WHAT IS AN OPTION AGREEMENT
An Option Agreement is when a prospective buyer enters into a contract with a Landowner for the potential purchase of a property or plot of land. This will usually involve the payment of a non refundable sum of money (usually the deposit).
In exchange of the deposit the prospective buyer has the legal right to buy the property during a specified period of time or at some future date for a predetermined price.
For the Landowner, An option agreement may guarantee an upfront payment, as well as gaining a solid commitment from the buyer that they will be seeking opportunities to purchase and develop the land once planning permission is obtained.
Situations which may give rise to an option agreement being put in place include:
- If a developer wishes to purchase any land adjacent to their existing development project site in the future in order to extend their venture.
- If the land being developed is sub-divided among owners, a buyer can buy up the full site piece by piece by obtaining option agreements from the individual owners.
Alternatively, it may be used when perhaps the buyer needs sufficient time to raise purchase money.
In accordance with legislative changes (Perpetuities and Accumulations Act 2009), option agreements which came into effect after the 6th April 2010 can be for any length of time, and the duration should be negotiated between the purchaser and the seller.
THE ADVANTAGES OF AN OPTION AGREEMENT
For the proposed buyer
- An option agreement minimises risk.
- You may not be legally bound to purchase the land at the end of the option agreement period (This, however, is dependant upon the type of Option Agreement entered into).
- You may not have the funds to purchase the property at this time but you can be confident that you have a legally binding agreement that prevents the seller from getting frustrated and selling the land to another buyer.
- You may be able to secure the final purchase price of the property in the option agreement. This can be a major advantage for agreements that span years rather than months because if land value increases, you are only bound to pay the contracted price.
For the Landowner
- If the property market is experiencing a downturn, you are assured of an interested buyer at some point in the future.
- You will normally receive a non-refundable deposit in exchange for the option.
WHY USE US
We structure our fees to incorporate a range of fixed fees for such matters. So if you have found the perfect piece of land or property for your new development and want to ensure it is not sold out from under your nose while you are gaining planning permission contact us on 020 8318 4345 and seek professional advice.