Option to purchase clause: sample, option fee and exercise

Sample clause

Written for option over a rural lot in Queensland, Lot 14 on RP 88213, granted by fictional owners to a fictional grazing business planning to buy after a season.

Grant and Exercise of Option. (a) In return for the Option Fee of $15,000, the Grantor grants the Grantee an option to buy the Land for the Price of $1,180,000 on the terms of the Contract in Annexure A. (b) The Grantee may exercise the option only by giving the Grantor written notice, signed by the Grantee, with the signed Contract, at any time before 5.00 pm on 30 June 2028. (c) On exercise, the Contract becomes binding, and the Option Fee is credited towards the deposit payable under it. (d) If the option is not exercised by that time, it lapses, the Grantor keeps the Option Fee, and the Grantee must withdraw any caveat it has lodged within 5 business days. (e) During the Option Period the Grantor must not sell, lease or grant any other interest in the Land, and must keep it in its present condition, fair wear excepted.

Sample wording, not legal advice.

Variants

What to negotiate

• The fee and what happens to it

  The option fee pays for the owner taking the property off the market. The clause should say whether the fee is credited to the price or deposit if the option is exercised, and that it is kept by the owner if not. A large non refundable fee with a long period favours the owner; a small fee credited on exercise favours the buyer.

• Exercise exactly as written

  Courts treat option exercise strictly: the notice must be given in the way, by the person and within the time the option requires. Missing the deadline by an hour, or sending notice to the wrong address, can mean the option has lapsed. The clause should say who signs, how notice is given, and the deadline including time and place.

• Protect the option

  An option gives the grantee an interest in the land that can usually be protected by a caveat on the title, so the owner cannot sell to someone else during the period. The clause should allow the caveat and require it to be withdrawn if the option lapses, as the sample does, and stop the owner granting other interests.

The risk of leaving it out

Without a written option, a buyer who has spent money on approvals and due diligence has no right to buy if the owner changes their mind or receives a better offer. A loosely written option, on the other hand, can leave an owner unable to sell for years, unsure whether it was exercised, and arguing about the fee.

Option, contract and the cooling off question

An option is not yet a sale: it is a promise to sell if the grantee chooses. The contract of sale is usually attached and becomes binding on exercise. In some states, exercising an option can affect cooling off rights and the timing of disclosure for residential property, so the state's conveyancing rules and the attached contract need to be checked together. Law checked on 21 October 2026. This page explains how the law works and is not legal advice.

Caveats and the title

In Queensland the grantee can protect the option by lodging a caveat with Titles Queensland, which records the claim on the title and stops other dealings being registered without notice to the caveator. Other states have similar systems. A caveat lodged without a proper interest can expose the caveator to compensation, so the option document should support it, and the caveat should be withdrawn promptly if the option lapses.

Duty and tax on options

State duty can apply to the grant of an option, to its assignment, or to the transfer that follows exercise, and the rules differ between states; Queensland's transfer duty rules are administered by the Queensland Revenue Office. The option fee can also have income tax and GST consequences for the grantor. The option example records price, deposit and GST terms in their own section so each can be checked.

Where the clause sits in a generated document

Option to purchase agreements, leases with a purchase option and development agreements carry this clause. When asking the AI document generator for one, give the fee and its treatment, the price, the option period and deadline, how notice is given, the attached contract terms, caveat rules and the grantor's promises during the period.

Documents that carry this clause

Option to purchase agreement with a fee, a window and a caveatAn option to purchase buys time rather than land. The grantee pays a fee for the exclusive right to buy at a fixed price within a set window, and can walk away without buying anything. This one gives a developer 18 months over a 3.4 hectare block at Woodford for $25,000, at a fixed price of $1,400,000.Rent to own agreement template with credits, price and defaultA rent to own agreement is a hire with an option to buy at the end, so the goods stay with the supplier until the last payment. This one covers a $2,400 sofa and dining set paid off at $62 a week for 52 weeks, with a table showing what has been credited and what the payout figure is at four points in the term.

Questions people ask