What is equitable conversion in real estate?

What is equitable conversion in real estate?

Equitable conversion is the common law principle that holds that, once two parties have entered into an agreement for the sale of real property, the purchaser under the agreement is the owner-in-equity of the land, and the seller is deemed to hold legal title only as security for the payment of the purchase price.

Who bears the risk of loss in a real estate contract?

The majority of states hold that the buyer bears the risk of loss because the doctrine of equitable conversion has given the buyer equitable title. A minority of states hold that the seller bears the risk of loss until legal title passes to the buyer.

What is an equitable interest contract?

According to Lawpath, equitable interest “arises when there is an interest in the property, but no legal title exists.” It’s a broad term that covers an interest established through principles of fairness, rather than the true legal assignment of ownership.

Who bears the risk of loss before closing?

The seller holds the property in trust for the buyer until final closing and the deed has been recorded. This means that the risk of loss of damage to the property before closing and before recording, falls on the purchaser unless otherwise agreed to in a written agreement.

What is the purpose of equitable conversion?

The doctrine of equitable conversion is used to make a buyer the equitable owner of title to the property at the time that they sign a contract binding them to purchase the land at a later date. The buyer is deemed the equitable owner after the contract is signed, but prior to the closing.

What is equitable doctrine of conversion?

What is the equitable mortgage doctrine?

The equitable mortgage doctrine was created to prevent unscrupulous lenders from disguising what was really a loan, as a sale and option, in order to avoid having to go through the foreclosure process in the event of default.

What are equitable remedies in law?

Equitable relief, also referred to as an equitable remedy, is a type of court-ordered relief for an aggrieved party that is used when ordinary legal remedies – such as awarding damages – are considered inadequate justice for the suffering party.

How do you prove equitable interest?

An equitable interest usually has to be in writing, but does not require creation by deed. An equitable interest attaches to land and is good against the whole word except a bona fide purchaser for value without notice (BFPFVWN), or an interest that is otherwise formally registered in a superior way.

What if house burns down before closing?

If damage occurs before closing, the seller will transfer to the buyer all rights to recover insurance proceeds for the damage, and the seller will pay for the deductible under the insurance policy. The buyer can then deal with the insurance process and ultimately end up with a rebuilt building.

What is equitable mortgage charges?

In an equitable mortgage, the owner has to transfer his title deed to the lender, thereby creating a charge on the property. The owner also orally confirms the intent of creating a charge on the property. An equitable mortgage is also known as an implied or constructive mortgage.

What is the legal definition of equitable conversion?

Convenient, Affordable Legal Help – Because We Care! Equitable Conversion Law and Legal Definition. Equitable conversion, in the context of real estate law, refers to when, after the parties have entered into a binding contract for the sale of land, the buyer becomes the “equitable owner” before the delivery of the deed.

How to avoid risk of loss and equitable conversion?

Buyers and sellers can avoid the application of the equitable conversion doctrine through their sales contract. For example, the sales contract can expressly assign who will bear the risk of loss. It can also require the property be insured and provide who will benefit from the insurance proceeds should a loss occur.

How does the UVPRA negate the doctrine of equitable conversion?

Uniform Vendor and Purchaser Risk Act. A growing minority of States have adopted the Uniform Vendor and Purchaser Risk Act (UVPRA) in one form or another. The UVPRA negates the doctrine of Equitable Conversion as it relates to the risk associated with loss. The risk of loss is retained by the seller (Vendor/Grantor) under the UVPRA.

When does a purchaser become an equitable owner?

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.