Transfer of options to purchase land

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They have a wide variety of uses, including for real property, businesses or put and call option deed nsw assets and as tools for succession planning. This article focuses on their use for real property i. An Option Agreement can contain what is known as a put option, or call option, or both. This put and call option deed nsw the most common method of exercising options concerning real property, however other mechanisms available depending on specific circumstances or type of agreement.

The purposes and type of Option Agreement will determine what is a reasonable basis for requiring option fees or deposits to be paid. For example, an Option Agreement may provide that:.

There can be adverse tax consequences of utilising a large non-refundable option fee, so it is imperative that consideration is given to the capital gains put and call option deed nsw and GST treatment of option fees before the Option Agreement is entered into.

There can also be the risk that the arrangement constitutes an instalment contract read more about those here if it is not properly prepared.

Where an Option Agreement is intended to be more mutually beneficial or grants both parties the right to compel the other to buy or sell respectivelyit is more common for put and call option deed nsw Option Fee to be a nominal amount i. This may avoid some adverse tax and duty consequences. Option Agreements may have set time frames during which a party may exercise its option, or otherwise the option periods can be triggered by certain events for example, the Buyer obtaining a development approval.

Option Agreements can also allow for the asset to be sold to another party on exercise of the option. This can be useful where the buyer has not yet determined or established the legal entity that is to acquire the asset. In summary, Option Agreements have a wide range of uses and may offer benefits over a sale contract alone, however there put and call option deed nsw a number of significant legal and tax issues that will need to be considered. Sale contracts and option agreements each have their limitations and you should always seek advice before entering into an arrangement concerning real property.

We have extensive experience in this area. Skip to content Property Development. What are the Different Options? Put Option — this is where the seller has the right to compel a buyer to buy the Property.

Call Option — this is where the buyer has the right to compel a seller to sell the Property. Put and Call Option — this may grant both parties the right to compel the other to buy or sell the Property. Usually these options would run consecutively — the call option first, and then the put option kicks in after the first option has expired.

How does it work? An Option Agreement usually contains two main parts: The body of the Option Agreement, which put and call option deed nsw the terms on which the parties may exercise their option; and The sale contract as an annexure to the Option Agreement.

The Contract will often have all details and terms finalised, including the Purchase Price and length of contract. On exercising an option, both parties will need to sign the agreed sale contract. Option Fees and Deposits The purposes and type of Option Agreement will determine what is a reasonable basis for requiring option fees or deposits to be paid.

For example, an Option Agreement may provide that: The commercial basis for having a Call Option Fee is that the Seller is taking the property off the market for 6 months, without being guaranteed a sale. Triggers for Options Option Agreements may have set time frames put and call option deed nsw which a party may exercise its option, or otherwise the option periods can be triggered by certain events for example, the Buyer obtaining a development approval.

Nominees Option Agreements can also allow for the asset to be sold to another party on exercise of the option. Why use Option Agreements? There are many reasons why Option Agreements can be beneficial or necessary.

Practical reasons — for example, where a property developer wishes to lock in the option to buy a property at a set price, but subject to its right to obtain development approvals for the land and determine a final buying entity; or Tax reasons for long sales — using an Option Agreement can defer put and call option deed nsw or duty liabilities until a period more convenient for one of the parties, such as the next financial year for CGT purposes, or closer to the anticipated settlement date.

A Option can be attractive compared with using a long term unconditional sale contract. Paying Your Deposit under a Land Contract — when, where, who, what, how? Sellers — make sure you disclose all easements in the contract!

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Also, a transfer is taken to occur if an option holder, for valuable consideration:. The person liable to pay the duty is the transferee. In the case of a nomination or novation, a transferee includes a person who obtains the right to exercise the option or purchase the land. Your liability for duty arises when the transfer occurs. Where there is a nomination or novation, the liability date is:. Duty is calculated on the dutiable value of the option being transferred, being the greater of the consideration or the unencumbered value of the option.

When the option is exercised, duty is charged on the dutiable value of the dutiable property. The consideration for the transfer of the land will be taken to include the amount or value of the consideration provided by the transferee for the option whether for its a grant, transfer, exercise or otherwise.

The duty payable on the transfer of the land will, however, be reduced by the amount of duty if any paid by the transferee on the transfer of the option. Where a person A has a right under a call option requiring another person B to sell dutiable property, and B has a right under a put option requiring A to purchase the dutiable property, an assignment or transfer by A to C, for valuable consideration, A will be liable to duty on the dutiable value of the dutiable property.

The dutiable value of the dutiable property will be taken to include the amount or value of the consideration provided by A for the option. The duty payable by A will be reduced by the amount of duty if any paid by A when the interest under the call option was acquired. A grants B a call option that confers a right on B or any assignee of B to require A to sell land. B also grants A a put option that confers on A a right to require B or any assignee of B to purchase the land from A.

No duty is payable at this point. C then transfers the option to D. C as the option holder is required to pay call option assignment duty as if the option were a transfer of the land.

However, in this case C will receive a credit for the duty paid by C on the transfer of the option to C. D as the transferee of the option is required to pay duty on the transfer. Transfer duty Stamp duty Calculate dutiable value Lodging for assessment Pay your transfer duty Transfer of options to purchase land Exemptions and concessions Forms and factsheets Frequent questions.

Transfer of options to purchase land. Also, a transfer is taken to occur if an option holder, for valuable consideration: Who pays the duty?

When am I liable for the duty? Where there is a nomination or novation, the liability date is: When must the duty be paid? Duty must be paid within 3 months after the liability arises. How is duty calculated? No duty is payable on the grant of the option to Purchaser A. The amount of duty is to be reduced by the amount of duty paid by Purchaser B on the earlier nomination. Example 1 A grants B a call option that confers a right on B or any assignee of B to require A to sell land.

B then transfers the call option to C. Duty is payable as follows: B as the option holder must pay call option assignment duty as if the transfer of the option were a transfer of the land. Duty is payable on the dutiable value of the land, C as the transferee of the option must pay duty on the transfer of the option.

Duty is payable on the dutiable value of the option being transferred. No duty is payable on the grant of the put and call option. Option assignment duty is payable by A on the transfer of the option to B. Duty is calculated on the dutiable value of the land. Duty is payable on the dutiable value of the option. B will receive a credit for the duty paid by B on the earlier transfer of the option.