Uploaded byRedchip
Put and call options
The presentation discusses put and call options in real estate, highlighting their benefits for buyers and sellers in securing pricing and conducting due diligence. It explains the documentation involved, including the need for a separate agreement and details on option fees and terms. Additionally, it notes that stamp duty applies when the option is exercised and emphasizes the importance of seeking professional advice.
Law◦
Put and call options
- 1. Put and CallOptions REAL ESTATE BREAKFAST BRIEFING
- 2. Legal stuff -disclaimer All material contained in this presentation is delivered by way of general comment. No material should be accepted as authoritative advice and anyone wishing to act upon material contained in this presentation should first contact Redchip for properly considered professional advice, which takes into account specific situations.
- 3. What are putand call options? Call Option Future right to compel a seller to sell land Put Option Future right to compel a buyer to buy land
- 4. Call option benefitsto buyer • Gives buyer the opportunity to: • Undertake due diligence on land • Lodge/amend a DA • Obtain approvals to develop the land • Secure finance for the acquisition • Source partners pre a ‘fund’ being structured • Gives rise to a caveatable interest in the land in favour of the buyer • The price must be agreed before the call option deed is entered into and will not change, regardless of market fluctuations Slide 4
- 5. Put options benefitsto seller • Secure buyer • Secure a price • Potentially obtain an upfront release of funds for the grant of the put option Slide 5
- 6. How are theydocumented? Slide 6
- 7. A separate agreementthat sits on top of the contract
- 8.
- 9. How are theydocumented? • Terminology: • Grantor = Seller • Grantee = Buyer • Complete and valid contract for sale/purchase as annexure • All aspects of transactions agreed prior to option deed • Typically a binding arrangement from signing (subject to the buyer/seller utilising their rights) Slide 9
- 10. Features • Option fee •Nominal amount • Larger amount in return for the grant of the right to put/call • Option exercise period • Assignment/Nomination • Potential for uplift in purchase price as a buyer to a third party • Allows for an entity/fund to be determined post signing the option Slide 10
- 11. Stamp duty • Payableby buyer when option exercised (as per usual conveyance) • Implications arise when assigning option or appointing nominee • Advice should be considered Slide 11
- 12.