Put and call options have become an attractive and popular for property developers and investors. With the property market booming and land in demand, put and call options are a great tool when negotiating with a seller.
What are put and call options?
A put and call option is a contract where one party being the seller agrees to sell a property or sometimes multiple properties if requested by the buyer (call option) and the buyer agrees to buy the same property if requested by the seller (put option).
The call option has an allotted time frame for the buyer to exercise the option. Once the time has expired, the seller has the chance to make the buyer purchase the property by giving notice in a period to exercise the put option.
What are the benefits of using put and call options?
There are many benefits of using a put and call option over a normal contract. The primary benefits of using a put and call option rather than a normal contract of sale are the potential tax benefits. The benefits include:
- delaying the buyer’s obligation to pay transfer duty
- nominate another buyer to buy the property without paying transfer duty or revenue duty twice
- change the period in which the property is sold for tax purposes which can impact on the tax obligations of the seller including capital gains tax (CGT)
- allowing a builder or developer to secure a site to on-sell to a third-party wanting to purchase a house and land package.
How can FC Lawyers help?
The drafting of put and call options require considerable knowledge. Our team property team has over 25 years’ experience acting for property developers, sellers, builders and joint venture partners in both small and large projects.
If you are thinking about using a put and call option, contact our team today so that we can explain the process and run you through everything you need to know going forward.