Texas land sales now require water disclosures in many deals

Under a rule effective July 1, sellers using most Texas Real Estate Commission contracts must deliver a two-page disclosure about groundwater and surface water rights. TREC adopted its Seller’s Disclosure About Groundwater and Surface Water Rights, Form 61-0, in July. The change applies across Texas and places water information inside the land-sale process.

The form requires sellers to address groundwater wells, rights and management, plus surface water permits and related features. TREC sets a knowledge standard: sellers complete the form “to the best of their knowledge.” Owners, prospective buyers, real estate agents and attorneys all face a new diligence question before a transaction closes.

Scope of the new requirement

Completion is required for sales using TREC contracts. For most property sales using those contracts, the seller must submit the disclosure. The document asks about groundwater conservation districts, wells, ownership and operating arrangements, water supplied from another property, rights held outside the boundaries, and any severance, sale or lease.

The guidance treats water as one of the most valuable and complicated assets attached to Texas land. Form 61-0 therefore does more than inventory ponds and wells. It asks sellers to identify permits, ownership and any prior separation of water rights from the land.

The five-part exception

A seller need not complete the form only if the seller can answer yes to all five statements:

• There are “no active, capped or abandoned water wells on the property.”
• There are no ponds, lakes or tanks on the property.
• The seller does not hold surface water rights or permits from the Texas Commission on Environmental Quality to divert or use surface water.
• There have been no prior severances, sales or leases of groundwater rights.
• The property receives water exclusively from a named city, municipal utility district, water supply corporation or private water company.

If any one statement is not true, the disclosure requirement remains. The final exception can apply only where the seller can name the entity supplying the property.

Groundwater information

For groundwater, the seller must first state whether the property lies within a groundwater conservation district. If it does, the seller must identify the district by name and provide its website. The Texas Water Development Board maintains a map of current districts, and the Texas Alliance of Groundwater Districts provides an interactive map.

For identified wells, the disclosure must report:

• The total number of wells, how many are in use, and how many are inactive but capped, covered, plugged or abandoned.
• Any applicable groundwater conservation district permit or registration numbers.
• Whether the seller owns and operates a well solely for the property’s benefit.
• Whether another person owns or operates the well, or other agreements govern it.
• Whether the property receives water from a well on another property.
• Whether a well on the property relies on groundwater rights owned or leased from outside the property’s boundaries.

The seller also must state whether the property’s groundwater rights have been severed, sold or leased. These answers define both the physical well and the legal right to use it.

Surface water information

For surface water, the seller must disclose any TCEQ permit, filing or certificate of adjudication associated with the property. The seller must provide the permit, filing or certificate-of-adjudication number and identify anyone else who may have an interest in the rights.

The form also requires sellers to identify ponds, lakes and water tanks on the property, whether or not they currently hold water. That requirement reaches physical infrastructure as well as formal rights.

Legal exposure

A seller who fails to deliver a required disclosure gives the buyer grounds to terminate the contract. The buyer would likely recover the earnest money. Material misrepresentations on the form may also support claims for fraud, negligent misrepresentation or other causes of action tied to nondisclosure.

The form therefore can affect both deal certainty and legal exposure. No enforcement totals or claim counts accompany the new requirement, so its practical frequency in disputes remains unmeasured.

What does this change for farm and ranch buyers?

The rule changes due diligence rather than the physical water supply. For an agricultural buyer, the disclosure and exception criteria identify whether water comes from on-property wells, another tract or a municipal supplier, and whether the associated rights have been severed, leased or sold.

Water is an operating input. Buyers must translate those answers into their own cost and margin analysis because the form supplies no estimates for pumping costs, land prices or farm margins.

Buyers and sellers should review every portion of the real estate contract, including the disclosure. The guidance recommends working with an attorney to understand or negotiate the agreement and any water-related contract terms. Landowners who are not selling can still use the form’s questions to research the sources serving their property.

The Owning Your Piece of Texas handbook, Chapter 4, provides additional information on Texas water law. A podcast with Dr. Charles Porter discusses the disclosure. Going forward, every qualifying Texas land sale will carry the same water-rights checkpoint, making the seller’s answers part of the closing record.