Page 18 - PR Mag Nov19

PUT AND CALL

OPTIONS

Put and Call Options are a special type of contract commonly money (as opposed to its own) to complete the land purchase
used by land developers. In the most typical scenario, the and once the land purchase is complete, the developer can then
developer is also a home builder who will use a Put and Call go on and happily build the new home for a profit assuming
Option to secure the exclusive right to buy a property from its of course the developer has done its sums right. By using a Put
existing owner at a set/fixed price, but with no obligation to and Call Option device, the whole project becomes much more
actually complete the purchase and pay over the money for an affordable because the developer doesn’t have to borrow and
extended period of time of say 120 days. The developer then pay commercial interest rates on the land purchase whilst trying
enthusiastically sets about marketing the property for on-sale to find a buyer and, if the documentation is done right, the land
to a third party as a finished “house and land” package. If all goes transfer will occur from the original owner directly to the third
to plan, the developer will have found a buyer willing to sign up party house and land buyer, thus cutting out the developer as
to a purchase contract for the land and a simultaneous building the middleman and saving the payment of double stamp duty
contract for the home within the first 90 days and with the new in the process. Put and Call Options can and often are also used
buyer secured, the developer can then go on and safely deliver for other situations, such as a developer buying a larger parent
the “call” to the original land owner to commit to the sale of the block with the intent to subdivide and sell off smaller blocks for
land before the 120 day time limit has expired. With the timing profit, but in those scenarios, usually paying the double stamp
set up in this way the developer will be using the new buyer’s duty is going to be unavoidable.

Michael Zande is the Principal of Zande Law Solicitors, with 30 years’ experience in practice.
Michael and his team have had extensive experience in conveyancing matters. Please feel free to
review our firm and staff profiles at www.zandelaw.com.au
The information in this article is merely a guide and is not a full explanation of the law. This firm cannot take
responsibility for any action readers take based on this information. When making decisions that could affect your
legal rights, please contact us for professional advice.

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