Option Contracts, Pre-emption and Overage Agreements

An option contract for property givies the holder the right, but not the obligation, to purchase or sell property for a price at a future date. 

Option contracts are often used where a buyer is a developer who will apply for planning permission for the development of a property and wants to secure the right to purchase the property at an agreed price when they secure planning permission for the proposed developement. 

Overage agreements are also known as 'claw back' agreements. 

Overage agreements are used when land or property is sold which is likely to greatly increase in value in the near future, usually where property is sold to a building developer. 

Overage agreements require the buyer to make a further payment to  the seller, representing a share of the increased value of the property  after the occurrence of an agreed trigger event. The trigger event upon which a payment usually becomes due to the seller is often the grant or implementation of planning permission or the sale date of the completed development.