Option Agreement Freezer Clause

In general, we found landowners for the market default clause because they link a long-term option agreement or a transportation contract, so that they know that they are traveling long term with the developer and that they feel relatively comfortable with an extension because of a problem that is not under the control of the developer. An option agreement is an agreement between a landowner and a potential purchaser of their land. Simply put, both parties enter into an agreement, in return for a non-recoverable sum of money, the potential purchaser of the land has a legally binding option to purchase at an agreed time or time or after the conclusion of a particular event (for example. B after receiving the building permit). The main advantage for a landowner is that an independent third party bears all the risks and costs associated with granting a building permit, while a major disadvantage is the loss of control of the land. The reason is that the land is “linked” for the duration of the option contract (which could last 5 or 10 years – or even longer depending on the length of time negotiated), which prevents the landowner from freely selling the land to a third party. In both situations, the developer will have a lot of time and money in promoting the land through the local planning process, site study costs, planning fees (and if necessary. Complaint fees) invested to obtain a detailed building permit, as well as costs for contractors and consultants. The developer will not want to lose the site, but if there was a significant slowdown in the market, it could render the site unprofitable for a certain period of time (especially in light of a high minimum price).

Without the Freezer clause, the developer would have to make the difficult decision to buy the land despite the market downturn (or continue to buy tranches) or lose a site where he invested a lot of time and money. The Freezer clause works to delay this difficult decision, and hope that the market will be back on track at the end of a two-year period and the developer will be able to continue the purchase. The other option I would like to imagine for now is some kind of buying a property for a lesser amount, say 260K (figures to be agreed) now and pay the rest 40K if/if the lease is renewed.