What is a Shared Well Agreement
A shared well agreement is a document prepared for water rights property owners who are connected to a common water well. While water rights law differs by jurisdiction, in many areas it is entirely possible for multiple properties to share a single well, either because their lots are small or because they are located in a master planned development. In many cases, this is even provided for by a development’s Covenants, Conditions and Restrictions . However, while the water rights may be spelled out in your CC&Rs, the actual logistics of well usage often are not covered.
This is where a shared well agreement comes into play. If you and your neighbor are all drawing from the same well, you need to clearly define how that right of use will work. As with any business contract, the shared well agreement should cover the cost of maintenance, use restrictions, rights of removal, damages and liabilities, and remedies.
Components of a Shared Well Agreement
The key elements of a shared well agreement are water rights, maintenance responsibilities, cost-sharing, and the dispute resolution process.
Water rights set out each neighbor’s water right to the shared well. A typical approach is that the neighbors are essentially sharing the water equally. "Equal" can mean equal volumetric amounts or equal uses (i.e., commercial use versus residential use). No matter what, neighbors should know how the well water is to be shared before the well is drilled. If it is not known until after the well is drilled, that could be a problem if water is being over drawn from the well.
Maintenance responsibilities can be very particular to the type of well being constructed. For example, a dug well will need yearly cleaning, but a drilled well will not. Regardless of the type of well, a contractor will typically monitor it for the first year, during which time the neighbors should have agreed who is responsible to take over after the contractor is finished.
Cost-sharing is likely to be the most contentious part of a shared well agreement. How the cost is to be shared should be based on the fair perceptions of each neighbor. To illustrate how perceptions can lead to problems, consider this: One neighbor could be forced to accept a much smaller share of the well because the larger land was simply able to absorb drilling costs to place its well much closer to the water source.
Finally, the dispute resolution process needs to be addressed, which would require feeling amongst the neighbors will likely be high. It could be required that the neighbors enter mediation prior to initiating litigation. Another option would be having the chosen well driller also act as the mediator to help settle the dispute.
Issues with a shared well can be handled with open discussion between neighbors and the use of a shared well agreement.
Writing a Shared Well Agreement
Assuming that the title search shows no problems with the well and all of the parties are in agreement, drafting the Shared Well Agreement should involve the following steps:
- Identify and list the parties
- Identify the property by metes and bounds
- Draft the appropriate clauses for Joint Use, Maintenance, and Dispute Resolution.
- Have the agreement reviewed by an attorney.
- After all of the parties have reviewed the drafted agreement and they agree on the terms, arrange for all parties to sign the document.
- Hold the original in escrow with a trusted third party or index it in the local real estate records office. Note that to be effective against third parties a recorded Shared Well Agreement is recommended.
Legalities of a Shared Well Agreement
Well-sharing agreements are not unique to Texas, but Water Well Inc. suggests that you have a written agreement with your neighbor covering the details of your shared well and/or pipeline. Most states do not make any distinction between surface water rights and aquifer/pumpage rights. The critical issue for both parties is that there be a neighborhood association or a preferred party to represent both parties to look after their mutually advantageous interests. A written agreement is usually required by lenders and title companies, etc. before they will close on any property transaction involving a well. It is one of the first items a title company will look for when reviewing a proposed transaction. We strongly suggest that you have a legally drawn up agreement if it is not done through a well association. The agreement should be explicit as to the responsibilities of each party. For example who will do the maintenance, testing and repairs. Both parties need to agree as to the service fees. Spelling out all the basic details can eliminate friction between two neighbors.
Commonly Encountered Problems with Shared Well Agreements
While having a shared well agreement can be incredibly beneficial, there are still some problems that can arise. One common issue is disputes over usage. In some cases, neighbors may be putting too much stress on the well or using too much water. When that happens, one neighbor may want to reduce water use by others or reduce the overall quantity of water that the shared well produces. In some cases, a neighbor responsible for installing a new pump can refuse to pay for a replacement. You can prevent many of those issues through the use of a well agreement. However, disagreements between neighbors can still occur even if there is an agreement in place . Common reasons for these issues include:
Dispute over maintenance costs or charges for water use
Disagreement over a new pump or well repairs
Disagreement over a replacement or new access road
In most cases, the greater problem is the first, which involves disputes over maintenance cost. There are a number of ways you can handle these issues prior to the development of a well. One option is creating a percentage of shares. For instance, you could have a set percentage of shares for each property in a well agreement, and then you would simply agree that each owner pays that percent of the total cost to maintain the well. You can also have a set dollar amount. So instead of a percent of shares for a repair, you would bill owners a set amount whenever maintenance is required.
Of course, if the disagreement arises after a well is developed, it’s often best to try mediation with the other well owners.
Shared Well Agreement Example
Section 3: Sample Shared Well Agreement Template
Below is a sample shared well agreement template to show you how to organize your shared well agreement. Please note that this is only a template. You can follow this template as closely as you want, or choose to incorporate elements from other templates. Just remember that you do not have to abide by any specific set of rules when constructing a shared well agreement. As long as it works for you, it works. This Shared Well Agreement Agreement is made this ___ day of _________, 20XX by and between [NAME OF PROPERTY OWNER 1] located at [OWNER 1’S ADDRESS], hereinafter referred to as "Owner 1," and [NAME OF PROPERTY OWNER 2] located at [OWNER 2’S ADDRESS], hereinafter referred to as "Owner 2," (collectively, the "Owners"). Each Owner may also individually be referred to as an "Owner" and collectively as the "Owners." Each Property Owner intends to construct, own, operate, repair, maintain, replace and remove wells within the Easement Area as defined herein. This Agreement establishes the rights of the Owners with respect to their use of the Easement Area and the Wells constructed to access water supplied by the Easement Area for agricultural, domestic and livestock use.
Recitals A. The Owners are both owners of real estate which is adjacent to shared boundaries with respect to each Owner’s Property located in: ______________________.[1] B. The Owners wish to enter this Agreement to set forth the terms upon which they will share certain water wells and associated infrastructure located on the Property in order to serve each Owners’ water needs for agricultural, domestic and livestock use. C. Seewhereas paragraph on Common Well above.Back to Common Well paragraph above. AGREEMENT In consideration of the mutual covenants and conditions contained in this Agreement, the receipt and sufficiency of which is acknowledged by the Owners, the Owners mutually covenant and agree as follows: 1. This Agreement is intended to benefit and bind the Owners and their respective successors and assigns. Neither Owner will have a separate right with respect to any Well or Easement Area which would conflict with the terms of this Agreement or the interest of the other Owner that is to be established by this Agreement. 2. Each Owner represents and warrants that he has full power and authority to enter into this Agreement and to perform his obligations hereunder. Each Owner has taken all actions required by applicable law to authorize the execution, delivery and performance of this Agreement. When executed and delivered, this Agreement will be legally binding on each Owner. 3. Each Owner assumes responsibility for each well owned by such Owner on his Property, including the Well constructed in the Easement Area and the Easement Area from time to time. Each Owner may construct, maintain, repair, replace and/or remove Wells on his Property but may not construct, maintain, repair, replace or remove the Well constructed in the Easement Area or disturb the Easement Area in any manner without prior authorization from the other Owner. 4. To the extent that an Owner constructs, maintains, repairs, replaces or removes a Well, such Owner will be responsible for the costs, expenses and liabilities related to such Well, except for ordinary wear and tear as determined by the Owner. Each Owner will be responsible for the costs, expenses and liabilities related to all Wells existing upon his Property on the date of this Agreement and in all Wells constructed upon his Property prior to July 1, 20XX. After July 1, 20XX, each Owner will be responsible for the costs, expenses and liabilities related to his Wells, including Wells constructed in the Easement Area if the Easement Area is no longer common to both Owners. Wells which are commonly owned will be treated according to 2.2, above. 5. The Owners may revise this Agreement at any time by written instrument which must be executed by the Owners. Each revision will be subject to the mutual agreement of the Owners. 6. This Agreement is governed by the laws of the State of ____________________, excluding its conflicts of laws rules. The parties hereto have executed this Agreement as of the day first above written. _____________________________ _____________________________ [NAME] ____________, a _______________ [NAME] ____________________ _______________________________ _____________________________ [NAME], an Individual [NAME], a [STATE OF INCORPORATION] [TYPE OF ENTITY]
Advantages of a Well Written Shared Well Agreement
A well-drafted shared well agreement can provide numerous benefits to all parties involved. By clearly defining each party’s rights and obligations, as well as the terms of use and maintenance of the well, a shared well agreement helps to prevent disputes from arising in the first place, and resolves many of the potential issues that underlie common disputes. A sound agreement provides a mechanism for allocating costs and resources proportionately, so that one party does not carry more than its fair share of the burden. This ultimately protects the interests of the other co-owners. Having these provisions in place means each party has an equal opportunity to invest in the well , while improvements that benefit all parties are borne only by those that use the well.
Provisions that allocate liability are also vital to a shared well agreement. In the absence of an agreement, the owner of the land where the well is located may be held strictly liable for any underground pollution that results from the drilling of a well on the property or from the abandonment of the well if the well is left uncapped (penetrating the cap rock seal above an aquifer). A shared well agreement can protect the landowner from liability by apportioning negligence and creating a mechanism for sharing any costs that arise from the well. It can also set forth safety and environmental provisions that minimize the potential for risk and liability.