Legal Definitions - equitable conversion

Equitable conversion is a legal concept that refers to a change in the nature of property, where real property is treated as personal property, or vice versa, in certain circumstances. This change is based on the maxim that equity regards as done that which ought to be done.

For example, when a contract is made for the sale of real property, the buyer acquires equitable title to the property, and the seller retains legal title. However, the seller's interest is treated as one in personal property rather than in real property because the seller's true interest is in the proceeds (usually personal property such as cash); the legal title is security for the buyer's payment. Courts usually apply the doctrine of equitable conversion to recognize the transfer of equitable title, including the right of possession, to the buyer when the contract was signed. The buyer then acquires legal title by performing under the contract.

Another example of equitable conversion is when a person dies and leaves real property to their heirs. The property is treated as personal property until it is distributed to the heirs, at which point it becomes real property again.

Overall, equitable conversion is a legal tool used to ensure that property is treated fairly and in accordance with the intentions of the parties involved.