In an assessment of takes as part of changing water regulations, the ORC found many landowners did not have the legal right to take water on their properties.
Council regional services director Jeff Donaldson said at a committee meeting this week most of the water rights were still held by a previous owner but were used by the present owners, who believed they had implied permission under the Resource Management Act (RMA).
''That is a very cloudy area.''
Council policy and resource planning director Fraser McRae said ''implied transfer'' did not have legal status so, theoretically, they were not permitted to take the water.
''There is no tie between land and water.''
The council was making those owners aware of the problem and telling them to address it.
Cr David Shepherd said landowners could run into ''significant trouble'' if they did not own their water take as Otago made the transition from mining permits to RMA consents over the next eight years.
If the property was irrigated, the legal agreement giving the right to take water was the ''most valuable piece of paper'' a landholder had, as it determined the property's value, he said.
Cr Gretchen Robertson said she knew of one case where a North Island farmer bought an irrigated property in Otago and the previous owner then asked for more money for the water right.
''It's a risk.''
Council resource management director Selva Selvarajah said when solicitors did the land transfers on properties, they also needed to transfer the water right to the new owner.
However, that was not happening. The council had met some solicitors to emphasis the importance of transferring the water takes but some still ''ignored'' the issue, he said.
The only thing the council could do was continue to meet solicitors about the issue.
Cr Shepherd said a good sale and purchase agreement should include those things.
''The legal fraternity need to respond to this and tidy this up.''
