Call options—protection against third parties
Call options—protection against third parties

The following Property guidance note provides comprehensive and up to date legal information covering:

  • Call options—protection against third parties
  • Registered land
  • Unregistered land
  • Restrictions on dealings with the option land

A call option is (generally) an equitable interest in land and must be protected by registration in order to bind the grantor’s successors in title. The exception is where the option agreement is personal to the grantor. In such a case it is not an equitable interest and therefore need not be registered.

It is only the option agreement that has to be protected. It is not necessary separately to register the contract for sale that comes into being once the option is exercised.

Failure by the grantee's solicitor to register the benefit of the option is capable of constituting negligence actionable in both contract and tort.

Even if the option holder does not register the option and the landowner sells on to a third party, who is thus not bound by the option, the landowner will remain liable to the option holder under privity of contract. The usual remedy is damages. However, in Coles v Samuel Smith, an award of specific performance was made against a grantor who sold on to a subsidiary, where the option had not been protected by registration as a land charge. The sale to the subsidiary was entered into with the intention of defeating the option. Crucially, the grantor was still in control of the subsidiary company and therefore able to procure the transfer of the property to