 |
IurisConsulting Property Lawyers Purchase Option |
   |
|
|
With the purchase option contract a person (granter) grants to another (grantee) the exclusive power to decide on the celebration or not of a purchase contract of a property, that has to be executed in a concrete period and with certain conditions, by means of the payment of a premium, which will be part of the purchase price if the purchase contract becomes perfected. The purchase option supposes a perfect purchase agreement that does not need later activity of the parties to develop the contractual bases contained in the option contract. It is sufficient that the grantee communicates his decision to exercise the right of option to the grantor, so that the purchase contract remains confirmed, perfect, executed and obligatorily for the grantor. That is to say, as soon as the option was exercised by the grantee in the agreed period, and communicated to the grantor, the option contract transforms it’s nature becoming a purchase contract (I mean, it becomes automatically perfected as a purchase contract) and the grantor of the option can do nothing to avoid it. The option forces the grantor not to sell anybody else during the agreed period and to grant the purchase title deed in favor of the grantee if this one uses the option.
Obligations of the partiesThe Grantor cannot sell the property to another person during the agreed period, and must grant the deed in favor of the grantee in the period and conditions fixed on the option contract, if the grantee exercises it in this period. Normally, when the parts sign this kind of contract, they agree that the grantee pays a premium to have the unilateral right to decide if he buys or not during a period of time.
Exercise of the right of option The Grantee can exercise his right in the agreed period, notifying in the agreed form his decision to the Grantor. As soon as the option is exercised, the purchase contract becomes perfected, without further ado (But!, if it was agreed that the exercise of the option has to be completed with the payment of the rest of the price agreed for the purchase, the Grantee has not carried out his commitment until he makes the entire payment). If the option’s period finishes before the Grantee uses the option right, the Grantor remains free of his obligations.
Basic requiriments for the validity of the Purchase Option.For the validity of the option, the contract must contain at least the following agreements: - The identification of the property and the price that is fixed for his possible acquisition by the grantee (Although it is not essential that a premium is fixed for the right of option, option does not exist if the price of the possible purchase is not fixed in case it is exercised). - The concession to the grantee of the sole right to decide about the completion or not of the purchase. - The concret period for the exercise of the option, during which the grantor binds not to transmit to other the property.
The Purchase Option is a right subjet to expiry: if the Grantee does not exercise it in the agreed period, loses the right definitively, without right to return of the premium (since this premium was the price to have in exclusive the right to decide), and the grantor can sell the property immediately, and without restrictions, to any other person. For having access the option contract to the Land Registry it is necessary that, in addition to the necessary circumstances for the registration, the following ones: a) That the parties expressly agree the registration. b) Normally, the premium agreed to grant the option. c) The agreed price for the acquisition of the property. d) The period for the exercise of the option, which cannot exceed of four years.
Breach of Contract In case the Grantor fails to observe some of his obligations respect of the option, the consequences change, deppending on if the right is or not inscribed in the Land Registry:
|
|
| |||||||||
