Most developers will look to negotiate an option for them to purchase the land within the site rather than entering into contracts to purchase the site. An option gives the developer a right to buy the property without any legal commitment to do so.
We have excessive experience in negotiation of option agreements both acting for the land owner and developer clients. Options are generally used by developers where the ability to develop the site or the nature of the development that will be possible is uncertain. The option agreement will need to cover the following basic elements:-
- The amount which the developer is to pay in return for the land owner tying up during the option period.
- The length of time during which the developer may exercise its option, known as the option period.
- Any conditions precedent to the exercise of the option by the developer such as the obtaining of a planning consent.
- The mechanism for agreeing or determining the price to be paid for the property.
- Any maximum or minimum (collar and cuff) to be applied to the determination of the purchase price.
- The obligation on the developer to pursue its investigations on site in this planning application it is of little use to a land owner to tie his land up in an option where the developer fails to maximise the value of the site by pursuing its development proposals.
- What happens in respect of plans, drawings, reports etc. in the event that the developer does not exercise its option to buy. It is important in these circumstances that the land owner can use all of the documentation prepared by the developer and that this can be assigned to the land owner or a subsequent purchaser.