As with any real estate purchase, a leasing option carries some risk for buyers and sellers. But with benefits on both sides of the agreement, this new form of lease could prove a refreshing alternative to traditional UK real estate contracts. The document contains an option for the seller in order to obtain an additional payment in the future. This additional model gives a seller a greater incentive to sell because he will have a second “cherry bite” if the buyer is able to generate more value thereafter. If the .B purchaser cannot obtain the building permit for the entire land and apply for a building permit gradually, the seller may benefit from the increase in the value of the land by subsequent authorization. Please contact a member of our sales team if you would like help with an option agreement. We are happy to discuss your plans for your property and help you create custom documentation that works for your contract. An option contract is a contract between the owner of a property and a potential buyer that gives the potential buyer the right to acquire the property for a period of time, the “option period,” at an agreed price. The concept of the option is known in the world of finance and can be applied to stocks, land or real estate.
An option gives the holder the right to buy or sell something at an agreed price after an agreed deadline. As a general rule, the holder pays a premium to obtain this right, but is not required to exercise it. If the tenant decides to buy the land, they will inform the owner. The price to be paid by the tenant is set in the option contract – either a fixed price or a price based on the market value of the land at the time of exercise of the option. This contract maximizes the ability of the seller to share the profit without the option holder being exposed to an excessive risk of overpayment. Leasing option contracts can also be addressed to sellers. They are best suited to homeowners who own a number of properties that they may want to sell in a few years. Sellers who need an immediate sale to buy another home (i.e.
those in a chain) are better at staying in the open market. Take the example of first-time buyers Fran and Fred. They want to rent an apartment worth $180,000 in January 2007. As part of a rental agreement, the owner offers them the right to buy the apartment for 200,000 $US in January 2010 against a consideration of 3,600 $US. Example of use of this agreement: for the purchase of land or buildings for the following development: the rental option offers some protection against the value of a property that goes down. However, the seller has the opposite risk for the buyer. If house prices rise during the rental period, then a property could be sold at the end for much less than it could do on the open market. Hello interested in the leasing option and would like to get more information about it.