With any contract, it’s pivotal that both parties understand it before agreeing to the commitment of the contract. In terms of an option agreement, it’s the contract formed between a developer (purchaser) and a landowner. It’s our job to ensure that whether you’re the developer or land owner that your option represents your exact requirements.
An option agreement is an agreement between two parties – the landowner and a potential buyer (the developer). It allows developers the ability to purchase a specific area of land after they’re granted the permission for development. It provides the right, but not obligation, for a party to purchase, sell or gain an asset at a certain price and at a particular period of time.
Essentially, both parties enter into an agreement in return for a non-refundable sum of money. This is then paid to the landowner and in exchange, the buyer is granted first option to buy the asset. This is agreed contractually through an option agreement.
A potential buyer of the asset in question (property or land) has a legally binding option to buy on a specific day, within an agreed time-frame or after the completion of an event.
They contractually can only complete the purchase within the option period. The period could be as long as several years, or can be triggered as a result of an event; such as the planning permission being granted for the development.
It provides protection for the developer – a developer can safely explore their options for the project without the risk of incurring a huge cost only to lose the property to someone else. You will have a contractual agreement which means you can gain the planning permission without the seller getting frustrated and selling to someone else.
Security for the seller – Although it doesn’t guarantee a sale, it does mean that you have some security when it comes to the sale of your property. If the property market was to experience a dip, then you’re assured of an interested buyer for the future. You’ll also receive a non-refundable deposit for the option agreement.
Every option agreement will differ depending on the facts and the reason for the agreement. They do each however have similar requirements within an agreement.
Some of the typical requirements in a contract include:
Our specialist team of lawyers are skilled in the preparation of commercial contracts and agreements. They’re experienced in acting for either a developer or the asset owner in an option agreement.
What makes our team of solicitors stand out is their ability to spot any potential legal issues early. This means they can then negotiate effectively and help manage risks in any commercial contract.
Before committing to any kind of option agreement, it is vital that you work with an experienced solicitor to review the option agreement. By working with our solicitors, we will be able to review the agreement and ensure your best interests are being met.
Please do not hesitate to get in touch whether you have a question or you would like to arrange a call.
Middletons Solicitors have a reputation for excellence with offices based in Warminster, Andover and Stockbridge. With more than 50 years’ experience delivering comprehensive legal services, our team of legal experts provides the highest standard of advice and service.
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