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Signed Into Law
Signed May 24, 2025Effective 2025-09-01
SB2550

Regular Session

Relating to an exemption of the transfer of certain rights in water from certain disclosure requirements applicable to the transfer of certain interests in real property.

Government Affairs & Regulatory Compliance Analysis

SB2550: Government Affairs Overview

SB 2550 deregulates the transfer of severed water rights by removing the requirement to provide irrelevant real estate disclosures (such as HOA obligations, coastal erosion, and annexation notices) for transactions involving only groundwater or surface water rights. This legislation impacts water brokers, energy land departments, and title companies, requiring a bifurcation of closing processes to distinguish between "fee simple land" and "water rights only" transactions.

Sen. Royce West·Senate Bill·Regular Session

Low
Low Cost
Effective:2025-09-01
Business Impact

Who SB2550 Affects

This legislation has regulatory implications for the following Texas businesses and organizations:

Regulatory Priority: low

Standard regulatory changes (effective 2025-09-01). Review during normal business planning.

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Water

Affected business types:

  • Water utilities
  • Wastewater treatment facilities
  • Municipal water districts
  • Agricultural water users
View all water legislation

Key Operational Considerations

  • 1Deed Preparation: Ensure the granting clause is strictly limited to groundwater or surface water rights to qualify for the exemption.

Estimated Cost Impact

lowMinimal cost impact anticipated.

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SB2550
Low
Relating to an exemption of the transfer of certain rights in water from certain disclosure requirements applicable to the transfer of certain interes...
Low Compliance Urgency
Requires routine attention
Cost Impact
Low
Effective
2025-09-01
Primary Author: Sen. Royce West
89th Texas Legislature
jdkey.com
01

Compliance Analysis

Key implementation requirements and action items for compliance with this legislation

Implementation Timeline

  • Effective Date: September 1, 2025
  • Compliance Deadline: September 1, 2025 (Applies to all contracts entered into on or after this date).
  • Agency Rulemaking: None required. The statute is self-executing.

Immediate Action Plan

  • 1. Segregate Workflows: Immediately update intake checklists to classify deals as "Surface/Fee" or "Water Rights Only."
  • 2. Update Templates: By August 1, 2025, strip the now-exempt disclosure forms from your "Water Rights Only" closing packets.
  • 3. Audit Pipeline: Identify any deals currently under negotiation that will sign after September 1, 2025, and adjust the draft contracts to reflect the new disclosure regime.
  • 4. Issue Internal Guidance: Distribute a memo to landmen and closing agents clarifying that "Water Rights Only" means *no surface land whatsoever*.

Operational Changes Required

Contracts

  • Purchase and Sale Agreements (PSAs): Review standard templates for water rights transfers. Remove "Savings Clauses" or "Statutory Notice" appendices that automatically incorporate Property Code § 5.011 (Annexation), § 5.014 (HOA), and Natural Resources Code § 33.135/61.025 (Coastal/Erosion) for water-only deals.
  • Deed Preparation: Ensure the granting clause is strictly limited to groundwater or surface water rights to qualify for the exemption.

Hiring/Training

  • Closing Teams & Title Agents: Staff must be trained to identify the asset class immediately. They must stop attaching "standard" real estate disclosure packets to water rights files, as doing so may now create confusion regarding the nature of the asset.

Reporting & Record-Keeping

  • File Documentation: While you are removing forms, you must document the *reason* for the omission. Create a standard file memo for water-only closings stating: *"Statutory real property disclosures withheld pursuant to SB 2550 (Exemption for Water Rights)."*
  • No New Filings: There are no new government reporting requirements.

Fees & Costs

  • Cost Reduction: Minor administrative savings due to reduced paperwork and packet preparation time.
  • Liability Reduction: Eliminates "technical foul" liability where a contract could previously be voidable for failing to disclose a coastal erosion notice on a groundwater permit sale.

Strategic Ambiguities & Considerations

  • The "Mixed Asset" Trap: The statute explicitly applies to the transfer of *"only"* a groundwater or surface water right. It is unclear if the inclusion of a small surface easement (e.g., for a pump station or access road) disqualifies the transaction from the exemption.
  • Operational Directive: Until case law clarifies "only," if a transaction includes any surface fee interest or easement alongside the water right, do not use the exemption. Provide full real property disclosures to prevent the contract from being voidable.

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Information presented is for general knowledge only and is provided without warranty, express or implied. Consult qualified government affairs professionals and legal counsel before making compliance decisions.

02

Legislative Timeline

This bill's path through the Texas Legislature

Filed
Mar 13, 2025
Passed Senate
May 5, 2025
Passed House
May 12, 2025
Signed
May 24, 2025
Effective
Sep 1, 2025
TopicsProperty InterestsProperty Interests--real PropertyWaterWater--generalWater--rights
03

Senate Authors

Sen. Royce WestDemocrat · Primary Author

House Sponsor

Rep. Drew DarbyRepublican · Primary Sponsor

Bill Text(with markup)

View bill text in multiple formats on Texas Legislature website

Fiscal NoteView Original

Related Legislation

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Related by Topic

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Quick Reference

Frequently Asked Questions

Common questions about SB2550

Q

What does Texas SB2550 do?

SB 2550 deregulates the transfer of severed water rights by removing the requirement to provide irrelevant real estate disclosures (such as HOA obligations, coastal erosion, and annexation notices) for transactions involving only groundwater or surface water rights. This legislation impacts water brokers, energy land departments, and title companies, requiring a bifurcation of closing processes to distinguish between "fee simple land" and "water rights only" transactions.

Q

Who authored SB2550?

SB2550 was authored by Texas Senator Royce West during the Regular Session.

Q

When was SB2550 signed into law?

SB2550 was signed into law by Governor Greg Abbott on May 24, 2025.

Q

How significant are the changes in SB2550?

The regulatory priority for SB2550 is rated as "low". Businesses and organizations should review the legislation to understand potential impacts.

Q

What is the cost impact of SB2550?

The cost impact of SB2550 is estimated as "low". This may vary based on industry and implementation requirements.

Q

What topics does SB2550 address?

SB2550 addresses topics including property interests, property interests--real property, water, water--general and water--rights.

Q

What are the key dates for SB2550?

Key dates for SB2550: Effective date is 2025-09-01. Consult with legal counsel regarding applicability.

Q

Which Texas businesses are affected by SB2550?

SB2550 primarily affects property owners and real estate professionals. These businesses should review the legislation with their legal and compliance teams to understand potential impacts.

Need Strategic Guidance on This Legislation?

JD Key Consulting is an Austin, Texas-based government affairs firm led by James Dickey, former Chairman of the Republican Party of Texas. We specialize in Texas regulatory compliance and legislative strategy for data centers, energy, banking, and manufacturing.

Legislative data provided by LegiScanLast updated: January 11, 2026