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Land owner and developer enter into put and call option
agreement
A land owner owned a large block of land in West Pennant Hills,
in Sydney's north west. The land owner was approached by a
developer who indicated he was interested in purchasing the land
under a put and call option agreement. This is an agreement for the
sale of land under which the developer can compel the land owner to
complete the contract once certain conditions have been met.
The relevant conditions were that development approval would
need to be granted first, before the developer would commit to
completing the purchase, and the developer was responsible for
obtaining the development approval.
Land owner seeks to terminate agreement and developer lodges
caveat on the land
Significant time had passed, and development approval had not
been granted. Due to the time that had elapsed, the market value of
the land had increased substantially from the time when the
contract was entered into. With no clarity as to when the option
under the agreement would be called, the land owner sought to bring
the contract to an end.
The developer refused and lodged a caveat on the land to protect
its alleged interest. The land owner commenced proceedings in the
Supreme Court to have the contract brought to an end
case a - The case for the land owner
case b - The case for the developer
The developer had indicated that he would have development
approval within six months of us entering into the contract in
April 2015. My initial intention was to sell my land within six
months.
After it became clear that the developer would not be able to
call the option in that time, in November 2015 we negotiated a
further six-month term, and this was reflected in a deed of
variation. This meant that the developer had over a year from the
date of us entering into the original agreement to call the option.
It has now been three and a half years and the option has still not
been called.
The developer has no current development application on foot
with the council. This shows that he is not making any reasonable
attempts to complete the contract.
The developer does not have a caveatable interest in my land,
because in my view, the contract came to an end six months after
the deed of variation was negotiated. His caveat is preventing me
from being able to deal with my land and the court should order
that the caveat be withdrawn.
While it was my intention to try to complete the transaction
within six months, this was not included as a term of the contract,
because although I could try to obtain development approval, I
could not guarantee that it would be granted within six
months.
I did make an application to the council for development
approval within the six-month period. However, the application was
refused because the council had some concerns regarding asbestos
contamination of the land. I was not previously aware of the extent
of this contamination, nor the impact that the contamination would
have on obtaining the development approval.
The council required that certain works be done regarding the
contamination before it would consider granting development
approval. I obtained a quote for undertaking the contamination
works and found it to be quite costly. Procuring the finance
required to fund the contamination works would take some time.
I am ready, willing and able to perform the contract. The land
owner should not be able to end the contract because I have not
breached a term of the contract. The relevant term of the contract
is that I must call the option within 30 days of development
approval being granted. Since development approval has not been
granted yet, I am not in breach of the contract.
So, which case won?
Cast your judgment below to find out
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