It is common for a mini-development plan to consist of a five to ten acre parcel that is split into several smaller lots. It’s best when well share agreements are in place. The developer will have one “exempt” domestic water well drilled to serve all of the lots. In order to remain exempt from regulation the well will serve a small number of lots, falling below the Public Utility Operator Certification requirements of the New Mexico Department of Environmental Quality. The developer then dedicates the water, well and necessary equipment to the new lot owners. The result is a loose association of people sharing a single exempt well, generally managed by one of the lot owners. Usually, the well manager has little to no experience managing water systems. At some point, well maintenance is required and the members of the well share association are unprepared to respond to the problem. If there is not a properly written and recorded well share agreement in place to address issues as they arise throughout the life of the well, disagreements can arise and neighborly relations can succumb to discord.
What follows is a recipe for an effective document memorializing your agreement and tips for successful well share agreement.
Authorized Water Systems Manager and Treasurer
To begin, each shared water system must have a designated manager. Contractors and inspectors must know who has the authority to authorize services and who will make the payment following repairs. The well share agreement should name the association’s manager, defining his or her authority and responsibilities. Include the term of office, contact information as well as how replacements are elected. There should also be a second in command in cases where the manager is unavailable or unable to perform duties.
The not-for-profit association’s agreement should name a treasurer, defining the treasurer’s authority and duties in managing funds for the association and making payments of invoices.
A good well share agreement has provisions for tardy and absentee member nonpayment. Moreover, the agreement should have a specified plan for covering expenses in excess of currently available funds in order to prevent an unpaid Contractor from filing a Contractor’s Lien against the association.
Provisions for amending a bad well share agreement, or a well share agreement that no longer addresses the needs of the association, should be incorporated into agreement itself.
Location, Location, Location
To avoid future litigation and difficult relations, the best arrangement is for the water well, storage tank, booster pump and all associated equipment to be located on a separate parcel of land that all lot owners share an equal and undivided interest in. To avoid disputes, this parcel of land should house a separate electrical power meter in the name of the association. Each association member should also have an individual water meter. One member of the association should be the designated meter reader and do so on a monthly basis in order to generate monthly water bills based upon true consumption, pro-rated electrical service and any maintenance and repair costs incurred during the month.
If the well is located inside the property boundaries of an association member, there must be easements for ingress and egress for each member of the association to avoid issues of trespass. If such a lot owner claims that only he or she has the right to enter the property, inspect or service the well then he or she runs the risk of operating a private water company not a sharing well and may be subject to New Mexico Department of Environmental Quality penalties and tax assessments.
Water quality should be tested regularly. Water systems serving more than 25 persons are technically subject to NMDEQ authority and must be managed by a NMDEQ Certified Water Plant Operator. Failing to monitor water quality raises liability issues and may result in sick or injured association members who encounter contaminated water.
Many institutional lenders require water quality tests prior to funding. Good well share agreements will have language stipulating the sharing of test findings with other association members and new well share owners.
Enough Water for All?
It is crucial to ensure that your well share agreement provides a legal claim to adequate water services in the future. Developers divide parcels into smaller lots. Each owner of a lot may then split their lot into smaller lots. However, if each buyer can subdivide his or her lot, the well share rights increase. A well share agreement should make it clear whether a buyer has the right to subdivide. Can the well, or aquifer, sustain future demands? Some shortages can be cured with additional water systems equipment, others cannot. A good well share agreement will address the problem of what to do when the water system no longer delivers adequate water service due to the increase in new lots from further subdivision.
Problems arise when the original well share agreement set aside a small parcel for the well site and related well equipment. There is no room on the parcel to drill a second well. A separate parcel of land should be set aside and dedicated for the drilling of a future well.
Anyone considering buying into a well share agreement must ask what guarantees there are that the system will continue to operate and sustain all of the association members. If the well runs dry and there is no option for a second well, the property owner will watch their investment and equity dry up.
Avoiding the pitfalls of a bad or absent well share agreement begins with the creation of a not-for-profit well share association with a manager, second in command, treasurer, meter-reader and clearly defined responsibilities and authority of each office, including terms of office and provisions for replacement. A separate well site property in which all association members have an equal and undivided interest is crucial. Where the aquifer may not meet the needs of all association members for at least fifty years, a separate second site should be dedicated to the drilling of a future, deeper well. Though the future presents unknowns, a good well share agreement can ensure that in the face of adversity all will be well.