Getting the Scoop on the Option Agreement
The popularity of option agreements has grown since the number of landowners marketing their property for development increased. Having a legal document to support the collaboration between the owners and potential developers is of utmost importance for overall security. You should learn how to write a valid contract and protect your rights efficiently.
Our guide explains the purpose of option agreements and teaches you to draft this contract hassle-free. Check it out and learn how to write killer contracts without costly lawyers or inaccurate online forms!
What Are Option Agreements?
Option agreements are contracts signed by a landowner and a potential buyer who wants to develop the property for commercial use. The buyer pays the fee to ensure they can purchase the land once they have all the permits and the project is in the final phase. The involved parties can be individuals, companies, or other legal entities.
How Can You Benefit From Option Agreements?
Here are some key benefits of signing an option agreement:
- The contract brings financial benefits to the landowner since they can require a specific amount, premium, or option fee from the developer in exchange for certain rights
- Landowners can avoid long and burdensome planning permission procedures and save some money because developers finance it at their own risk
- In the development phase, landowners can benefit from the experience of the developer they collaborate with. They can use the available skills and assets of the other party in their favor
- The agreement serves as evidence to developers if they face problems while requesting planning permission
- If the project doesn’t end in the landowner’s favor, i.e., the sale doesn’t happen, the agreement allows them to access a non-refundable deposit
What Should You Consider Before Signing an Option Agreement?
If a developer offers you an option agreement, you shouldn’t accept it until you check a few details. The table below lists several points you must consider before deciding to participate in such a deal:
|Contract duration||Ensure the defined agreement duration doesn’t affect your other plans since these contracts may last for years. Find out whether you will be entitled to extra payment if the planning process takes too long|
|Purchase price details||Check how the purchase price was calculated and whether deductions apply to the parts of the land that can’t be used|
|Taxes||Ensure there are no overseen charges or taxation changes and penalties. If any unforeseen or adverse change arises, you should have the right to cancel or postpone the process|
|Potential future value increase||The agreement should include a specific disclosure stating that you must get your share of any future property value increase|
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