Equitable conversion
Encyclopedia
Equitable conversion is a doctrine of the law
of real property
under which a purchaser of real property becomes the equitable owner of title to the property at the time he/she signs a contract
binding him/her to purchase the land at a later date. The seller retains legal title of the property prior to the date of conveyance, but this land interest is considered personal property
(a right to the payment of money, rather than a right to the property). The risk of loss
is then transferred to the buyer if a house on the property burns down after the contract has been signed, but before the deed is conveyed, the buyer will nevertheless have to pay the agreed-upon purchase price for the land. Such issues can and should be avoided by parties by stipulating in the contract who will bear the loss in such occurrences. The above rule varies by jurisdiction, but is the general rule.
his real property to his son, and his personal property
to his daughter. If the seller dies after the contract for conveyance is signed, his interest in the land will be treated as personal property, and will pass to his daughter.
The State
of New York
does not recognize equitable conversion. In New York, as long as the buyer is without fault, the risk of loss remains on the seller until the buyer takes title or possession.
Law
Law is a system of rules and guidelines which are enforced through social institutions to govern behavior, wherever possible. It shapes politics, economics and society in numerous ways and serves as a social mediator of relations between people. Contract law regulates everything from buying a bus...
of real property
Real property
In English Common Law, real property, real estate, realty, or immovable property is any subset of land that has been legally defined and the improvements to it made by human efforts: any buildings, machinery, wells, dams, ponds, mines, canals, roads, various property rights, and so forth...
under which a purchaser of real property becomes the equitable owner of title to the property at the time he/she signs a contract
Contract
A contract is an agreement entered into by two parties or more with the intention of creating a legal obligation, which may have elements in writing. Contracts can be made orally. The remedy for breach of contract can be "damages" or compensation of money. In equity, the remedy can be specific...
binding him/her to purchase the land at a later date. The seller retains legal title of the property prior to the date of conveyance, but this land interest is considered personal property
Personal property
Personal property, roughly speaking, is private property that is moveable, as opposed to real property or real estate. In the common law systems personal property may also be called chattels or personalty. In the civil law systems personal property is often called movable property or movables - any...
(a right to the payment of money, rather than a right to the property). The risk of loss
Risk of loss
Risk of loss is a term used in the law of contracts to determine which party should bear the burden of risk for damage occurring to goods after the sale has been completed, but before delivery has occurred...
is then transferred to the buyer if a house on the property burns down after the contract has been signed, but before the deed is conveyed, the buyer will nevertheless have to pay the agreed-upon purchase price for the land. Such issues can and should be avoided by parties by stipulating in the contract who will bear the loss in such occurrences. The above rule varies by jurisdiction, but is the general rule.
Effect of death of a party
If one of the parties dies after the contract for sale of the property has been executed, the doctrine will govern how that party's interest will pass to his heirs. For example, the seller willsWill (law)
A will or testament is a legal declaration by which a person, the testator, names one or more persons to manage his/her estate and provides for the transfer of his/her property at death...
his real property to his son, and his personal property
Personal property
Personal property, roughly speaking, is private property that is moveable, as opposed to real property or real estate. In the common law systems personal property may also be called chattels or personalty. In the civil law systems personal property is often called movable property or movables - any...
to his daughter. If the seller dies after the contract for conveyance is signed, his interest in the land will be treated as personal property, and will pass to his daughter.
The State
U.S. state
A U.S. state is any one of the 50 federated states of the United States of America that share sovereignty with the federal government. Because of this shared sovereignty, an American is a citizen both of the federal entity and of his or her state of domicile. Four states use the official title of...
of New York
New York
New York is a state in the Northeastern region of the United States. It is the nation's third most populous state. New York is bordered by New Jersey and Pennsylvania to the south, and by Connecticut, Massachusetts and Vermont to the east...
does not recognize equitable conversion. In New York, as long as the buyer is without fault, the risk of loss remains on the seller until the buyer takes title or possession.