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Option Agreements

An option agreement grants the developer a right to purchase the property once planning permission has been obtained. 

This is not the same as an obligation on the developer to purchase the property once planning has been obtained (see conditional contract).

The developer should be placed under an obligation to obtain planning permission and this obligation needs to be carefully worded to ensure that he performs that obligation. The option should exist for a limited period of time which would be negotiated taking into account the time it is likely to take for planning permission to be obtained. The developer would normally contribute towards your legal and agent’s expenses in relation to the negotiation and exchange of the option agreement. It is likely that you will require to enter a planning agreement.

You need to bear in mind that, although not impossible, it is difficult to sell your property whilst an option exists over it. The price is likely to be a fixed sum, although it might be index-linked, or a percentage of market value. It could include overage arrangements. Care needs to be taken to ensure that you have the right to use the drawings, reports etc prepared by the developer if it decides not to purchase your property.

For more information, contact us on 01276 686 222 or email your query to realestate@herrington-carmichael.com 

Option Agreements – Purchasing land

A developer and a landowner can enter into an Option Agreement, which gives the developer the option to purchase the land (usually at and agreed sum, or at market price less pre-agreed deductions) and the ability to obtain planning, without the risk that they will be compelled to acquire a parcel of land without the benefit of planning. Entering into an Option Agreement can also benefit landowners as they can realise a higher price of their land without having to put forward their own funds in obtaining planning.

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