Reversion

Definition of "Reversion"

Written by

Elizabeth "Beth" Plumlee

Discover Real Estate

The definition of reversion in real estate is the return of property or assets to their original owner after a prespecified event or occurrence. This real estate term is used primarily in documents pertaining to estates and their execution, but can also be used in other circumstances. In the following section, we’ll provide an example of reversion in real estate. 

Example of reversion in real estate 

Steve and Harry are best friends and have been since childhood. After graduating the pair goes their separate ways, attending different colleges and graduating with degrees in finance and anthropology, respectively. Steve finds a comfortable job as a financial advisor in their hometown and marries his high school sweetheart, while Harry moves to the capital of the state and becomes a professor of anthropology at the state's largest University. 

Once they have established themselves in the world, they realize they’ve fallen out of touch, and make an effort to reconnect with one another. After gradually reconnecting, the pair are once again spending time together as they rebuild their relationship. Time goes by, and Steve is now the head of the firm he began his career at. 

Then, misfortune strikes. The economy enters a recession, and Harry loses his job at the University. He sells his expensive home in the capital and moves back to his hometown to find work. After becoming a grade history teacher, Harry is having difficulties with his finances. In order to help him back to his feet, Steve grants Harry the use of one of the houses he had purchased for investment purposes. 

Generously, the conditions specified in the contract were as follows: Harry will have the use of the house until the day he dies. When this happens, reversion dictates that the house will return to Steve, the original owner, or his heirs. In real estate, this is known as the reversion.