits to you on settlement free of any charges, or to allow you to use the water during the term of the lease.
Usually, water permits are transferred by sending a transfer notice which has been signed by both the seller and the buyer to the regional council. It is therefore important to make sure the seller gives you a signed transfer on the settlement of your purchase.
Water rights agreements
Instead of having a water permit transferred to you, you can also sign a water rights agreement with the owner of the water permit. This allows you to have the benefit of a water permit for a limited time. It is commonly used for leased properties. It should cover issues such as what happens if there is a breach of the water permit, or if the regional council changes the terms of the permit.
Summary
Water permits can add significant value to a property or business, so it is essential when buying a property or business, or taking a lease, to make sure there is an adequate water permit in place, and that you will get the benefit of that permit by transfer or other arrangement.