When Does the Title Pass in a Land Contract?

The typical real estate sales contract does not actually pass property title from seller to buyer. Rather, it is merely a promise by the seller to convey the property to the buyer at some specified date in the future. Title actually passes when the seller makes a legal delivery of the real estate deed to the buyer. Those with questions about a specific real estate contract or conveyance should consult a real estate professional.

In a real estate transfer contract, two parties agree that at some future point, one will convey the property to the other. Under a common law doctrine known as the Statute of Frauds, operational in all states, a real estate contract must typically be made in writing and signed by both parties. The contract should contain all important points about the real estate transfer, including a clear identification of both the property and the parties to the contract, any sale price and the manner in which the buyer will make payment. However, the contract alone does not actually transfer title to the property.

State laws generally hold that time is not of the essence for a real estate sale, meaning that the contract will still be valid even if parties wait some length of time before actually closing the sale and transferring the property. Therefore, many real estate contracts are followed by a period of time (often 90 days) during which the buyer and seller can conclude any necessary business before actual transfer takes place. Such business includes required repairs, searches to verify the property's title or additional paperwork. Many parties use this time as an "escrow" period, during which a third party (usually a title company) takes control of the property deed and passes it on to the buyer when all requirements have been fulfilled.

A property deed is a very specific form of contract that verifies a real estate transfer. Valid deeds must be written and signed by the party transferring the real estate (the "grantor"). The deed must also clearly identify the property being transferred, by physical address, parcel number or some similarly certain identification. A deed does not constitute a valid transfer of real estate unless the deed contains explicit language that shows the grantor's clear intent to permanently give ownership of his property to another.

Even a validly executed deed does not become legally operative until the grantor "delivers" the deed to the new owner (the "grantee"). Legal delivery does not necessarily mean physical delivery (though a physical hand-over may constitute a valid delivery). Rather, legal delivery is any means of giving the deed to the grantee that shows the grantor's intent for the transfer to take place immediately. For instance, if the grantor hands the deed to the grantee but says "I want it back in a week," that would not be a valid delivery. Deposit of the deed with an outside party with instructions to hand it to the grantee when all conditions have been fulfilled is another legally acceptable method of delivery. Only when the grantor has delivered a valid deed to the grantee does title to the property pass to the grantee.