Southampton - Most importantly, an option to buy is a contract for the purchase and sale of real estate, and like all contracts in New York State with respect to the purchase and sale of real estate, must be in writing to be enforceable.

The option to purchase is a contract regarding the actual sale of the property. (personalsecuritysolutions.com)

And as with all contracts, one of the essential elements in order to make it a binding contract is the exchange of consideration: "I promise to sell to you on the property on the agreed terms for which you will pay me a sum of money for the option to purchase," not to be confused with the agreed upon price to purchase the property itself.

Assume that a landlord has entered into a lease with a tenant, and has given that tenant the right to purchase the property on agreed terms at a point in the future; for example, at the end of the lease period. In these circumstances, the landlord and the tenant have entered into two separate contracts, the lease and the option to purchase the property.

The required consideration for the lease is, I the landlord will allow you the tenant, to occupy the premises in accordance with the agreed upon terms; you the tenant, will pay me rent.

The option to purchase is a contract regarding the actual sale of the property to the tenant, and therefore requires its own consideration, usually payment of a sum of money to the landlord separate and apart from the rent. Should the tenant decide not to purchase the property which is its right under the terms of an option, the landlord is under no obligation to return the consideration paid by the tenant for the option. It is common practice, but not required by law, for the landlord to credit the amount paid by the tenant for the option to the purchase price, should the tenant decide to purchase the property on the agreed upon terms in the option. The landlord, on the other hand, must abide by the terms of the option agreement, should the tenant be prepared to exercise the option. Otherwise, the landlord could be held in breach of contract.

It is important, therefore, that before a tenant and a landlord agree to terms under which the property may be sold to the tenant at some point in the future, each party engage legal counsel.

A real estate agent who represents a landlord with respect to the sale of the property, should determine whether the landlord has given the tenant a right to purchase the property before marketing it to the public.

Should the landlord employ a real estate agent to find a tenant for the property, the sale of the property to that tenant does not in and of itself obligate the landlord to pay a commission to the real estate agent, should that tenant purchase the property, either during the term of the lease or after it expires. The landlord and the real estate agent would at least have to agree that, under those circumstances, the real estate agent will be entitled to a commission.

A "right of first refusal" is common, but not limited to, Condominium Associations. Any home owner may give a right of first refusal to anyone of their choosing.

A Condominium Association, through its Board of Managers and as provided for in the Associations by-laws, requires that the owner of the unit who wishes to sell the property, give the opportunity to meet any terms that the unit owner can get a third-party to agree to regarding the purchase of the property that the third party is prepared and capable of meeting. It is not uncommon for the Board of Managers to require a signed contract between the owner of the unit and the proposed purchaser contingent upon the Association's right to exercise its right of first refusal.

Parties who wish to enter into this type of agreement should seek legal counsel before doing so, and a real estate agent who represents an owner who has given a "right of first refusal" must disclose that fact before marketing the property to potential buyers.