Option aGreement
An option agreement is where a prospective buyer enters into an agreement with a landowner for the right to buy their land/property, often paying the landowner a sum of money as an option fee.
The option period is typically between 1-3 years depending on the nature and scale of the development. The buyer has the choice to exercise the option within the agreed period but should they fail to do so, they will lose any monies paid to the landowner.
An option agreement will restrict the landowner from disposing of the land/property to anyone else during this period. This allows the buyer to explore the viability of a project, submit a planning application, all without risk of the site being sold to another buyer.
The landowner will benefit from the enhanced value of their as a result of planning permission being granted, without having to go through the complexities and cost of the planning process. The buyer will typically have a team of experts who will be well placed to deliver a scheme that is likely to be granted planning permission.
The price for the land in the option agreement will be determined by many factors including construction costs, buyers profit, local prices and comparable land sales. The price can be reached by negotiation between seller and buyer but if this is not possible then an independent value can be set by a RICS surveyor.
Once a value is agreed, heads of terms will be drafted and sent to both legal representatives for checking before signing. The landowner will need to allow the buyer complete access to the site during the option agreement period in order for them to complete any surveys or reports to aid the planning process.
If you believe that you have a plot or property with potential and would like to discuss an option agreement, then please contact us to arrange a meeting.