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An option agreement can be put in place where a potential prospective buyer, most commonly a developer, may wish to purchase property or land that’s suitable for a development project. A solicitor specialising in property contracts will be able to provide proficient assistance.
An option agreement in the UK is a contract that the prospective buyer and landowner will enter into for the potential purchase, most usually in exchange for a deposit. It provides the prospective buyer with the legal right to purchase the property or land at some point throughout the agreement for a predetermined price.
Our option agreement solicitors can assist with matters including:
- Advice about option agreements
- Drafting an option agreement
- Overage agreements
Our solicitors have considerable expertise in the commercial property field, having assisted many clients in creating option agreements that suit their circumstances. Whether you are a landlord or a prospective buyer, our solicitors can lend their expertise.
For specialist option agreement legal advice and guidance from our experienced commercial property solicitors, please don’t hesitate to contact the team.
Our expertise with option agreements
Advice about option agreements
Before jumping into signing a property option agreement, whether you are the landowner or the potential prospective buyer, it’s essential to seek legal advice from a professional who can provide expert advice and guidance on what exactly an option agreement is, the types available and the benefits and limitations to ensure you are making a fully informed decision.
Our solicitors have a broad scope of knowledge on option agreements and have considerable experience in advising and guiding clients in making them. Should you need legal assistance, our team are on hand to provide expert support.
Drafting an option agreement
If you decide to move forward with an option agreement, it’s paramount to have professional assistance with drafting the document. A solicitor will make sure that all important aspects are included in the document and negotiate an option agreement that best suits your needs and circumstances, ensuring it doesn’t negatively impact you.
An overage agreement is often created at the same time as an option agreement, and it’s there because when a piece of land is built upon, it usually significantly raises the value. The agreement allows the seller to receive an additional payment where the value rises due to development.
Option agreements explained
What is an option agreement?
An option agreement is a contract between a developer and landowner, where the landowner is unable to sell the land or property to a third party for a specified period of the time in case the developer makes the decision to purchase the land or property for development reasons. They will do this by exercising their right at any time during the option agreement period. The seller receives an option fee in exchange for providing this right.
What type of property option agreements are there?
There are two main types of property option agreements, and these are:
Call option – where the prospective buyer has the right to buy land from the landowner but is not obligated to do so.
Put option – where the landowner has the right to sell the land to the buyer but is not obligated to do so.
What is a lease option agreement?
There are also lease option agreements in the UK in addition to property option agreements. A lease option agreement allows a person to have control over a property and generate income from it, such as renting it out to tenants. They have the right to buy the property later but are not obligated to.
What should be considered in an option agreement?
It’s crucial to consider a number of things in an option agreement, such as:
- Whether there will be a non-refundable deposit due
- Which party will cover the legal fees
- How the purchase fee at the event of sale will be determined
- Any restrictions to consider
What are the advantages of an option agreement?
There are many advantages of having an option agreement in place for both the potential prospective buyer and landowner, including:
- The minimising of risk
- The potential prospective buyer may not be legally bound to continue with the purchase at the end of the option agreement period
- The potential prospective buyer has protection as the landowner will be prohibited from selling the property during the option agreement period
- Some option agreements will have a predetermined price meaning the buyer may buy for less than the market value
What are the limitations of an option agreement?
While there are many advantages to having an option agreement in place, there are also limitations too, and these include:
- There is no guarantee the potential prospective buyer will be able to obtain planning permission on the land they have an option agreement for, meaning they lose money on the option agreement deposit, as well as any solicitor and planning permission fees paid.
- For the landowner, there is no guarantee of sale.
How long does an option agreement last for?
The length of time an option agreement stays in place for will depend on certain circumstances, including the size of the land. Often option agreements for smaller areas of land will last between one and three years, whereas option agreements for larger areas of land are often between five and ten years. However, it is possible for them to last longer in certain circumstances.
Our option agreement legal advice fees
Seeking professional legal advice can feel daunting, particularly due to the costs involved. At BakerLaw, we always aim to be entirely fair and transparent with our pricing.
Where it is possible, we will charge our fees on a fixed fee basis, providing our clients with complete certainty over the costs of using our service.
Some cases may require us to charge an hourly rate. However, this is usually where ongoing support and a higher level of legal expertise is required.
Find out more about our pricing.
Contact our option agreement solicitors in Farnham, Surrey
If you’re a landowner or prospective buyer interested in taking out an option agreement, seeking clear, trusted advice is incredibly important. Our team of expert commercial property solicitors in Farnham, Surrey can help.