Put and Call Options

It is in your best interests to have an experienced contracts lawyer draft your option agreement. An experienced lawyer can ensure the agreement is drafted correctly and unambiguously. This will help prevent complications between the agreement’s parties. You will also have an option agreement tailored specifically to your situation.

Yes, an option agreement will annex the contract for the sale of the property. This contract should reviewed by a contracts lawyer so that your rights and obligations can be explained to you. The contracts lawyers at BSM Sydney Lawyers can assist you.

An option agreement can provide third parties with the power to exercise rights under an option agreement. For instance, it can allow third parties to participate in property transactions as if they were the purchaser or they can act on the purchaser’s behalf in the transaction.

It is in your best interests to have a lawyer review your option agreement prior to signing it. An experienced contracts lawyer can explain the rights and obligations that arise because of the agreement. In addition, a lawyer can negotiate the terms of an option agreement in order to protect your best interests and ensure that the agreement is effective. BSM Sydney lawyer offer a free 20-minute consultation.

In simple terms, an option period is the agreed period of time in which a party to an option agreement can exercise an option.

If neither party to an option agreement exercises their rights to buy or sell the relevant property within the option period, the option becomes invalid.

If a dispute arises regarding an option agreement, Brander Smith McKnight’s experienced contract lawyers are effective negotiators and can resolve most disputes outside of court using alternative dispute resolution techniques. If an agreement cannot be reached outside of court, our Sydney lawyers will advocate for you via litigation.

An option fee is a non-refundable fee that is paid after parties enter into an option agreement, there is no set price for option fees. A call option fee may generally be between 5%-10% of the total purchase price, while a put option fee is generally nominal (e.g. $1).

No stamp duty on the value of the land is payable when the option is granted, regardless if it is a call or a put and call option. Stamp duty is payable when the option is exercised, being required within three months of the options exercised date. Stamp duty is also payable on the value of the option when the option is transferred to another person.

The NSW Supreme Court recently ruled that following a put option on a residential property, the purchaser was entitled to rescind during the cooling off period. The purchaser is also granted a refund of the call option fee, as long as the purchaser had not waived their right to the cooling off period through s66W or another means. It is important to get legal advice to ensure that the cooling off period is waived. Notably, this right of rescission does not apply to a contract for a residential property which is created through the exercising of an option to purchase. The property lawyers at BSM Sydney Lawyer are experienced in contract law and can assist you.

Under the Duties Act 1997 (NSW) s111(1)(c) if the grantee who becomes the assignor or nominator is a licensed home builder, they may be exempt under s111(1)(c). That is, if the call option is assigned by an individual who is authorised to do residential building work under the Home Building Act 1989 (NSW), who is building or has built residential premises on the land for the purposes of sale, or has an agreement with the individual who the call option is assigned to build residential premises on the land, s111(1)(c) may apply.

Under the Duties Act 1997 (NSW) s111(1)(d) if the call option is transferred or assigned by a corporation that is a member of a group of corporations to another corporation that is a member of the same group. They may be exempt under s111(1)(d).

1. Call options or put and call options can be used in a number of ways, such as:
   A developer may identify a number of suburban blocks of land which they may be able to obtain development approval for, so they place a call option upon the blocks at 20% higher than the current market value for the blocks of land, paying the option fee upfront for the option. If the developer is able to obtain the development approval to develop the land (e.g apartments or townhouses), they may exercise their call options.
2. A renovator may identify a property which had been left in poor condition, place an option slightly above market value (e.g. 5%) for 12 months and pay a 5% to 10% option fee. This grants the renovator to immediate access to the property to renovate and improve the condition which the property had been left in. The option may then be sold on at a profit.
3. A developer may identify old strata apartments or offices which have potential to be granted development approval over. The developer can place a call option over the property for a significant percentage (e.g 40%) above the current market value and pay the option fee upfront. If the developer is able to obtain the development approval they can exercise the option and develop the property accordingly.