Using water? What you need to know about water usage permits

By Barbara McDermott

Water permits can be essential for a farm or vineyard to function and can therefore be extremely valuable assets. A recent court case (Marlborough District Council v Altimarloch Joint Venture Ltd [2012] NZSC 11) highlights the importance of ensuring that the necessary water permits are in place and can be transferred to the purchaser of a property.

The Altimarloch Case

In the Altimarloch case Mr and Mrs Moorhouse sold their Marlborough property to Altimarloch for $2.675m. Altimarloch planned to establish a vineyard on the property.

The Moorhouses' real estate agent and solicitor wrongly represented to Altimarloch that certain water permits were in place. The local Council also gave the incorrect water permit information in a LIM report.

Unfortunately for all parties, after the transaction had been completed, it was discovered that all these water permits were not in place. In order to rectify the situation, Altimarloch had to spend nearly $1.1m to obtain further water permits and to construct a dam. The case was complex, but in essence the Court found the Moorhouses' real estate agent and lawyer liable for Altimarloch's $1.1m loss. The court also found that a Council could be liable for an incorrect statement in a LIM report.

Restrictions on Water Use

The Resource Management Act 1991(RMA) prohibits the taking, using, damming or diverting of water unless it is allowed by a national environmental standard (established by regulations made under the RMA), by the relevant regional plan or by a resource consent. It is, however, permissible to take and use fresh water for reasonable domestic needs or for animals' drinking water provided there is no adverse effect on the environment. In most cases water permits will be required where significant amounts of water are required for farming activities.

Due Diligence and Water Permits

If you are purchasing or leasing a property or business, you can obtain copies of relevant water permits from the Regional Council. As water permits are issued by the relevant Regional Council, details of them are not usually given in a LIM report which is given by the local authority.

It is important to establish who owns the water permits, as they will not necessarily be owned by the person selling or leasing the land or business. If different people own the land or business and the water permits your lawyer will need to make sure that the owner of the water permits is contractually bound to transfer...