Option Agreements

When purchasing land for development, it is unlikely you will want to buy the land straight from the landowner. This is due to the risk that you will not be able to obtain suitable planning permission or there might be third parties that are difficult to remove.

Possible solutions that allow the developer to secure the land without the obligation to pay until they are sure that the land is suitable are conditional or option agreements. Our Commercial Property team have considerable experience in both conditional agreements and option agreements.

An option agreement gives the developer the right to insist that the landowner sells the land to the developer within a defined period or a trigger event occurs, such as the grant of planning permission. It reassures the developer that the landowner cannot sell the land to another party whilst they are assessing the suitability.

The agreement usually ties the seller in but not the buyer, meaning the buyer has the freedom to decide whether they wish to purchase the land without having to provide a reason. However, a developer is likely to have incurred significant costs when investigating whether the land is suitable or not and, unless there are significant issues, is unlikely to not proceed.

The benefit of an option agreement to the landowner is the ability to request payment of an option fee for the right to exercise the option and this is usually retained by the landowner whether the option is exercised or not.

However, entering into an option agreement for several years will restrict the landowner from selling the property to another interested party and does not guarantee a sale at the end of the period.

Our proactive and professional team can assist in the drafting and negotiation of an option agreement and will always be on hand to answer any questions you may have or deal with any issues that may arise.

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Legal 500, 2022