Option to purchase

An option to purchase gives the holder the right, but not the obligation, to buy property at a set price or formula within a fixed period. In British Columbia, an option over land is an interest in land that should be in writing and registered on title, and it must be exercised strictly on its terms.

How BC law treats it

The holder of an option to purchase has a right, not a duty. If it does not exercise the option on time and in the required manner, the option simply lapses. There is no breach and no damages. Courts require strict compliance with exercise terms such as the deadline, the form and delivery of notice, and any deposit, because the owner is bound only on those terms. An option to purchase land is an interest in land. It must be evidenced in writing under the Law and Equity Act, RSBC 1996, c 253, s. 59. Under the Land Title Act, RSBC 1996, c 250, an unregistered instrument does not pass an interest in land against anyone other than the parties (s. 20), and a purchaser for value is generally not affected by notice of an unregistered interest, except in cases of fraud (s. 29). The holder should therefore register the option on title promptly. Options to purchase often appear in commercial leases, letting a tenant buy the property during or at the end of the term. If the option is tied to the lease, the tenant's default under the lease may prevent exercise. Long options can also engage the Perpetuity Act, RSBC 1996, c 358. In share agreements, a call option lets a shareholder or the company buy another holder's shares on stated events, such as departure or default, often at a formula price.

What it means for your business

For a tenant or developer, an option to purchase locks in a future acquisition without committing capital today. For an owner, it limits what can be done with the property for the option period. Because there is no second chance if exercise is defective, the holder needs a calendar of deadlines and a clear notice procedure, and the option should be registered before anyone else acquires an interest. Example: A Kamloops manufacturer leases its plant with an option to buy at the end of year five for an appraised price. It registers the option on title and serves written notice two months before the deadline.

Risks and common mistakes

Missing the exercise deadline by a day and assuming the court will excuse it. Giving notice by email when the agreement requires delivery to a specific address. Not registering the option, so a later buyer or lender takes free of it. Being in default under the lease when trying to exercise a lease option. Leaving the price formula or appraisal process unclear.

Key authorities

Frequently asked questions

What happens if I miss the deadline to exercise an option to purchase?

The option lapses and you lose the right to buy. Courts require strict compliance with option terms and rarely excuse late or defective exercise. There is no breach on your part, but you usually lose any option fee paid.

Should an option to purchase be registered in BC?

Yes. Registering the option on title at the Land Title Office protects it against later buyers and lenders. An unregistered option generally binds only the original owner and can be defeated by a sale to a third party.

Can a commercial lease include an option to purchase?

Yes. Many commercial leases give the tenant an option to buy. The tenant usually must not be in default under the lease when it exercises, and should register the option to protect it.

Negotiating or exercising an option to purchase property? Talk to a Fulcrum real estate lawyer.