Q&As

What are the risks faced by the grantee of an option over land in Scotland and how can these be mitigated?

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Published on LexisPSL on 17/09/2019

The following Property Q&A provides comprehensive and up to date legal information covering:

  • What are the risks faced by the grantee of an option over land in Scotland and how can these be mitigated?
  • What risks does the grantee face?
  • Enforcing by way of court action—grantor fails to transfer the property
  • Where the grantor disposes of the property to a third party and the off-side goals rule
  • Standard security
  • Grantor insolvency or default on secured loans
  • Making provision in the option for risks associated with community right to buy

What are the risks faced by the grantee of an option over land in Scotland and how can these be mitigated?

Reference is often made to ‘put’ option agreements and ‘call’ option agreements. A call option agreement is one where the buyer (grantee) can call upon the seller (grantor) to sell a property (or part of it) to the grantee. A put option is one in which the landowner can call upon the grantee to purchaser the property, see Practice Note: Options to purchase property—Scotland.

When an option over land is granted, the grantee has a contractual right to exercise the powers conferred to them by the option agreement. These powers most commonly involve the right to purchase the land:

  1. at a particular point in time, or

  1. within a certain time-frame

at

  1. a price, or

  1. a pricing strategy (such as the market value of the land at the time of purchase)

determined at the time the option was agreed.

Grantees often pay a substantial fee for the option itself, particularly if the land has the potential to be developed. Sometimes the option to buy will only become available to the grantee on the satisfaction of certain conditions. While the grantee is under no obligation to purchase the property, choosing not to do so, or being prevented from doing so due to the conditions not having been

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