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Wanting to buy a property but not ready to sign a contract right now – what you can do

Small office

There is no avoiding or denying, Covid-19 (or Rona as we Australians have dubbed it) is here and it will be around to stay (at least for now).


As we’ve noticed, along with our referrers and clients, the uncertainty we face has resulted in apprehension in the commercial and business world.

But this uncertainty does not mean that you cannot go about your business as you would otherwise have in a Rona-free world.

Let’s say you have a property (residential or commercial) that you have had your eyes on purchasing. Then along came Rona and the uncertain impacts it has had on our economy and property market. Now you’ve probably got cold feet or are not certain you’ll be able to come up with the funding required to settle.

You can lock down a property (and a price) without entering into a contract to buy. This is known as an Option Agreement. Option Agreements contains either a call option, a put option, or both.

A call option is a future right to compel a seller to sell land and a put option is a future right to compel a buyer to buy land.

The benefit of a call option is that it allows the parties to enter into an agreement to potentially enter into a contract in the future, making it ideal for times of unprecedented uncertainty.

An Option Agreement gives the buyer a period of time to secure finance for the acquisition, undertake its due diligence, source partners and set up its purchasing entity/structure before committing to contract.

The buyer also has the benefit of deferring its transfer duty liability (which does not become due until after the contract is signed) and register a caveat over the property to protect its interest under the Option Agreement.

Exercising the call option gives the buyer choice to proceed to contract. If the buyer wishes not to proceed, the call option simply expires and the parties walk away.

Redchip can put together an Option Agreement that fits your needs. This ensures the property is put on hold without exposing you to the full risk of a contract.

If you are interested in locking down a property but do not want to commit until Rona is behind us or would like to consider your options generally, please contact Redchip’s Property and Commercial lawyer, Lauren Cutuli.

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