An option agreement is used to grant a potential purchaser an option as to whether or not to buy a premises and is an agreement entered into by the owner of property and potential purchaser. On entering the agreement, it is usual for a non-refundable sum to be paid to the owner in return for a legally binding option to purchase the property either within an agreed period of time or after a specified event.

For example, a developer may be interested in purchasing a plot of land to develop but does not want to commit to the purchase until planning permission is granted as the land will have little value without such consent.

This benefits the developer as he has peace of mind that the land will not be sold to someone else until the option expires. Equally, he can walk away from the purchase if he does not obtain the required planning permission. From the owner’s perspective, even if the developer does not go ahead with the purchase, he will usually be entitled to keep the option fee already paid.

An overage agreement is used in the buying and selling process where land is sold on the basis that if conditions specified within the agreement occur, the seller is entitled to an additional sum of money or an ‘overage payment’.

For example, a developer has purchased plot of land ‘A’ for which planning consent for development has already been granted. The developer now wishes to purchase a neighbouring plot of land ‘B’ for which planning permission is yet to be obtained.

However, the developer requires plot B, whether or not planning is granted, as in the absence of planning it will still be of use as access to Plot A. The developer will however be unwilling to purchase plot B for the same value if planning permission has not been granted as he would if planning had already been obtained. The owner will also be unwilling to sell plot B for the value of the land without planning, knowing of the possibility that planning permission will be granted in the near future, later increasing the value of the land.

One way to satisfy both parties is to enter an overage agreement whereby plot B is sold at the current value in the absence of planning permission with the condition that on the grant of planning permission, the developer must pay an agreed additional sum to reflect the increase in value of the land.

A tenant may, for commercial reasons, wish to leave commercial premises prior to the end date of a lease. One way of achieving this is to assign the benefit of the lease to a new tenant. Most commercial leases will contain a clause restricting the tenant’s ability to assign the lease. Frequently, assignments of part only of the premises will be prohibited but the lease will often allow the tenant to assign the whole of the lease subject to first obtaining the landlord’s consent.

The lease will often require the landlord to provide consent by way of a Licence to Assign for which the landlord will require payment of his legal fees. In addition, the landlord will often require the outgoing tenant to enter into what is known as an ‘authorised guarantee agreement' (AGA). Under the AGA the outgoing tenant will have to guarantee the obligations of the tenant to whom the lease is being assigned.

You will need to consider the facts and ask important questions which could include:

• Who owns the farm’s assets?
• Who occupies the land and buildings and on what basis?
• What does each member of the family want and need from the farm?
• What is the long term strategic focus of the farm and its business?
• What role does each member of the family play now and in the future?
• Do the younger generation need training and support to develop the skills and experience to drive the business forward so that the older generation can take a step back?
• Is all the necessary legal documentation in place, such as Wills, to protect the farm and its business?

Our advice will be tailored to suit your circumstances.

Commercial lenders will often insist you obtain legal advice before signing up to secured lending for good reason. Without taking legal advice you may not realise that: you are breaking an existing loan or lease condition by taking a new loan or charging your property; a debenture charges all of the company’s assets; the charge is an all monies charge and acts as security for other loans you have with the same lender; there can be several triggers for repaying the loan some of which you were not aware of; you may need to prepare board minutes and resolutions. Whether you are the borrower or lender, it is important to ensure that all security documentation and ancillary documentation is executed with due diligence and all the necessary safeguards are in place. This is a complex process, often required within a tight deadline, which involves review of extensive technical documentation and sometimes changes or additions to the documentation to benefit you and your intended use of the funds.