Question 1

What is an option to purchase?

Accepted Answer

An option to purchase is a contractual right to buy property at a specified price within a specified time. The option: gives the buyer (optionee) the exclusive right to purchase, does not obligate the buyer to purchase, does obligate the seller (optionor) to sell if the buyer exercises, must be supported by consideration (the option fee), and must comply with the Statute of Frauds for real property (Section 725.01: must be in writing). Options are commonly used in: real estate development, commercial leasing (option to purchase the leased premises), and land banking (securing the right to purchase undeveloped land).

Question 2

How is an option to purchase exercised?

Accepted Answer

Exercise: the buyer must comply strictly with the exercise provisions: written notice (the buyer must send written notice to the seller stating the intent to exercise the option), timing (the notice must be sent within the option period; even one day late may result in forfeiture), deposit (the buyer may be required to deposit earnest money or the full purchase price upon exercise), and closing (the contract should specify the closing date, which is typically 30-60 days after exercise). Florida courts strictly enforce exercise requirements: any deviation can result in forfeiture of the option.

Question 3

What is a first right of refusal vs. an option to purchase?

Accepted Answer

Comparison: option to purchase: the buyer can exercise at any time during the option period (regardless of whether the seller wants to sell), the price is fixed in advance, the seller cannot sell to anyone else during the option period, and the buyer has complete control. First right of refusal: the holder can match any third-party offer (the right is triggered only when the seller decides to sell), the price matches the third-party offer (not fixed), the seller can decide not to sell (the right does not force a sale), and the seller retains more control. Options are more valuable to the buyer; first rights of refusal give the seller more flexibility.

Option to Purchase

Option to Purchase

Key Elements

Exercise

vs. First Right of Refusal

Related Terms

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