Leases: clause granting an option to purchase the freehold

by Practical Law Property

A standard clause for use where a tenant is granted an option to purchase the landlord's freehold interest within a commercial lease. This clause outlines the terms under which the tenant can exercise the option, including the timing and procedures for serving an option notice, payment of a deposit, and determination of the purchase price. The purchase price is based on the Market Value of the landlord's interest at the date of exercise, exclusive of VAT. The clause provides detailed guidance on the completion process, including sale terms, title guarantee, and insurance obligations. The document incorporates relevant provisions from the Standard Commercial Property Conditions (Third Edition - 2018 Revision) and offers flexibility for modifications to specific lease terms. It emphasises the importance of registration to protect the option and outlines potential risks if not registered. This clause is designed to ensure a fair balance between the parties, with integrated drafting notes suggesting possible amendments.