- Most property purchases are commenced by the Seller granting to the Buyer an Option to Purchase in exchange for the Buyer paying an Option Fee usually equivalent 1% of the purchase price. Under the Option to Purchase, the Buyer has a certain period of time (usually 2 weeks) to decide whether to purchase the property
- If the Buyer decides to proceed with purchase he would be required to pay to the Seller a further sum which together with the option fee makes up the Deposit. The Deposit is usually 5% (inclusive of the Option Fee) of the price of the property. Upon payment of the Deposit, a contract for sale and purchase comes into existence. The terms of the sale and purchase contract are those contained in the Option to Purchase.
- If the Buyer decides not to proceed with the purchase, the Option Fee is forfeited by the Seller who is then free to sell it to another person.
- In view of the binding effect of the terms set out in Option to Purchase (once it is granted) it would be wise for a party, whether Buyer or Seller, to seek early legal advice on the terms of the Option to ensure that they are fair, especially if the option is drawn up by the other party.
- If you are the Buyer, you should also conduct checks on the following before paying your option fee :-(a) a bankruptcy search to ensure that the Seller is not an undischarged Bankrupt;
(b) a title search to ensure that the owner of the property is the person you are paying the option fee to;
- Since you have to appoint solicitors to act for you in the purchase, it makes sense to appoint them as early as possible. We shall be pleased to provide you preliminary advice on the terms of the option as well as to make the preliminary searches on your behalf. If you decide not to proceed with the purchase you only need to pay a sum of $50.00 to cover the costs of the searches.