Exclusivity Agreements: What You Give Up During the Option Period

Most option agreements prevent you from selling your property to anyone else while the option is in effect. That exclusivity has real value — and it's easy to sign it away for less than it's worth.

If a developer wants to reserve your property while conducting due diligence, the agreement should fairly compensate you for limiting your ability to market or sell your land to someone else during that window. Before agreeing to that exclusivity, get clear answers on:

• Option fee. Is the payment for granting the option reasonable given how long your property will be tied up?
• Option period and extensions. How long does the developer have before deciding? Can they extend it, and if so, how many times, for how long, and for what additional payment?
• Confidentiality provisions. Some agreements limit who you can discuss the transaction with — read this carefully. You generally want the ability to talk to family, a financial advisor, or your own counsel preserved.
• Access rights. Exactly what activities can happen on your property during the option period — drilling, soil borings, environmental testing, surveying, tree clearing?
• Default remedies. If the developer walks away or fails to close after exercising the option, what happens?

The broader point: exclusivity is a real cost to you even if the developer never ends up buying. Treat the length and compensation of the option period as its own negotiation, separate from the eventual purchase price.

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