Options, Conditional Agreements and Overage

Our Commercial Property Team has the expertise and experience to deal with complex property transactions, offering a comprehensive range of services tailored to meet the unique needs of our clients.

Our team is well-versed in advising on a variety of complex property-related matters, including Options, Conditional Agreements, and Overage.

With our in-depth knowledge of these areas, we are well-positioned to guide clients through the legal complexities, ensuring their commercial property transactions are structured to align with their long-term goals.

What are Options to Purchase and how do they work?

Sometimes referred to as Put and Call Options or Pre-emption Agreements, these are complex agreements that either grant the Buyer the right (but not the obligation) to purchase during a specified timeframe or after a particular event occurs, such as the acceptance of planning permission for development (a Put Option). Alternatively, they may provide the Buyer with a right of first refusal to buy land when and if the Seller decides to sell (a Call Option).

In a Put Option, which is the standard option to purchase, the Buyer is in control and can choose whether or not to purchase during the option period, whilst, in a Call Option, the Seller in in control.

What are the key considerations in Options to Purchase?

• Deposit requirements: Is a deposit payable and is this non-refundable?

• Conditionality: Does the option depend on obtaining planning permission for development? If yes, is there an obligation to secure it?
• Multiple Owners: Is the Buyer negotiating options with several owners who each hold a portion of a development site? This is a way of minimising risk to a buyer so the options will only be exercised once a buyer has an option with each owner and can, therefore, secure the whole site.
• Pricing: What is the agreed purchase price? Is it determined upfront, or will it be established after planning permission is granted? If it is to be determined later, does the Option include a method for property valuation?

What are Conditional Agreement and how do they work?

Conditional Agreements are often used as an alternative to Options. In these agreements, the purchase of a property is contingent upon certain events occurring, such as receiving planning approval for development or confirming the property is free of contamination. Like Options, these agreements raise similar concerns that need to be addressed in a carefully drafted contract:

• What are the specific conditions, what actions must each party take to fulfil them, and who will pay the associated costs?
• Is a deposit required, and if so, is it non-refundable?
• What is the final date (longstop date) for concluding the agreement?
• What happens if planning is granted but is subject to adverse conditions?
• Should the purchase price be agreed upon now or determined after planning approval? If it’s the latter, does the agreement include a mechanism for valuation of the property?
• How will disputes be handled?

What is Overage and how does it work?

Overage allows the seller to benefit from the future development potential of land they are selling. The land is sold at its current market value, but if planning permission is granted during the overage period, the seller is entitled to an additional payment.

What potential issues should be considered when dealing with overage?

• The duration of the overage period.
• The trigger event – what specific event will activate the overage, and will this be a one-time event or applicable to multiple future triggers?
• When the overage is payable – is it due after planning approval is granted, or after the property is sold with planning permission in place?
• The valuation of the overage – should the cost of obtaining planning approval be factored into the calculation?
• Will the overage bind future owners of the land – and how can the seller ensure this?
• How will the overage be protected?

How we can support you

At Taylor Bracewell, our Commercial Property Team offers expert support for complex property transactions, including Options to Purchase, Conditional Agreements, and Overage clauses. We provide tailored guidance to help you navigate the intricacies of these agreements, ensuring that your interests are protected.

Whether you are dealing with a Put or Call Option, a Conditional Agreement dependent on events like planning permission, or negotiating an Overage agreement to capture future development value, we address key issues such as deposit payments, conditions, valuations, and dispute resolutions.

Our team works with you to create carefully drafted agreements that minimise risks and maximise opportunities, ensuring a smooth and successful transaction.

For guidance with any property transactions, contact our Sheffield and Doncaster solicitors today on 0114 272 1884 or 01302 341 414.

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