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Options Explained

An option is the contractual right, but not the obligation to buy, a property, at a future date. When a person buys an option the seller agrees to keep the property available to to that person until a certain date. Until then, the person who has the option may buy it at the agreed price, or may decide not to take up the option and to let it lapse at the agreed time. The person will need to pay for the option. This is the 'consideration' to seal the contract, but the amount is immaterial.

The consideration is not refundable if the person does not take up the option, but it may be credited to the purchase price if the person does go ahead and buy. Unlike a Contract for Sale and Purchase, which is a two-way agreement, in an option, only the seller has an obligation.

An option can be used to gain some control of a property without actually owning it or having a registered interest in it.

This information has been reproduced with permission from Dorien Forster [1]

--Perry 23:48, 22 December 2007 (NZDT)