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Call or put option?

In a ‘call’ option the purchaser will have control in that it may call for a transfer of the property. A ‘put’ option gives the vendor control in that it can require the purchaser to take a transfer of the property and therefore the purchaser should be especially vigilant in ensuring that the terms for the transfer (particularly those relating to valuation and, if appropriate, insurance) are as favourable as possible.

Vendor’s charges

If the property is already mortgaged at the date of grant of the option agreement, there is a risk that the mortgagee may overreach the option by exercising its power of sale. Therefore ensure that the mortgagee either:

1. •

   joins into the agreement (this is rare in practice), or

2. •

   provides written consent to the granting of the option

In either case, the mortgagee should confirm that if the purchaser exercises the option it will acquire the property free from the charge or, if the mortgagee exercises its power of sale, it cannot sell free from the option.

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