Legal Definitions - reconversion

Reconversion refers to the legal concept where an earlier imaginary change in the nature of property is reversed. Sometimes, the law treats property as if it has already changed its character—for instance, a piece of land under a sales contract might be legally considered money, even before the sale closes, or money set aside to buy land might be considered land. This initial imaginary change is called "equitable conversion." Reconversion is the process by which this imaginary change is undone, and the property is legally considered to have its original character once again, as if the initial conversion never happened. This often occurs when the purpose for the initial imaginary change can no longer be fulfilled or is abandoned by the parties involved.

Here are some examples to illustrate reconversion:

• Abandoned Real Estate Sale: Imagine a homeowner signs a contract to sell their house. Legally, under the principle of equitable conversion, the house might be temporarily viewed as personal property (the money the seller will receive), and the buyer's payment might be viewed as real property (the house they will acquire). However, if the buyer later defaults on the contract, or both parties mutually agree to cancel the sale before closing, the legal fiction of the house being "money" is undone. The property undergoes reconversion, and the house is once again treated purely as real property belonging to the original owner, as if the sale contract never conceptually altered its nature.

• Beneficiary's Choice in a Trust: A will might instruct a trustee to use a specific sum of money to purchase a particular plot of land for a beneficiary. Under equitable conversion, that money might be legally considered "land" even before the purchase occurs. However, if the beneficiary decides they would prefer to receive the money directly instead of the land, and they have the legal right to make this choice, then reconversion takes place. The money, which was conceptually treated as land, reverts to being treated as personal property (money) in the eyes of the law, and the beneficiary receives the cash.

• Partnership Property Distribution: A business partnership might own a commercial building. For the purposes of the partnership's internal accounting and legal structure, this real estate might be treated as a general business asset or personal property of the partnership, rather than traditional real estate owned by individuals. If the partnership later dissolves, and the partners decide to distribute the actual building itself among themselves (perhaps as tenants in common) instead of selling it and dividing the cash proceeds, then reconversion occurs. The building, which was previously treated as personal property within the partnership context, reverts to being treated as real property owned by the individual partners.