What is an Option to Purchase?
Askews Legal LLP are your local Solicitors in Coventry, today we will be reviewing Commercial Law and in particular what is an option to purchase.
An option to purchase is a legally binding agreement between a seller that owns land or property and a buyer. There are two different types of option to purchase: the ‘call’ option and the ‘put’ option.
Call Option: This refers to the buyers right, but not the obligation, to purchase the property within a predetermined time period at an agreed price (known as the exercise price). A call option is usually granted for a non-returnable option fee payable by the buyer to the seller.
Once the call option has been entered into, the buyer acquires an immediate equitable interest in the land, which the buyer must protect by registration of a Class C (iv) land charge, in the case of unregistered land, or by a notice in the case of registered land.
Put Option: This is where the seller exercises their right to offer the property to the buyer at a specified price in the future. There is no obligation on the seller to sell but the buyer is obliged to buy. A put option is usually granted for a non-returnable option fee payable by seller to the buyer.
Put options do not create an interest in land and so cannot be protected by registration at Land Registry.
The person granting the option is known as the ‘optioner’ or grantor and the person receiving the benefit is known as the ‘optionee’ or beneficiary.
During the term of the option, the seller cannot sell the property to a third party and must sell it at the pre-agreed price and terms set out in a contract of sale. Only if the buyer refuses to buy the land or property does the seller have the discretionary powers to sell the property to another party.
Purchase Options in Commercial Leases
In commercial lease negotiations, it is not uncommon for prospective tenants to seek to negotiate an option to purchase the property. Under the Option Agreement the tenant can elect to purchase the leased premises at a price either stated or calculated according to a formula set forth in the lease.
How can Askews help you?
Your local firm of Coventry Solicitors, Askews Legal LLP, has a dedicated team of Property specialists who can assist with any commercial property issues. For further advice or to obtain a quote, please contact Kuljeet Sandhu, Head of Commercial Property at Askews Legal LLP, Solicitors in Coventry.
