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Explanatory Notes
Option for the Purchase of Freehold Property
This Option for the Purchase of Freehold Property document is designed for use as an option agreement for sale of the whole of freehold commercial property where the purchase price is fixed and where a written notice is required to be served on the Seller within a specified period. Our comments on the specific clauses of the agreement are set out below. Date and Parties Please refer to the additional notes on signing agreements and contracts at the end of these Explanatory Notes. 1. Definitions These need to be completed, where appropriate, owing to the particular circumstances of your contract. 2. Grant of Option This Clause sets out that the Seller will grant the Buyer the Option to acquire the property on payment of an option fee for the purchase price and on the terms set out in Clause 3. The option fee can be nominal but is more likely to be a considerable sum depending upon the development potential of the land. 3. Exercise of Option These Clauses set out how the Buyer may exercise the Option and the effect of the exercise of the Option. 4. Deposit This Clause stipulates that a deposit of [10%] of the Purchase Price is due on or before service of the Option Notice. 5. Completion This Clause specifies when completion of the purchase of the property will take place. 6. Title Guarantee This Clause sets out whether the Seller is selling with a full or limited title guarantee. A limited title guarantee implies the following covenants: · That the person disposing of the property has the right to dispose of it; · The person disposing of the property will, at its own cost, make reasonable efforts to give the new owner of the property the title that the person disposing of the property said it would and · The property is free from known encumbrances since the last disposition for value. In the case of a full title guarantee, the last covenant above is modified to imply that the property is free from all known encumbrances meaning that the disposal is free from all charges, encumbrances and all rights exercisable by third parties except any charges, encumbrances or rights which the person disposing of the property does not and could not reasonably be expected to know about. 7. Incorporation of conditions of sale It is usual for the option deed to incorporate a set of conditions of sale and this Clause sets out that the Standard Commercial Property Conditions (Second Edition) will apply to the contract. These can be obtained from OyezStraker, Oyez House, 7 Spa Road, London SE16 3QQ, telephone 020 7232 1000 or can be ordered on-line at www.oyezformslink.co.uk. 8. Registration Once the Option Deed has been entered into, the Buyer acquires an immediate equitable interest in the Property, which the Buyer must protect by registration of a C(iv) land charge in the case of unregistered land or by a notice in the case of registered land. This Clause specifies that the Option will be void if registration is not carried out within the period of one month from the date of the Deed. To register a C(iv) land charge, you can obtain the appropriate form (Form K1) from HM Land Registry's website at www.landreg.gov.uk/publications. When completed this needs to be sent to: The Superintendent The Land Charges Department Registration Section Plumer House Tailyour Road Crown Hill Plymouth PL6 5HY A fee of £1 is payable. In respect of registered land, an application to enter an agreed notice in Form AN1 (again obtainable from HM Land Registry's website) together with a £40 fee needs to be submitted to the appropriate District Land Registry.
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