Also known as: equitable conversions
Written by attorneys · grounded in primary & secondary sources — see below
A doctrine under which equity treats a buyer as the owner of land and the seller as the owner of the purchase money once a binding contract for the sale of land is formed. The buyer acquires an equitable interest in the property while the seller holds legal title as trustee. This characterization governs risk of loss, allocation of rents and taxes, and rights of creditors during the executory period.
Eastern Electric signed a contract to buy a warehouse from Edgewater Capital. Two weeks later a fire destroyed the structure. Eastern Electric must still pay the full price at closing because the risk of loss passed upon contract formation.
Ewan Eckhart contracted to purchase a rural tract from Emily Ellis. Lightning destroyed two turbines on the land before closing. Ewan Eckhart remains obligated to complete the purchase at the contract price.
Eclipse Manufacturing agreed to buy an energy facility from Echo Systems. A storm destroyed turbines after signing but before closing. Eclipse Manufacturing cannot avoid the contract or reduce the price.
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Emma Erickson contracted to purchase an apartment complex from Ezra Eastman. Tenants paid rent to Ezra Eastman after the contract but before closing. Emma Erickson is entitled to those rents as the equitable owner.
Eva Espinosa signed a contract to acquire an office campus from a seller. A fire damaged the main building before closing. Eva Espinosa must proceed with the purchase at the full price.
In the majority of jurisdictions risk passes to the buyer at contract formation. The buyer must pay the full price even if the property is later damaged or destroyed. Some jurisdictions or statutes leave the risk on the seller until closing or deed delivery.
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The buyer is entitled to the rents. Equitable conversion gives the buyer the beneficial interest in the land from the moment the contract is formed. The seller holds legal title only as trustee and must account for rents received during the executory period.
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No. The buyer bears the burdens of ownership including taxes once equitable conversion occurs. The seller's retention of legal title does not shift this responsibility back to the seller.
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Under the majority rule the buyer cannot rescind or reduce the price. The buyer must complete the purchase at the contract price and may seek any available insurance proceeds. The seller holds title merely as trustee.
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…losses on the purchaser of land while the purchase contract remained executory. This allocation was derived from the doctrine of equitable conversion. “Equity regards as done that which ought to be done.” The rule could always be modified by express agreement. It survives today where it does survive[^maj-9] largely by reason of its…