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Option Agreements (Drafting)

Option Agreements are legal contract between an owner and potential purchaser be it of a site, a house builder or developer. The option holder essentially has the opportunity of purchasing the property from the owner at an agreed price within a fixed time frame, once the terms within the option have been met. Most popularly, an Option Agreement is entered between Landowner and developers followed by trading in securities in connection with securities market.

 

BASIC INFORMATION:

Option Agreement benefits both landowners and developers, a landowner has the comfort of a developer promoting their site for development; and the developer has some security with regards to future pipeline for delivery, typically at a discounted purchase price to reflect the planning risks.

 

FEATURES OF OPTION AGREEMENT:

1.PREMIUM OR DOWN PAYMENT: The holder of this type of contract must pay a certain amount called the ‘premium’ for having the right to exercise an options trade. In case the holder does not exercise it, s/he loses the premium amount.

2.STRIKE PRICE: This refers to the rate at which the owner of the option can buy or sell the underlying security if s/he decides to exercise the contract. The strike price is fixed and does not change during the entire period of the validity of the contract.

 

CONTRACT SIZE: The contract size is the deliverable quantity of an underlying asset in an options contract. These quantities are fixed for an asset. If the contract is for 100 shares, then when a holder exercises one option contract, there will be a buying or selling of 100 shares.

Documents


Passport Photo

Passport photo of all parties.


PAN Card

PAN card of all parties.


Aadhar Card

Aadhar card of all parties.


Utility Bill

Utility bill of Electricity or Telephone.


Address Proof

Valid Address Proof of all the parties.


Licence

Valid Driving Licence of all the parties.


Terms and Conditions

Terms and Conditions between the parties.


Other Documents

Other documents will be intimated through e-mail.

FAQ

An option agreement is a legally binding contract between two entities outlining each counterparty's responsibilities to the other.Option agreements are entered into between landowners and developers and essentially grant the developer an option to purchase the land by exercising the right at any time during an agreed ‘option period’ in return for an ‘option fee’.

An option agreement is an arrangement between the property owner and a potential buyer. This signed document states that the potential buyer will pay a deposit and be given a specific time period to be the first buyer given the right to buy the property at a set price.

Option agreements are entered into between landowners and developers and essentially grant the developer an option to purchase the land by exercising the right at any time during an agreed 'option period' in return for an 'option fee'.

The landowner can demand payment of an option fee or premium from the developer in exchange for the right to exercise the option; this would be retained by the landowner whether or not the option is subsequently exercised. The option fee is also in addition to the purchase price payable for the land when the option is subsequently exercised.