Is now the time to use Option Agreements?

May 11, 2020

We’ve all heard the rhetoric of the Covid-19 lockdown being a strange and difficult time, and if you are looking to buy or sell property at first glance it may seem that now might not be the best time to enter into a contract. However, when you look a little deeper, it is a good time to consider an Option Agreement, particularly if you are buying or selling land for development.

As noted in our previous article on Options this form of contract provides a balance of security to both landowners looking to sell and developers who would like an interest in the land prior to outlaying costs in applying for planning. As Covid-19 is impacting on conveyancing transactions some parts of the market are inevitably slowing down at the moment, but many developers are looking forward to their supply of new sites for when lockdown measures are lifted, so by putting an option in place now, it will give the ability for developers and landowners to make the best of the situation in due course.

What is an option agreement?

To re-cap, an option is a contract whereby the developer can opt to purchase land during a set time (the “option period”). The landowner has the benefit of knowing that during the option period they may benefit from the developer exercising the option and paying a premium for developable land, while a developer has the ability to obtain planning, without the risk that they will be compelled to acquire a parcel of land without the benefit of planning.

What are the benefits of an option?

An option agreement also offers flexibility as to timings, which is a key consideration at this time. Frequently options are drafted to allow the developer to exercise their ability to purchase the land at any time during the option period. This allows developers to choose the most appropriate time to exercise the option, permitting them to take account of matters such as the grant of planning, availability of development finance and the ability to start work on site following the completion of the acquisition. Additionally, options have the benefit for landowners of allowing land to be sold at an enhanced development value without having to pay for planning themselves. 

Is there anything that I should consider at this time?

Although local authorities are accepting new planning applications during the lockdown, it is possible that the lockdown may have impacts on the usual planning timetable. Therefore landowners and developers should consider more flexible timescales for submission of planning applications and for pre-application matters, including any surveys or reports that will need to be undertaken. In addition, planning appeals have been impacted by lockdown delays, with the Planning Inspectorate having ceased certain elements of their casework (see our recent article for a more in depth review of the delays https://www.herrington-carmichael.com/planning-with-covid-19/), so parties should consider making provision for extensions to the option period in the event of a delayed planning appeal.

If you are looking to enter into an Option Agreement or any other land transaction please contact Steph Richards on steph.richards@herrington-carmichael.com or call 01276 686222.

This reflects the law at the date of publication and is written as a general guide. It does not contain definitive legal advice, which should be sought as appropriate in relation to a particular matter.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Daniel York

Daniel York

Partner, Property Law

Podcasts

Categories

Latest Articles & Legal Insights

Sign up

Enter your email address for legal updates on Property & Construction Law.

Please see our privacy policy regarding use of your data.


Top read insights in 2019

Contract Law

Material Breach of Contract

What is a ‘material’ breach of contract by a party to a commercial contract? This is a critical issue regularly considered by the courts. What constitutes a material breach and what are the remedies?

Property Law

Purchasing Land – Option Agreements

A developer and a landowner can enter into an Option Agreement. What are the strategies that can be employed by both landowners and developers to assist in such land deals?

Divorce and Family Law

What are the Tax Implications of a Civil Partnership?

Is there a significant tax saving to be made by a couple who are married or in a civil partnership that cohabitating couples simply don’t qualify for?

Land & Property Dispute

Restrictive Covenants – The Price of Modification

Having identified that your land is burdened by a restrictive covenant and for the purposes of this article the covenant in question will be that only one residential building can be erected on the land. What do you do next?

Wills, Trusts and Probate

Is my Will applicable to my Spanish property?

You must be careful when relying on an English Will in relation to your Spanish property.

Award winning legal advice

Herrington Carmichael offers legal advice to UK and International businesses as well as individuals and families. Rated as a ‘Leading Firm 2024’ by the legal directory Legal 500 and listed in The Times ‘Best Law Firms 2023 & 2024’. Herrington Carmichael has offices in London, Farnborough, Reading, and Ascot.

London

60 St Martins Lane, Covent Garden, London, WC2N 4JS 

+44 (0) 203 755 0557

Camberley

Building 9, Riverside Way, Watchmoor Park, Camberley, Surrey. GU15 3YL. 

+44 (0)1276 686 222

Wokingham

+44 (0)118 977 4045

info@herrington-carmichael.com

© 2020 Herrington Carmichael LLP. Registered in England and Wales company number OC322293.

Herrington Carmichael LLP is authorised and regulated by the Solicitors Regulation Authority.

Privacy   |   Terms and Conditions   |   Cookies   |   Client Feedback