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Managing your rights under an option.

For more information contact Serina Pace on 8410 9294 or send an email via this form.

Parties to legal documents relating to control or ownership of an asset, in particular land, should be aware of rights which can be incorporated into that document.

The rights outlined below place some form of obligation on the asset owner when either leasing, selling or otherwise altering the control of the specified asset.

These rights should be considered seriously prior to their inclusion into a legal document and must be sufficiently specific in order to be enforceable and reflect the exact intentions of both parties.

An option gives the other party the right, without any obligation on that party, to buy, lease or control a specified asset in the future allowing great flexibility for the asset owner.

Therefore, it is essential that the option be specific and set out the exact intention of the asset owner.

Right of first refusal
A right of first refusal does not force the asset owner to sell the asset at the discretion of the other party; however it does give the other party the right to purchase the asset at the same price with the same terms as offered to a third party. Essentially, it gives the other party first access to the asset should the owner ever decide to sell it.

This has a negative effect on the attractiveness of the asset when attempting to sell it.

Right of first negotiation
A right of first negotiation places an obligation on the asset owner to notify the other party if they intend to sell or lease the asset. The other party then has the right to negotiate with the asset owner exclusively.

This right does not guarantee the other party that a final agreement will be met, it merely gives them the right to negotiate exclusively prior to any other negotiations being entered into.

Right of first offer
A right of first offer gives the other party the right to make an offer for the asset before the asset owner is able to sell the property to a third party.

The asset owner can then reject the offer, with the only restriction on them being that the asset owner is unable to accept a lower offer for the purchase of the asset.

Pace Lawyers is able to advise on:

  • Options generally and how they may apply to you.
  • Options relating to commercial and residential land.
  • How to create, assign or exercise options.
  • Obligations of the option grantor and the rights of the option holder.

DISCLAIMER: this newsletter is not intended as legal advice; no reliance is to be placed hereon