Put And Call Options
Property & Conveyancing
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Options are created by written agreements. They can come in two forms; as either “put” or “call” options.
A “put option” provides a right to the property owner to compel another person to buy the property at an agreed price. In contrast, a “call option” gives the holder the right but not a duty to buy shares from the grantor. To identify if an option is a call or put option, the question is which party has the right to trigger the option. That party will be the option holder.
In New South Wales, there are strict requirements which govern option agreements in relation to transactions of residential property. Failure to meet these requirements or stay within the bounds of the legislation can result in an option agreement being found to be void or able to be rescinded by the other party.
At Burgess Thomson, we can help to identify any options in your agreement which may be a put or call option and what rights you hold in relation to the entire agreement. In drafting your agreements for you, we can discuss possible options to include which could advantage you. We can also analyse your agreement to ensure that it falls within NSW regulations and provide advice regarding any existing agreement you may have.
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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.
