Also known as: sales of land · land sale · real property sale
Written by attorneys — see sources below.
A contractual transaction by which title to real property passes from seller to buyer upon payment of the purchase price and delivery of the deed. The seller must deliver marketable title free from reasonable doubt that a prudent purchaser would accept. Once a binding contract forms, equitable conversion treats the buyer as equitable owner and may shift risk of loss to the buyer before closing.
Simone Sanders contracted to buy a warehouse from Stonehaven Properties. At closing the title search revealed an unreleased construction lien from a prior owner. Stonehaven could not remove the lien before the deadline. Simone refused to close and demanded return of her deposit plus damages for the unmarketable title.
Sabrina Shah signed a contract to purchase a retail building from Silverline Industries with closing set for thirty days later. Two weeks after signing a fire destroyed the structure. Under equitable conversion Sabrina bore the risk of loss and remained obligated to pay the full purchase price even though the building no longer existed.
Santiago Sanchez bought coastal property in State B from a seller domiciled in State A under a contract selecting State A law. After closing a neighbor in State B claimed a prescriptive easement based on decades of use. The court applied the law of State B because the land was located there and the prescriptive claim turned on local use and expectations.
Scott Summers contracted to buy a farm from Southland Foods with closing scheduled for the following month. A tornado destroyed the barn and damaged irrigation equipment the week before closing. Because the contract contained no risk-allocation clause the majority rule placed the loss on Scott who still had to complete the purchase at the original price.
Seth Shapiro obtained a default judgment in State A against a defendant who owned land in State B. The judgment creditor attempted to sell the State B land to satisfy the debt. Because the defendant had not been served personally in State A the sale of the land was invalid and conveyed no title to the purchaser.
In February 1866, J.H. Mitchell obtained a judgment in an Oregon circuit court against Neff for less than $300 in an action for attorney services. At that time, Neff resided outside Oregon, received no personal service of process, and made no appearance in the case. The judgment was entered by default following constructive service by publication as authorized by the Oregon Code for non-resident defendants possessing property within the state. The Oregon Code also provided for attachment of a non-resident's property in money actions. No such attachment occurred with respect to the land at issue. Instead, after the judgment, an execution issued, leading to a levy on the land and its sale at a sheriff's auction. Pennoyer purchased the property at that sale and received a sheriff's deed. Separately, in 1866, the United States issued a patent to Neff for the same tract of land under the Donation Law of Oregon, which Neff valued at $15,000. Neff then brought suit against Pennoyer in the circuit court to recover possession of the premises based on his patent title. The lower court held the Oregon judgment invalid because of deficiencies in the affidavits used to obtain the publication order and to prove publication occurred. The Supreme Court of the United States granted review to consider the validity of the state court judgment and the resulting sheriff's sale.
View caseSamantha Stone held a life estate in farmland with remainder interests in her grandchildren. She petitioned the court to sell the land and invest the proceeds for her support. The court refused the sale because the life tenant's maintenance needs could be met without destroying the remaindermen's interest in the specific parcel.
John Harrison Weedon was born in High Point, North Carolina. After living throughout the South and two prior marriages that produced daughters Florence Weedon Baker and Delette Weedon Jones, he purchased Oakland Farm, a 152.95-acre tract in Alcorn County, in 1905. In 1915, at age 55, Weedon married 17-year-old Anna Plaxico; the couple worked the farm together, and Anna's daily labor hoeing, picking cotton, and milking fifteen cows protected the property during the difficult years after World War I. Weedon executed his will in 1925, granting Anna a life estate in all his property with remainder to her children if any existed and otherwise to his grandchildren in equal shares, while expressly excluding his daughters because they had not cared for him in his later years. Weedon died in 1932. Anna remarried J.E. Myers in 1933, but that union produced no children that would terminate the grandchildren's contingent remainder. Anna continued operating Oakland Farm until 1955, after which the land was rented for $1,000 per year plus $300 annually from sign rental and $50 monthly in social security. No contact occurred between Anna and Weedon's children or grandchildren from 1932 until 1964. At the time of suit Anna was 73 years old and her income was insufficient for her comfortable maintenance given her age and infirmities. In 1964 the Mississippi State Highway Department acquired a right-of-way across the farm for the U.S. Highway 45 bypass, paying $20,000 of which Anna received $7,500 to construct a new home. A 1970 contract for the sale of soil from the property yielded an additional $1,000 to Anna. At trial the property's commercial value was $168,500 and was projected to reach $336,000 within four years because of the highway construction and the growth of Corinth. Anna filed suit in the Chancery Court of Alcorn County seeking a sale of the property less the house site, with the proceeds invested so that interest would provide her adequate income. The chancellor ordered the sale. The contingent remaindermen Henry Baker, Sarah Baker Lyman, and Louise Virginia Baker Heck took an interlocutory appeal to the Supreme Court of Mississippi to review the decree.
View caseIn many jurisdictions risk of loss passes to the buyer at contract formation under equitable conversion. The buyer must still pay the full price even if the property is damaged or destroyed before closing unless the contract provides otherwise or the jurisdiction follows a minority rule or statute placing risk on the seller until deed delivery.
Supporting sources
Title is unmarketable when it contains reasonable doubt that a prudent purchaser would accept such as unreleased liens gaps in the chain of title outstanding easements or covenants or adverse claims. The buyer may refuse to close and seek rescission or damages unless the contract waives the defect or the seller cures it before closing.
Supporting sources
The law of the state with the most significant relationship to the land and the parties governs interests in the property. For immovables the situs state's law including its choice of law rules usually controls to protect local expectations and policies concerning land use and title.
Supporting sources
…service of the summons on the defendant, the Circuit Court of Oregon had no jurisdiction, its judgment could not authorize the sale of land in said county, and, as a necessary result, a purchaser of land under it obtained no title; that, as to the former owner, it is a case of depriving a person of his property without due…