Put And Call Options
Property & Conveyancing
We Guide You Through Your Property Transactions With Sound Legal Advice
When dealing with property transactions, understanding and managing put & call options can be complex. These legal instruments provide unique rights and obligations that can significantly impact the outcome of a transaction.
At Burgess Thomson, we specialise in advising clients on the intricacies of put and call options to ensure they are used effectively and comply with New South Wales property laws.
What Are Put & Call Options?
Put and call options are legal agreements that grant specific rights regarding property transactions. These transactions are ‘future transactions’ and also known as ‘option agreements’. They are agreements between potential buyers and sellers to buy or sell property at an agreed price, when a specific event occurs, or on a specific date.
They are valuable tools for structuring agreements between buyers and sellers, offering flexibility and clarity. The two primary types are:
- Put Option: A put option gives the property owner (the option holder) the right to compel another party (the purchaser) to purchase the property at an agreed price. This means that the seller can require the purchaser to ‘buy’ the property. This ensures the owner has a guaranteed purchaser under specific conditions, offering a level of certainty in the transaction.
- Call Option: A call option grants the holder the right—but not the obligation—to purchase the property from the grantor at an agreed price or within a specified time. It essentially means the buyer is given the option to ‘call’ or compel the vendor to sell the property to them. This provides flexibility for the buyer, as they are not required to proceed unless they choose to exercise the option.
When distinguishing between a put option and a call option, the key question is which party holds the right to trigger the agreement. The option holder is the party with this right.
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How Do Put & Call Options Work?
In practice, a put and call option agreement may include both types of options, creating a mutually beneficial arrangement for both parties. For example, a seller might grant a call option to a prospective buyer, while simultaneously securing a put option to ensure the property is sold within a specific timeframe.
These options must be exercised during a defined period of time, known as the ‘option period’. Once this period has lapsed, or expired, the option cannot be exercised. If exercised during this period, the contract for sale is then properly formed.
These agreements are often used in residential property transactions in New South Wales to provide security and flexibility such as delaying the formation of the contract for stamp duty or taxation purposes. However, they must be carefully drafted to comply with strict legal requirements.
The Importance of Complying with NSW Regulations
In New South Wales, option agreements are subject to stringent regulations, particularly when involving residential property transactions. This includes thorough stamp duty requirements. It is vital that purchasers strictly adhere to stamp duty requirements, otherwise failure to do so will result in fines and unwanted interest.
Several requirements, among others, include a call option must not be exercised within 42 days it was granted; there must be separate but duplicate option agreements executed and exchanged; and the option agreement must include the full contract for the sale and purchase of land.
These rules regarding option agreements are designed to protect both parties and ensure fairness. Failing to adhere to these legal requirements can result in significant consequences, including:
- The option agreement being declared void.
- The agreement being rescinded by the other party.
- Potential financial losses or disputes.
To avoid these outcomes, it’s essential to have your agreements reviewed and drafted by experienced property lawyers who understand the nuances of call and put options under NSW law.
How Burgess Thomson Can Help
At Burgess Thomson, we offer expert legal guidance to help you navigate the complexities of put and call options. Whether you’re drafting a new agreement or need advice on an existing one, our team provides tailored support to protect your interests and ensure compliance with the law.
Our services include:
- Drafting Put & Call Option Agreements: We can create clear and enforceable option agreements tailored to your specific needs. Our legal team will discuss the benefits of including put options, call options, or both, depending on your objectives.
- Reviewing Existing Agreements: If you’re already party to a call option and put option agreement, we can analyse the terms to ensure they align with NSW regulations and safeguard your rights.
- Advising on Legal Compliance: We help identify potential pitfalls and ensure your put and call agreements are fully compliant with NSW property laws, reducing the risk of disputes or invalid agreements.
- Strategic Advice: By understanding your goals, we provide advice on how to leverage put & call options to your advantage, whether you’re a buyer or seller.
Why Choose Burgess Thomson?
With decades of experience in property law, Burgess Thomson has built a reputation for delivering exceptional legal advice. Clients choose us for:
- Expertise in Property Transactions: We have a deep understanding of put and call options and their application in the NSW property market.
- Attention to Detail: Our lawyers meticulously draft and review option agreements to ensure compliance with legal requirements and alignment with your goals.
- Personalised Service: We tailor our advice to your unique circumstances, helping you make informed decisions with confidence.
- Clear Communication: We provide straightforward explanations and updates throughout the process, so you’re always informed.
Protect Your Interests with Expert Legal Support
When it comes to put & call options, having the right legal support can make all the difference. At Burgess Thomson, we’re committed to helping you understand and maximise the benefits of these agreements while ensuring compliance with NSW property laws.
Whether you’re a property owner looking to include a put option in an agreement or a buyer considering a call option, we can guide you through the process with clarity and professionalism.
Contact Us Today
If you need assistance with put and call options or any other property-related legal matters, contact Burgess Thomson today. Our experienced team is here to provide the expert advice and support you need. Contact us today to discuss your needs:
Secure your property transactions with Burgess Thomson—your trusted partner in navigating put & call options. Let us help you protect your interests and achieve your goals with confidence.
Frequently asked questions
What types of regulations apply to put and call options?
In NSW, there are strict regulations governing option agreements in relation to transactions of residential property. For example, the full contract for the sale or purchase of land needs to be annexed to the option agreement, including all documents outlined in the Conveyancing (Sale of Land) Regulation 2017 (NSW), such as sewer diagrams and planning certificates. Additionally, a call option must not be exercisable within 42 days of the date it was granted. At Burgess Thomson, we can help in your dealings with option agreements by going through your new agreement and ensuring it follows all relevant regulations and requirements. We can also do this with an existing agreement.
Dividing Fences
The option-holder must exercise their put option during the specified option period. Note that the put option agreement will terminate upon expiry of the option period unless otherwise agreed (i.e. a put option can e structured in a way to make it exercisable at any time).
When the option is exercised, the grantor will be issued an “exercise notice” by the option holder, confirming that it wishes to exercise the put option. This notice is irrevocable and completion occurs shortly after it is issued. Between service of the exercise notice and date of completion will normally be agreed in the original option agreement.
