Also known as: sales of land · land sale · real property sale
Written by attorneys · grounded in primary & secondary sources — see 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.
Select any source to read its text and confirm it supports the definition.
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.
Samantha 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.
In 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…