MBE Rules · Real Property
Equitable conversion / risk of loss
The rule
Once a land sale contract is signed, equitable title passes to the buyer; legal title remains with the seller. Majority rule: risk of loss falls on the BUYER from contract signing (despite no legal title). UVPRA (minority): risk on the party in possession.
In plain English
When you agree to buy a property, you take on the risk if something happens to it before the deal is finalized, unless you're in a place where the person living there is responsible.
Worked example
After signing a contract to buy a house, a storm damages it. Under the majority rule, the buyer must handle the repairs, even though they don't officially own it yet.
Memory hook
Buyer buys the risk. Equitable title means buyer bears loss, even without legal title.
The trap
Students think: Seller bears risk until closing. Wrong, because equitable conversion shifts risk to buyer at contract. Majority rule: buyer bears risk post-contract.
How examiners test it
The MBE loves: a natural disaster damages property after contract but before closing. Trap: students assume seller bears risk, but buyer does unless UVPRA applies.
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