Option Agreements2024-03-12T12:20:53+00:00

Option Agreements

In recent years a growing number of landowners across the East of England, particularly in Suffolk and Essex have been marketing their land for development. Option agreements are therefore becoming popular as a way of structuring an offer or informalising potential development agreement.

What is an Option Agreement?

An option agreement gives a potential buyer a right to purchase the land, provided they give notice to the landowner during an agreed period (the option period), usually in return for a sum of money (the option fee). If the notice is given by the buyer during the option period, the landowner has to sell the land to the buyer on the terms of the option.

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What are the benefits of an option agreement?

By entering into an option agreement, the buyer is able to explore the planning potential of the site without being obligated to complete the purchase should they not be able to obtain the planning permission they require. It is also a helpful way to structure a transaction where the land over which the buyer is looking to obtain planning is owned by several different parties.

Usually, the option is exercised on the basis that planning permission has been granted, which will significantly increase the value of the land without the landowner having to incur the costs of obtaining the planning permission themselves.  The price for the option may be fixed, based on a formula, or subject to market value determined by a surveyor.

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