What are Put & Call options?

Published 29 Sep 2017

Buying or selling property in NSW is a big decision. There are sometimes situations in which the intention is there but the time isn't quite right - in these scenarios, individuals can enter into what are called put and call options, each of which is designed to help either the purchaser or the vendor respectively.

Both of these options are legal agreements that ensure the sale of the property will take place at a specified future date for a specific price. What are the differences between put and call options, what do they need to include to be valid and how can you get one with the help of a Parramatta lawyer?

1. Call option

A call option is an agreement entered into by both parties that requires the vendor to sell the land to the buyer at a specified future date and for a particular price. This is helpful for individuals or organisations that want to purchase land but need time to acquire sufficient funds.

2. Put option

A put option is the opposite of a call option, in that the seller receives the right to require the buyer to go through with the purchase (again, at a certain time and a stipulated price). Put options are a type of insurance so sellers know that their land will ultimately be bought.

What happens then?

As mentioned, put and call agreements must include a date and a price at which the transaction must be completed. The deed will also include a call option exercise period - this is a timeframe in which the buyer can require the vendor to sell the land to them. If the buyer does not exercise this right, the vendor then has a put option exercise period (also stipulated in the deed) in which to require the buyer to buy the land.

If, at the date specified in the initial agreement, neither party has decided to exercise their put or call option, the agreement becomes void - the buyer is not obligated to purchase the land, and the seller is free to sell to another party.

Options can also be transferred to other parties, according to NSW law, allowing you to nominate another person to purchase the land in your stead. This process is outlined on the NSW Revenue website, but it's always smart to make sure you're seeking legal help with such a complicated transaction.

At Malouf Solicitors, we have a number of experienced lawyers who can help make sure your put and call option agreements are comprehensive and valid. Reach out to us today for more information.

Please call us on 02 8833 2000 to speak with a lawyer

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