Entering into an option to purchase property is a good way for individuals and developers to purchase property at an agreed price in the future in the hope that the property price increases, whether by market forces or by making rezoning and development applications on the land.
An option to purchase is where a buyer enters into an Option Deed to purchase a property at a time in the future say in 18 months. An option fee is paid by the purchaser and the sale price is guaranteed for the Vendor, often at an amount above the current market price as at the date of the option deed.
Subject to the length of the option period and the property characteristics, option fees can be as little as 1% of the proposed agreed price to 5% of the purchase price.
The option fee payments are often released to the Vendor and are non-refundable if the purchaser does not proceed with the purchase.
On agreement between the parties the option fees can also be offset against the purchase price to be paid at completion.
Often developers will take an option to purchase one or more properties for consolidation and lodge applications for rezoning and applications for development approval for building of units or townhouses on several blocks of land.
Whilst the Option Deed is clear in the amount that the purchaser has to pay in the future, the manner in which the Option to Purchase can be exercised is very stringent and must be complied with strictly.
Any failure by the purchaser to exercise the Option to purchase in the manner prescribed by the option deed and pay the required deposit monies under the option deed and contract can result in the Vendor reneging on the sale to the purchaser. Often by such time the purchaser has invested substantial amounts in seeking a development application approval from the local council to increase the base value of the property.
At Quinns we act for both landowners and purchasers and are able to assist you in transactions involving options, staged payments and final purchase of real property.
Contact our team of lawyers at The Quinn Group on (02) 9223 9166 or submit an online enquiry form today.