Real Estate; Occurrence of Sale by Equitable conversion where Agreement of Sale Conditional

Binswanger of Pennsylvania, Inc. v. TSG Real Estate LLC, 2017 WL 6568779 (Pa. Super. 2017), allocatur granted Aug. 30, 2018, appeal docket 30 EAP 2018

Under the real estate doctrine of equitable conversion, an agreement to purchase real estate effects a sale of the property, and makes the purchaser the equitable owner and the seller the legal title holder as trustee.  The question presented in this case is whether an agreement of sale subject to the buyer’s right to terminate (a) for any reason during a 60-day due diligence period or (b) if it could not in good faith obtain a mortgage, is actually a sale that effects an equitable conversion.  The Superior Court agreed with the trial court in this case that the two conditions were not mere formalities, but rather conditions precedent to enforceability of the contract, thus preventing equitable conversion.

The issue arises in the present case as the determining factor in whether a real estate broker, Binswanger, will receive a commission on a sale to a buyer that was excluded from Binswanger’s listing agreement with the seller, TSG, until two days before TSG entered into the conditional agreement of sale with the excluded buyer.  However, the Supreme Court’s decision will affect the ability of real estate buyers and sellers to seek specific performance of real estate agreements of sale to the extent the agreement of sale contains conditions.

The issue, as stated by Petitioner, is:

Where an agreement of sale for Pennsylvania real estate is final and binding as to the seller, but contains typical and routine buyer-friendly conditions, is the centuries-old doctrine of equitable conversion rendered inapplicable?