If the developer does not obtain the necessary building permit for the development of the plot, it is unlikely that the developer will exercise the option, and therefore the sale of the land would not continue. Option agreements allow developers to consider (and lock in) the possibility of acquiring land for potential development without being required to do so. Therefore, among other things, the option period and option fees should be carefully considered in order to mitigate these risks. With a growing number of landowners across the region marketing their land for development, option agreements are becoming increasingly popular as a method of structuring businesses and attracting the interest of potential developers. We explore a few key questions regarding options. Carefully designed and agreed, option agreements can be a practical method by which landowners can offer their land for development and reap the benefits without having to be directly involved in planning or construction. For a free initial consultation on how we can help you with the legal aspects of creating an option contract, contact us today. We will review your situation and discuss your options in a clear and accessible manner. Early legal advice from experts can help avoid the stress of dealing with these issues yourself. Simply call us on 0345 901 0445 or fill out our online application form and a team member will get back to you. An option contract contractually binds the seller to the buyer for a certain period of time, but not the other way around. With this type of contract, the buyer has the freedom to decide whether to buy or not and does not have to give the seller a reason.
The purchase price mechanism generally reflects a discount percentage relative to the market value at the time of exercise, often also additional deductions for option fees and planning financing costs. The price agreement process can be difficult because there is no transaction where the market value is determined by competing bidders in the open market. For the landowner, an option contract can guarantee an upfront payment and obtain a strong commitment from the buyer that they will look for ways to purchase and develop the land once the building permit is granted. Our team is adept at handling all the different aspects of creating and advising on option agreements and we are here to help you in any way possible. We are able to clearly explain legal issues and offer open, honest and professional advice. The differences between an option contract and conditional contracts are manifold, but at Coles Miller we have experience in both areas and can advise buyers and sellers on these issues. A developer can agree on the purchase price with the landowner at the beginning of the option agreement. This means that the initial cost is safe and the developer can pay less than the market value. Often, however, each price is subject to the deduction of unforeseen costs.
Although each type of option agreement is different and depends on the specific facts and purpose of the agreement, there are a number of common clauses that should be taken into account when drafting option agreements. As a rule, the important considerations are as follows: – Perhaps the most common use of option agreements is for the purchase of real estate or land. Option agreements can be used to help in a commercial or residential real estate situation where the buyer has the opportunity to purchase a specific piece of land or property. This option is usually available for a certain period of time and is subject to other specific conditions of the option agreement. With the growing demand for land, many landowners are starting to think about how to make their land work for them, and an option agreement is one way to do it. Our commercial real estate lawyers are able to assist clients with a variety of option contracts – but not with rental option agreements. The real estate market has experienced ups and downs over the past 10 years. An option contract does not guarantee a sale. When entering into an option agreement, the landowner often has to provide a standard guarantee to the developer, which means that the seller cannot sell the property entirely to a third party during the period agreed in the option. The disadvantage for the seller is that if the developer does not obtain a building permit and withdraws from the option, the purchase will not take place. An example of a real estate option contract is when a buyer is interested in land that they want to convert into a new apartment development. In its current state, the country can only be worth £50,000.00.
However, if the land has a building permit for a residential property, the land can be worth £500,000.00. Once the land is developed, it will have an increased market value, so landowners will also be able to think about mechanisms by which they can share the developer`s profits or increase the value of their land, even after it has been separated; known as “surplus contracts”. Such agreements are often used for vacant properties or land and for potential real estate development projects, or perhaps because the buyer needs time to raise funds, do more research, or get a building permit. .