Option Agreements: Controlling Land with Minimal Risk

For developers and landowners alike, the concept of securing or disposing of land without triggering full purchase or sale commitments upfront can be both powerful and pragmatic. Option agreements offer precisely this flexibility.

What is an Option Agreement?

An option agreement is a legal contract that grants the buyer (typically a developer or promoter) the right – but not the obligation – to purchase a piece of land at an agreed price within a specific timeframe, usually 6-24 months for shorter-term deals and up to 5-10 years for strategic sites. This allows the buyer to secure control of the site while they explore planning or financial viability.

There are two main types (with variations such as cross-options, where both parties grant options to each other, and reverse options, which flip the usual arrangement in favour of the landowner):

• Call option: The developer has the right to buy.
• Put option: The landowner can require the developer to buy under specific terms.

Often, agreements involve a small non-refundable fee paid upfront (known as the option fee, sometimes credited against the purchase price) and typically last 6-24 months, though strategic agreements can run several years or even up to a decade.

Why Use an Option Agreement?

Minimised risk: The buyer doesn’t commit to purchase unless the site proves viable.

Time to add value: Allows for planning work to be undertaken without tying up capital.

Strategic land control: Used widely in strategic land promotion, especially for greenfield or longer-term sites.

Legal and Commercial Considerations

Option fee – Typically 1-5% of purchase price; non-refundable (sometimes deductible from the purchase price if the option is exercised).

Term length – Commonly 2-5 years, with possible extensions.

Trigger events – Often linked to planning permission, allocation in a local plan, or valuation conditions. Conditional contracts differ here, as they usually oblige purchase once conditions are satisfied.

Price mechanism – Fixed price, indexed, or based on valuation post-planning.

Registration – Call options are usually protected by registering a notice at HM Land Registry to secure the buyer’s rights.

Landowners must ensure the terms are clearly defined and include sunset clauses or review mechanisms. Developers should ensure they have sufficient time and rights to carry out due diligence and planning.

Current Relevance

With the planning system under strain and funding conditions tightening, option agreements remain a cornerstone of land assembly – though many landowners are now also considering promotion agreements, where risk and reward are shared with the promoter. Their use is widespread across Oxfordshire and surrounding counties, particularly in areas where planning allocation or infrastructure timing is uncertain.

These agreements also align well with neighbourhood plan strategies – where sites are brought forward by collaboration between landowners and developers under a long-term shared vision.

Practical Tip

Options work best when the parties have a shared understanding of value and intention. Misaligned expectations – especially on timing or deliverability – can lead to friction later. Early clarity, open dialogue, and robust legal drafting are key.