In the past water licences were “attached” to land and accordingly were transferred automatically on sale. The Department of Natural Resources and Water is in the process of converting water licences into water “allocations” under the Water Act 2000 that are a stand-alone entitlement that can be separately sold or transferred.
Water allocations are therefore now tradeable commodities that can have substantial value independent of land value.
Agents involved in rural sales should consider the value of water allocations when listing the property and negotiating price. If a water allocation is not specifically mentioned in a contract then the property will be sold without the water allocation.
The land contract may include the sale of the water allocation. If the allocation is intended to be included in the sale at the contract price, it must be specifically mentioned in the special conditions as being included. Alternatively, two separate contracts may be prepared.
Regardless, it is essential that information be obtained from a seller regarding water allocations before the property is placed on the market. It should be considered as to whether the water entitlement should be dealt with separately and whether there are other potential buyers for the allocation, for example, a neighbouring landowner.
Water allocations are now registered on a separate registry called a Water Allocation Register (WAR) at the Department of Natural Resources and Water. A search of this register can be made by doing an ordinary title search using the registration number.
It is also probable that a buyer’s financier when taking security over property that contains a water allocation will have certain requirements that the buyer will need to comply with. This should be drawn to the buyer’s attention by the buyer’s conveyancer.