Conditional contract: property sale
This is a conditional contract – where the entire deal is under contract and both sides are bound subject only to one or more conditions being met.
A conditional contract is an alternative to using an option agreement. An option places the option holder (usually the potential property buyer) in control of whether the property is sold. A conditional contract tends to favour the seller in that he knows he has sold subject only to the condition being met.
The most usual condition is a grant of planning permission.
The document includes an option for the seller to receive an additional payment in the future. This top-up provision gives a seller a stronger incentive to sell because he will have a second “bite of the cherry” if and when the buyer is able to generate more value later. For example, if the buyer cannot obtain planning permission for the whole site and instead seeks planning permission in stages, the seller can benefit from the increase in value of the land as a result of the subsequent grants of permission.
The document also includes an option to include a guarantor if the buyer is a company.
Example uses of this document
- for the redevelopment of an office building conditional on a tenant being found first
- for the sale of a field to have houses built conditional on planning permission being granted
- for a warehouse to be converted into a nightclub conditional on local authority permission