What are the main differences between an option agreement and a conditional contract?

Option is an agreement

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What are the main differences between an option agreement and a conditional contract? When you are thinking of purchasing land, perhaps with the intention to develop, but only wish to proceed subject to certain events occurring e.

Options An option can provide you with the means to call upon the landowner to sell the land in question.

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  • What is an option agreement?

This will be to your advantage if you are no longer in a position to purchase, or you simply change your mind. However, the option agreement will still compel the landowner to sell the land to you if you decide to exercise the option.

Options Contract

There are certain points that you should consider when negotiating terms for an option agreement, such as: If there will be an option sum payable to the landowner e. It is a matter of negotiation as to whether an option sum will be payable on exchange and if so, the value of the option sum payable.

You may also wish to have the land valued. The option period will be the period in which you will have the ability to trigger the option and proceed to purchase the land.

What is an option agreement?

In the event that you do not serve option is an agreement option notice within the option period, the option agreement will become null and void and the landowner will be free to sell the property to any third party as they wish.

Option agreements are often appealing to developers wishing to obtain planning permission or third-party financing, as it option is an agreement them with the flexibility to not proceed with the purchase in the event that satisfactory planning permission is not granted, or they are unable to obtain satisfactory funding.

As well the advantages to developers, there are also advantages for landowners, which option is an agreement option agreements an attractive choice. A landowner option is an agreement request an option sum to be paid on the date the option agreement is exchanged. The option sum is usually retained by the landowner if the developer does not exercise the option and, in addition, if a developer applies for planning permission and decides not to proceed, the landowner will have the benefit of the planning permission at no cost to them.

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This may also have a positive impact on the value of the land. Conditional Contracts A conditional contract is a binding agreement, requiring the buyer to purchase the land once certain conditions have been satisfied. The most common type of condition is the grant of satisfactory planning permission.

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This would be the date on which the contract would be determined in the event that the condition precedents are not met. Once the long-stop date has passed, the contract will automatically determine without the need for either party to terminate the same.

What are the benefits of an option agreement in a land purchase?

It is important to note that, unlike an option agreement, once you have entered into a conditional contract, you will be compelled to complete the purchase once the condition precedents are satisfied. This may only provide you with a short amount of time to obtain finance if required.

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Therefore, you would not simply be able to withdraw holding in trading the transaction if your circumstances change. If you are considering entering into a conditional contract or option agreement, or would like to discuss your options, please do not hesitate to contact our Commercial Property Department on, or This article does not necessarily deal with every important topic or cover every aspect of the topics with which it deals.

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It is not designed to provide legal or other advice. If you require specialist advice on this topic, please contact us to discuss how we may assist you.