Chapter 1
Virginia Real Estate Law & Agency
Course: Virginia Real Estate Exam Prep
Subject: Virginia State Salesperson Exam Prep
Chapter: Contracts Virginia Forms
This is a pivotal legal concept unique to property law. Upon ratification (the moment a valid, binding contract is formed), the buyer becomes the equitable owner of the property, and the seller holds legal title in a security capacity.
Practical Implications of Equitable Conversion:
- Risk of Loss: If the property is damaged or destroyed by fire after ratification but before settlement, the buyer typically bears the risk. The buyer is still obligated to close and pay the full price, and must rely on insurance proceeds. For this reason, contracts include provisions requiring the seller to maintain insurance until closing and to make proceeds available for repairs.
- Right to Profits: Conversely, the buyer is entitled to any "fruits" of the property after ratification. For example, if the seller has rented the property, rent collected for periods after the ratification date must be prorated and credited to the buyer at settlement.
- Insurable Interest: The buyer has an insurable interest in the property the moment the contract is ratified and should secure their own insurance policy effective on the ratification date.