Option Agreement And Conditional Contract

A buyer could therefore enter into an option contract while, for example, applying for a building permit for the land. If the buyer obtains a satisfactory building permit during the option period, he can decide whether to exercise the option and acquire the land. Unlike a conditional contract, it does not have to buy the land simply because it has obtained the building permit. This would be preferable if the buyer does not yet have funds or if he has alternative land for which he has also applied for a building permit. Most of the conditions to be included in a land sale contract have been refined over the years by lawyers and standardized in the fine print of a contract document form. Often the other things are just a few words. But in some commercial contracts, “extra” paragraphs can run on many pages. A contract may depend on various issues, but the most common condition is that the buyer obtains the building permit for a specific use. If the buyer receives the required building permit within the contractual time frame, the contract becomes unconditional and both parties are required to complete the sale. (1) Is the transaction an option contract or a conditional contract? The latter obviously benefits the seller by ensuring greater security; The developer agrees to purchase the property if the building permit is obtained.

An option simply gives the buyer the right to exercise that purchase option. It is important to keep in mind that the buyer will move the case forward and look for the possibility of leaving if the building permit issued does not match his plans for the site. Contract negotiations to ensure flexibility and communication between the parties in the event of a potential planning obstacle can benefit both buyers and sellers. When looking at the mathematics of an option, there are several variables: an option agreement only engages the seller – because the option holder can choose not to exercise it. If the owner does not exercise until the last day of exercise, he dies and is dead. It follows that it is very important to use as comprehensive a treaty as possible. If you agree with someone to buy their land, they expect lawyers to produce papers. But if you call one night with an agreement under your arm, he may be scared if he is six pages long and needs a lawyer to explain it.

So if you are dealing with a demanding owner, certainly do not take any risks and do it properly with a complete document. But if your other party is probably worried, you might be better off with a simpler document, although this could cause delays or other problems later on.

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