An option agreement is an agreement between a landowner and a potential purchaser of their land. When the parties enter into the contract, an agreed payment is often made to the owner of the land and, in return, the buyer receives a first contractual option for the acquisition of the property. A call option must be registered if you want to engage your successor in the title. If it is not registered and the landowner sells to a third party who pays for the land and is not aware of the option contract, the new owner is not bound by the option (although the owner remains responsible under the terms). There is no interest in a sale option for the land and does not need to be registered. The developer could check the financial situation of the landowner, but this would not prevent future difficulties. A contract entered into by the landowner for the mortgage payments to be honoured or compensation for losses incurred as a result of the lender`s untitable agreement would likely be of low value, as if the landowner could not pay his mortgage, he would probably not be able to cover significant damages. The parties should consider whether there are circumstances in which the agreement should be terminated prematurely. What is the effect of the agreement on credit quality if the seller enters the option agreement (compared to a house)? How would this affect their ability to buy another property? Lenders would consider the seller to already have a mortgage (and what type (buy-to-let or normal)? A pre-emption right should be registered to inform potential naders or tenants. If the right is not registered and the landowner sells to a third party who pays for the land and knows nothing about the pre-purchase agreement, the new owner is not bound to it.
As for your ability to buy another property, it depends on the existence of an unpaid mortgage on the existing property, if you want to use the proceeds of the sale, it is your subsequent purchases and the terms of the option agreement itself. The agreement must be clear as to the areas subject to the legislation. Unless the agreement is otherwise available, the option agreement is freely ceded. If the parties preferred that the agreement be personal only to the parties they conclude, this must be specified. It is clear that developers need to consider the availability of the lender`s agreement at an earlier stage than could have been the case so far. The price to be paid is perhaps one of the most controversial parts of the option agreement. Even if the parties agree on how the price is calculated, it is worth considering and documenting the following: Have you had a remarkable experience of option agreements or overruns? We and others who deal with commercial real estate would like to hear from them. Feel free to comment below and share your experience and wisdom. Hello Natalie – given the potential of your property to increase the value if you give a pre-emption right to the seller, you may consider the following options: If the landowner is not ready or able to obtain the mortgage to remortgage or release the land in question, the landowner and the developer should, in such circumstances, , decide whether it wants to continue with the proposed option without the lender`s consent. , which may be the only option if development is to continue. Entry into the option without consent would result in the landowner breaching his mortgage, although a mortgage company would probably not claim possession until the repayments were made.