A put and call option is a contract that provides one party an enforceable right to buy (or ‘call’) and the other party to sell (or ‘put’) real property at a future time and at a particular price. There are also call options available providing grantee’s with a unilateral right to purchase.
A put and call option may achieve the same effect as a conventional contract of sale as either party has a right to bind the other to either purchase or sell the property.
Put and call options in property transactions gives rise to various opportunities for any grantee (who has the call option right) to defer payment of transfer duty and in particular cases to nominate third parties to purchase the property (which may minimise duty payable by the grantee, assessed only on the amount of any premium it makes by effecting the third party nomination). There could also be taxation benefits to sellers of property utilising option arrangements (including delaying capital gains tax on the sale to the following financial year).
The drafting of put and call option agreements requires care and consideration and legal advice. If you are thinking of structuring your purchase or sale through the use of options, our property lawyers can draft the documentation, explain the technical complexities in ‘plain English’ and guide you through the various pitfalls that can often be associated with such agreements.