Case of the Month Sandton Agriculture Investments III, LLC v. 4-S Ranch Partners, LLC

Water in California is always precious, but in this case, it was worth hundreds of millions of dollars. A ranch in Merced County lost more than 5,000 acres in foreclosure, but the former owner argued that the underground water — much of it floodwater that had seeped into an aquifer — was still theirs. They claimed it wasn’t part of the land but instead personal property, like barrels of wine in a cellar, and tried to keep it even after the land was sold.

The rule in California water law, however, has been settled for over a century: water in its natural state is part of the land. It is treated as real property and passes with the land unless it is severed; bottled, piped, or otherwise removed and placed in containers. Only then does it become personal property.

The court analyzed the claim and found it lacking. The ranch owners argued floodwater was different, that simply exercising control over it turned it into their personal property. But the judges said no. The water remained in its natural state, seeping and percolating into a natural aquifer. Nothing had been done to separate it from the soil. The law did not recognize “ownership” of floodwater just because it had been allowed to flood and soak in.

The conclusion was unavoidable: the water rights ran with the land. When the land was foreclosed, the water went with it. The ranch owners lost not just the soil but the water beneath it.

For real estate consumers, the case is a cautionary tale. In California, water rights can define the value of farmland, ranches, and even suburban developments. Understanding that those rights travel with the property — unless expressly carved out — is critical. Investors and homeowners alike need to know that water is not just a resource; it’s a legal right tied tightly to the land itself.