Buying or Selling a Horse – Not as Simple as a Handshake

By: Crystal McDonough

When I bought our first horse it was for my daughter for 4H. At that time, I knew very little about horses, much less buying or selling a horse. Fortunately for me, we had a good veterinarian, and my husband grew up with horses so he had a fair amount of knowledge. That first horse turned out to be a good experience for all of us (my daughter included), but that is not always the case. What do you need to know if you are buying or selling a horse?

First thing to know – do not use a “form” contract off the internet! Each state has specific laws that may apply such as brand inspections, state or local agency requirements, or some other legalities. Sometimes a bad contract is worse than no contract. But a good contract can cover the state requirements and potential issues that could arise, giving both the buyer and seller some certainty and understanding of the process. As I like to say, if good fences make good neighbors, then good contracts make good business deals.

Typically, horse sellers, breeders, or brokers do not offer guarantees or returns. So it is important to know what you are getting into before you sign a contract or purchase a horse. If you are buying a horse, get a copy of the veterinary records and a full health history and Coggins report, and have your veterinarian do a comprehensive examination. For registered horses, you may want to enter into a Letter of Intent to Purchase that allows for a due diligence period in order to examine medical records, insurance documents, and registration papers. If you are considering a trial period or a lease/purchase option, then you will want to have a more comprehensive pre-purchase agreement. A pre-purchase exam is at the buyer’s expense and should be done either by your veterinarian or an independent veterinarian. A pre-purchase medical exam can cost between $500 and $5,000 and is paid by the buyer regardless of whether the buyer purchases the horse or not.

For more expensive horses, it is not uncommon to have agents or trainers act as brokers for the sale. This can be a great option; however, it is important that you understand the agent or trainer’s experience in such sales and their fees up front before you sign any agent or broker agreement. In addition, you need to know who is paying those fees which are essentially commission fees. For example, a trainer may charge 10-25% of the purchase price, and the buyer is often on hook for those fees.

If you are purchasing a horse from out of state, then you will need to know both the seller’s state laws and your state laws regarding transporting livestock between states. You may have to board a horse temporarily before transportation can be arranged or scheduled. If boarding is required, then a boarding agreement must be in place to cover details such as cost and care for your horse. Make sure to have insurance cover your horse the day you take ownership even though you may not have physical possession of the horse yet.

Occasionally, I will have a client ask the difference between a horse’s legal title and the horse’s breed registration. This is an important distinction, especially if you are taking out a loan to purchase the horse. Legal title is established through a bill-of-sale and other written transactional documents that trace the ownership from one owner to another, and often include warranties related to the horse. The breed registration does not establish legal title, but it is an important part of ownership. It can educate the legal title, and in some cases, breed registration can be used as collateral for the purchase of a horse.

Both sellers and buyers should understand that horses are usually sold “as is” without any warranties, expressed or implied. There is no guarantee that a horse is going to perform for you as it does for the previous owner. If you are the seller, it is important to disclose all known health and behavioral issues. If you don’t disclose, and it is discovered later by the buyer that you knew there were problems or potential issues, then you could be liable to the buyer for veterinary bills, training, and possibly other legal remedies. It is always best practice to be transparent during the purchase/sale of a horse. It will make the transaction smoother and reduce potential risks.

Horse ownership can be so enjoyable, but there are risks. The best way to mitigate these risks is to have all the appropriate documents such as a bill-of-sale, breed association transfer form, brand inspection if required, insurance, and all necessary health documentation. Having these assurances in place can make both the sale/purchase process smoother and horse ownership a rewarding experience. Ready to buy or sell a horse? Contact McDonough Law Group today.

Navigating the Complexities of Elder Law with McDonough Law Group

Elder law addresses the complex needs of elderly individuals and their families. As people age, many face the uncertainty of how their health, assets, and overall well-being will be managed. At McDonough Law Group, we understand these challenges and are committed to guiding you and your loved ones through the intricacies of planning for the future.

End-of-Life Planning: Preparing for the end of life is a sensitive but essential aspect of elder law. Our attorneys assist in crafting detailed plans that respect your wishes and ensure that your end-of-life care is handled according to your specific desires. This includes drafting estate plans (wills and trusts), end of life directives, making funeral or memorial arrangements, and ensuring that all pertinent legal and financial affairs are in order.

Powers of Attorney: Establishing a power of attorney (POA) is vital in elder law planning. This allows individuals to appoint someone they trust to manage their affairs if they become incapacitated. A power of attorney allows you to authorize one or more individuals to act on your behalf regarding property, finances, and healthcare decisions, if you are ever unable to do so.

Guardianship and Conservatorship: When an individual no longer has the capacity to make certain decisions on their own, establishing guardianship or conservatorship may become necessary. These legal tools allow a designated guardian or conservator to make crucial decisions on behalf of the incapacitated or vulnerable adult. Our attorneys guide families through the legal process ensuring the protected person’s interests are prioritized and safeguarded.

At McDonough Law Group, we pride ourselves on our ability to offer personalized elder law services that anticipate the needs and address the concerns of older adults and their families. If you’re looking for guidance on elder law matters, or if you have questions about how best to protect the interests of an elderly loved one, contact McDonough Law Group today.

Expanding Horizons: McDonough Law Group’s Growth and Enhanced Legal Services

McDonough Law Group is proud to announce significant expansion, enhancing our capacity to deliver exceptional legal services across a broader geographical area. With recent additions to our team licensed in Idaho and New Mexico, we are better positioned than ever to serve our diverse client base.

Our firm’s commitment to innovation and client-focused service remains at the forefront of our expansion. By integrating cutting-edge technology and streamlined processes, we’ve simplified client interactions, making our services more accessible and user-friendly. Whether through virtual consultations from the comfort of your home or in-person meetings in our strategically located offices, our approach is designed to cater to your convenience and needs.

Each new attorney at McDonough Law Group brings a unique experience and a fresh perspective, contributing to our collective ability to handle a wide range of legal challenges. Under the leadership of founder Crystal McDonough, we continue to foster deep, meaningful relationships with our clients. This relational approach allows us to truly understand and effectively address your specific legal needs, delivering personalized results.

As McDonough Law Group steps into this exciting phase of growth, we remain dedicated to our mission: providing smarter, more creative legal solutions through genuine client relationships and a streamlined, efficient service model. We are grateful for the trust our clients place in us and look forward to continuing to serve both existing and new clients with the highest standards of legal excellence.

Contact McDonough Law Group today to discuss your specific needs.

Understanding Conservatorships and Guardianships: Legal Protection for Vulnerable Adults

Navigating the complexities of conservatorships and guardianships is crucial for ensuring the protection of vulnerable adults. These legal arrangements are designed to safeguard individuals who are no longer able to manage their personal care or financial affairs due to various incapacities.

Conservatorships
A conservatorship is a legal arrangement designed to protect vulnerable adults who cannot manage their financial affairs. It creates a relationship between a court-appointed Conservator and a protected person.

The Conservator gains the authority to make financial decisions on behalf of the protected person when they are unable to do so themselves. This safeguards the individual from financial exploitation, including scams and other forms of abuse.

Establishing a conservatorship requires judicial intervention, with ongoing court oversight to ensure the protected person’s interests are safeguarded. Conservatorships typically arise when no financial power of attorney is in place.

Guardianships
A guardianship is a legal arrangement that may become necessary when an individual becomes incapacitated, even if they have a medical power of attorney in place. This often occurs due to illnesses like dementia or Alzheimer’s, which can leave adults vulnerable and unable to secure their basic needs.

Similar to a conservator, a guardian is appointed by the court to ensure that an incapacitated adult is properly cared for when they can no longer care for themselves. The guardian’s responsibilities include securing essential needs for their ward, such as food, shelter, clothing, and healthcare.

Conservatorships and guardianships serve as essential legal tools for protecting vulnerable adults from exploitation and ensuring their basic needs are met. Whether managing finances through a conservatorship or addressing personal care needs under a guardianship, the oversight provided by these arrangements is vital. For families facing such decisions, understanding these legal structures and seeking competent legal advice is crucial to navigate the process effectively and ensure the well-being of their loved ones.

If you or someone you know might benefit from a conservatorship or guardianship, or if you have questions about establishing these protective arrangements, don’t hesitate to reach out. Contact McDonough Law Group today to discuss your specific needs and ensure your loved ones receive the protection they deserve.

Water Law Wisdom: The Turner v. Bassett Case and New Mexico Water Rights

By: Bruce Frederick

The case of Turner v. Bassett[1] is an excellent primer on some important technical aspects of New Mexico water law, as well as a cautionary tale for lawyers and realtors helping clients to sell formerly irrigated land or to transfer irrigation water rights apart from the land. In New Mexico, water rights used for irrigation are appurtenant to the land.[2] This means that if a deed transferring land fails to include an express water rights reservation, any water rights appurtenant to the land will pass to the buyer along with the land.[3] But water rights can also be “severed” from the land by a permit issued by the Office of the State Engineer (“OSE”) and transferred to new places or purposes of use.[4]

The fight in Bassett was over who owned 312.5 acre-feet/year of highly valuable irrigation water rights developed but no longer used on 125 acres of land in the Estancia Valley, New Mexico. The Bassetts sold the land to Turner in 1984, and neither the deed nor the purchase contract had mentioned any water rights. However, the Bassetts argued that the water rights had been severed by permit, and therefore, there was no need to include an express water rights reservation in the deed conveying the land to Turner.

It was undisputed that, in 1974, Ray Bassett had obtained a permit from OSE severing the water rights and transferring them to new places and purposes of use, namely, to supply drinking water to the local population that ultimately became the Town of Edgewood. However, although that population was steadily increasing, only a fraction of the water rights was needed in 1984 to meet the demand for water. As a result, the Bassetts had not fully applied all of the water rights to the new purpose and place of use when they sold the land to Turner, but they had obtained a series of extensions of time from the OSE in which to do so, so their permit was in good standing. Although that did not affect the validity of their permit, it did create an opening for Turner under the holding of Sun Vineyards, Inc. v. Luna County Wine Development Corp.[5]

In New Mexico, a permit to transfer water rights is technically not “vested” until the water is fully applied to beneficial use at the “move-to” location in accordance with all permit and statutory requirements.[6] Permittees are usually required to use the full amount of water subject to the permit at the move-to location and file appropriate “proofs of beneficial use” (“PBU”) within three years or risk cancellation of their permit. However, if despite reasonable diligence a permittee cannot fulfill this requirement, either in whole or in part, the permittee must apply for and obtain extensions of time every three years, or risk permit cancellation, until all of the water is placed to beneficial use at the move-to location.[7]

The process of vesting a transfer permit used to supply drinking water to a growing population necessarily requires decades to complete, which is perfectly fine under the applicable statutes so long as the permittee obtains the necessary extensions of time. In New Mexico, reasonable diligence in putting water to beneficial use in accordance with law is generally all that is required to maintain a permit or a water right over time.[8]

However, Sun Vineyards called this fundamental precept of western water law somewhat into question. Prior to selling a parcel of land, the seller in Sun Vineyards had obtained an OSE permit to sever a portion of the irrigation water rights from the parcel and to transfer that portion to an adjacent parcel. In other words, the seller desired to “spread” its existing water rights over a larger area. However, at the time of the sale, the seller had not filed a final PBU with the OSE, which turned out to be a fatal flaw from the seller’s perspective, at least under the facts of Sun Vineyard.   

The deed conveying the parcel in Sun Vineyards included the clause, “with water rights.” It did not include a water rights reservation and none of the conveyance documents mentioned the transfer permit previously obtained by the seller. The buyer apparently had no idea that any of the water rights historically used to irrigate the conveyed parcel would be withheld from the sale, and therefore, filed a suit to quiet title to the full amount of water rights, and also brought tort and contract claims.

The Supreme Court held for the buyer, explaining:

[Although] approval of the [transfer permit] would have permitted the [seller] to undertake spreading [of the water rights], the transfer would not vest until the spreading ripened into valid rights through beneficial use as documented by final [PBUs]. … Here, [the seller] did not reserve the right to continue the [statutory] procedure necessary to accomplish a beneficial spreading of water rights from the [conveyed parcel]. Conveyance of the [parcel] without reservation resulted in the discontinuation of a procedure which could have reduced existing water rights through their proportionate transfer to adjacent land. … In other words, once [the seller] sold the land, without reservation of rights, the procedure necessary to accomplish a beneficial use of water through spreading was interrupted and a proportionate [severance and] transfer from the conveyed land was prevented from vesting.[9]

In other words, because the seller had not filed a final PBU with OSE, the severance and transfer process were “discontinued,” and therefore, the water rights subject to the permit remained appurtenant to the parcel conveyed to the buyer. This is a unique and also short-lived holding.

Although Bassett did not formally reverse Sun Vineyards, it essentially limited the case to its facts. Practically speaking, Bassett rewrote the holding of Sun Vineyards to clarify the law applicable to permits that sever irrigation water rights from the land and transfer them to new uses and/or places, holding:

[A] bright line rule [as held in Sun Vineyards] that a severance is interrupted upon sale of the underlying land makes little sense when a contract or tort claim does not arise. Considering the statutes, regulations and practice of the State Engineer, a better approach to the issue of severance is to recognize the issuance of a permit as giving rise to a presumption that the land and water rights are no longer appurtenant. Without more, the conveyor of title to the land who has acquired a permit [from OSE] need not express in the conveyance documents that which is already presumed as a matter of law: the land passes without water.[10]

However, the presumption of severance is not conclusive:

If the seller acts as if the land and water remain as one, if the seller creates reasonable expectations in the buyer contrary to the presumption of severance, then those water rights remain within the power of the court to order full relief to the parties, just as this Court did in Sun Vineyards. We clarify, however, that a post-severance conveyance of land, even in the absence of reservation of rights, does not nullify a severance. Individuals who hold water rights, like the Bassetts, and follow the statutory and administrative procedures to effect a severance and initiate a transfer, may convey the underlying land severed from its former water rights, without necessarily reserving those water rights to the seller in the conveyance documents.[11]

Bassett was correctly decided. Had the Supreme Court in Bassett simply applied the holding in Sun Vineyards, as the Court of Appeals had, a community water supply would have been seriously compromised, the buyer would have obtained a windfall, and empty formality would prevailed over substance and standard OSE practice. However, the true moral of Bassett and Sun Vineyard is that conveyance documents should always carefully and fully describe the parties’ intentions regarding any water rights, even if every agrees there are none. If the seller obtained a permit severing irrigation water rights from the land before the sale, for example, the conveyance documents should make that clear. To avoid any possible confusion, the deed conveying the water rights could even include a contingent reservation clause, expressly reserving to the seller all appurtenant water rights, if any, if that is consistent with the parties’ intentions.

[1] 2005 NMSC 9, 137 NM 381.

[2] NMSA 1978, § 72-1-2 (1907).

[3] Twin Forks Ranch, Inc. v. Brooks, 1998-NMCA-129, 125 N.M. 674, 964 P.2d 838 (stating that appurtenant water rights, never severed by permit, passed to the buyer by contract without a reservation of rights).

[4] See NMSA 1978, § 72-5-22 (1907); NMSA 1978, § 72-5-23 (1941), and 19.26.2 NMAC (2005). These statutes are part of the New Mexico Surface Water Code, but New Mexico courts have applied these same laws to cases involving the transfer of groundwater. 2005 NMSC 9, n. 1.

[5] 1988 NMSC 75, 107 N.M. 524.

[6] See, e.g., Sun Vineyards, supra.

[7] See, e.g., 19.26.2 NMAC (2005).

[8] See, e.g., Sun Vineyards, supra.

[9] 760 P.2d at 1293.

[10] 2005 NMSC 9, ¶ 24.

[11] 2005 NMSC 9, ¶ 24.

Navigating Real Estate Purchases: Essential Due Diligence for Water Rights

By: Kirsten M. Kurath

Looking to buy a farm or ranch property, or even a large spread out of town? We can help you with the purchase and sale contract, but just as importantly, we can assist you with the necessary due diligence for the water rights that may be associated with the property.

Many people do not realize until late in the purchase process that title companies will not provide title insurance for water rights like they do for the land. Likewise, it is almost impossible to get a title opinion from an attorney without spending thousands and thousands of dollars on the necessary research. Even then, it is unlikely you will ever get a definitive title opinion that can really guarantee you will have absolute fee title in a certain water right at a certain rate or volume. And any properly advised seller will not convey water rights with any warranty of title.

The reasons for this have to do with Colorado water law. There is no registry of ownership for water rights. Furthermore, water rights can be conveyed without even identifying the water rights in the deed conveying the property because Colorado law allows conveyance of water rights by the catch-all deed language “and all appurtenances”, if the grantor intended to convey the water rights with the land. Also, water rights can be conveyed separately from the land, creating an entirely new chain of title.

Another thing to keep in mind is that the amount of the water right is not just based on its original decree, but it is also based on its historical use. This is particularly critical if you want to change the use or place of use of the water right. You need to be sure that no portion of the water right has been abandoned, and that any conditional water right has been maintained through proper diligence applications with the water court. In some circumstances, even if a water right has a very senior priority, this does not necessarily mean you will be able to divert water for the entire irrigation season. And if the water right is more junior, you will want to be sure that any necessary augmentation plan is in place and understand what maintaining that plan will cost you in the future.

While there may be no complete guarantee when you purchase water rights, you should investigate as much as possible. At McDonough Law Group, we can help you with the due diligence you should complete before deciding to close on the property. This may include researching the record title to the extent possible, reviewing the original decree and any subsequent decrees, reviewing the records on file with the Department of Water Resources, talking with the local water commissioner, reviewing augmentation plans and contracts, reviewing well permits, talking with the ditch company, if applicable, and addressing other issues that may arise in the investigation.

Contact me at (970) 776-3311 if you have questions about water rights relating to your real estate purchase.