Options to Purchase
Options to purchase and pre-emption agreements requires specialist advice and expertise as they can contain hidden or implied responsibilities and consequences which can cause significant damage to the parties involved. The two sorts of arrangement might appear to be the same but there are significant differences between them.
Under an option to purchase agreement, the buyer is given the right to acquire the land, usually subject to the occurrence of a specified event or events, for a limited period of time. If the specified event occurs, the right to acquire is absolute. An option will also bind a future owner of the land in question. To be binding, an option must be made in writing.
A pre-emption agreement however, gives the buyer the right to be ‘first in the queue’ should the landowner decide to sell the land within the pre-emption period. A pre-emption agreement does not create an immediate interest in the land and need not be made in writing.
The use of options and pre-emption agreements create very different tax positions and any negotiation of an option or pre-emption agreement should be carried out with the benefit of professional advice.
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