A Developer Wants an Option on Your Land, Not a Contract of Sale: What You Are Actually Being Paid For

General information only for South Australian landowners, not legal, tax, valuation or financial advice. An option deed is a legal document, and only your own solicitor can tell you what the one on your table does to you — including whether any cooling-off right attaches and whether a clause is enforceable. What your land is worth, now and after a rezoning, belongs to a registered valuer. Duty is a question for RevenueSA; income tax, capital gains tax and GST belong to your accountant.

A developer or a land agent has been in touch about your block — a corridor site at Concordia or Roseworthy, acreage near Sellicks Beach or Murray Bridge, a wide inner-ring allotment at Prospect or Woodville with subdivision potential. Then a document arrives, and it is not what you expected. It is not a contract of sale. It is a deed, it is long, and it says the developer may buy your land, at a price fixed now, at some point over a period measured in years rather than weeks. Attached to it is a modest payment described as an option fee.

If the proposal on your table is a profit share, start with Red Flags in Landowner JV Agreements. If it is a price and you want to know whether it is fair, start with A Developer Offered to Buy My Adelaide Block. This article is for the third case: you have been handed a deed, and before anyone can tell you whether the number is fair, you need to know what the document does.

Cyberate PM is engaged by the owner. We are not paid on the transaction, by the developer, or by a lender. On an option deed our role is narrow and stays that way: we do not draft, review, interpret or negotiate the legal document, and we do not value your land. We coordinate the solicitor, the valuer and the accountant who each own part of the answer. We coordinate; we do not give the advice.

What an option actually is, and why it is not a contract of sale

A contract of sale binds two parties: one to sell, one to buy. An option does something different. It is a right, granted by you as the owner, that lets someone else bring a contract of sale into existence later by giving you notice in the manner the deed specifies. Until that notice is given, there is no sale. The contract of sale is usually attached as an annexure so there is no argument later about terms — they are settled now, and only the trigger is deferred.

That structure explains almost everything else. What you sell on the day you sign is not your land. It is optionality: the right to decide, later, whether the land changes hands. The land is what you keep, frozen, while somebody else holds the decision.

Call only, or put and call? The question that decides who is locked in

Under a call option, the developer holds a right to compel you to sell and you hold nothing equivalent. If the rezoning stalls, the development application goes badly, their finance falls over, the market turns, or they simply change their mind, the option lapses. Depending on how your deed treats the fee you may keep it, you keep the land, and you have lost the intervening period. The asymmetry is not accidental — it is the thing being purchased.

Under a put and call option, you also hold a right: a right to compel the developer to buy. If they do not call, you can put. Subject to the conditions around it the land is sold either way, so what the arrangement defers is timing rather than outcome. That makes the counterparty question far more important, because a right to compel a shell company to buy is worth only what that company can pay.

So the first thing to establish about any deed is which of the two it is, and whether the put — if there is one — is itself conditional on matters the developer controls.

What the option fee is compensating for, and what it is not

An option fee is usually described as something other than a deposit: a deposit is part payment under a contract that already exists, while an option fee is generally the price of the right itself. Deeds are typically drafted either so the fee is forfeited if the option is not exercised, or so it is credited against the purchase price if it is. But the character of the fee and how it is treated turn on the wording of your own deed, so which of those yours does — and what the fee is in law — is worth having your solicitor confirm before you sign.

More usefully, ask what the fee compensates you for. Not the land — that is the strike price, payable only on exercise. It compensates you for the period in which you cannot sell to anyone else, cannot easily deal with your title and cannot move on with your own plans. Whether that is a reasonable price is a valuation judgement for a registered valuer, with the option period and the strike price in front of them.

Then there is the price itself, fixed today against a value the land may not hold at exercise. Where the deed contemplates that the developer will pursue a rezoning during the term — in South Australia's growth areas that is often the plan — the value they are working towards may be one the land only reaches because of work done while your hands are tied. Whether any of that uplift is shared is worth understanding before you sign, alongside how rezoning in South Australia works and what being named in a GARP growth area does and does not give you.

What the option period does to the rest of your plans

Depending on what the deed actually grants, an option grantee in South Australia may hold an interest in land of a kind that can support a caveat under the Real Property Act 1886, and option holders commonly lodge one at the Lands Titles Office not long after signing. Whether the deed in front of you creates such an interest is a question for your solicitor. A caveat is not a claim to ownership; it is a notice recorded on your title, and its general effect is to stand in the way of registering dealings inconsistent with the interest the caveator claims. What that means for a specific dealing you have in mind is a question for your solicitor. In practical terms it also means that if you want to refinance, sell to a family member, wind up a deceased estate or simply change course, you are negotiating with the option holder rather than acting.

Meanwhile you still own the land, so rates, the emergency services levy, insurance, maintenance and, depending on your position, land tax keep falling on you. The land tax position while land is held for development is a question for your accountant and RevenueSA, but it is a real cash line across a long term. Whether the deed shifts any of it to the developer, and whether it lets them onto your land for surveys or to lodge applications in your name, is worth reading closely.

Who is on the other side of the deed, and who ends up buying

The name at the top of the document is often not the trading name you have been dealing with. Options are frequently granted to a special-purpose entity incorporated for the project, sometimes with no assets, no trading history and no guarantee behind it. Under a call-only option the entity is not promising to buy, so the weight of that question is different — but it does not disappear, because the deed may still oblige you to deal with that entity throughout the term. Under a put and call it matters a great deal. Ask your solicitor who the grantee is, whether any guarantee supports its obligations, and what happens if it is wound up mid-term.

Most deeds also let the holder assign the option, or nominate another party to take the transfer on exercise. Entities get restructured and capital partners come in, so there are legitimate reasons for it — but the effect is that the person you met, whose track record you may have quietly checked, need not be the person who buys your land.

Duty on the grant of an option, on its transfer or nomination, and on the eventual transfer of land is a matter for the relevant revenue authority. Almost all the Australian commentary on it concerns New South Wales — the Duties Act 1997 and the NSW Commissioner's practice notes on options and change in beneficial ownership — and those instruments do not determine a South Australian transaction. Your position is a question for RevenueSA and your own adviser.

Which conditions actually oblige the developer to do anything

Option deeds are full of conditions and it is easy to read them as commitments. Often they are not. A condition that the option may only be exercised once a rezoning or an approval is obtained tells you when the developer may act; it does not by itself tell you they must pursue anything. The obligations frequently run the other way — you may be asked to sign as applicant, grant access, refrain from making a representation on their application, keep the arrangement confidential and not deal with your own title.

So the useful question about every clause is: who does this bind, and what happens if they do nothing? Where the deed does impose something on the developer, note how it is expressed — an obligation to use endeavours and an obligation to lodge by a fixed date are drafted differently, and what each actually requires of the developer is a question to put to your solicitor. Characterising the strength or enforceability of any of it is a matter for them, not for you and not for us.

The South Australian layer the interstate material will not give you

This is where the reading an owner does on their own can mislead them, because the search results are against them. Type "call option land" into a search engine and you will be served material on section 66W certificates and cooling-off waivers under the Conveyancing Act 1919 (NSW), or Queensland practice. Section 66W is a New South Wales provision under New South Wales legislation, and it does not govern a South Australian transaction. South Australia's cooling-off and waiver machinery sits in its own Act and works differently, so reading the interstate material as though it described your position is how owners end up confident about the wrong thing.

South Australia's disclosure and cooling-off framework sits in the Land and Business (Sale and Conveyancing) Act 1994 and runs through the vendor's statement — the Form 1 — that a vendor must serve. What governs your position is that South Australian framework, not the interstate material. How it applies where a contract comes into existence by the exercise of an option, rather than by signature on a contract of sale, is a question for your solicitor.

What that means for the deed on your table — whether a cooling-off right attaches at all, and when it would start and end — is the one question in this article we will not answer for you in either direction. It is fact-specific and it turns on how and when the document is executed and served. Put it to your solicitor in writing before you sign.

How Cyberate PM handles this on your project

Our role on an option approach is deliberately limited, and we say so plainly because the boundary matters. We do not draft or review the deed, we do not advise on whether a clause is enforceable, we do not tell you whether the price is fair, and we do not advise on duty or tax. Those belong to your solicitor, a registered valuer and your accountant. An option deed touches all three areas at once, which is why owners commonly want each of them to have looked at the document before they sign, and why we would not want to see an owner sign without having put it to all three.

What we do is get you to those advisers in the right order with the right questions — to the solicitor, what the deed obliges each side to do and what you can still do with your title; to the valuer, whether the strike price fairly reflects value, with the deed and the length of the option term put in front of them so that the registered valuer — not us — decides what scope and considerations the valuation calls for; to the accountant, how the fee and an eventual sale are treated. We also explain the development logic a developer in this position is usually pursuing: what they are likely trying to achieve during the term, and where those steps sit in a South Australian planning sequence. We do not sit on the other side of the table from you, and our fee does not depend on whether you sign.

Frequently asked questions

A developer wants an option on my land instead of buying it. Should I be worried? Not automatically — options are an ordinary way development sites are secured. What matters is that you are agreeing to freeze your land at a price fixed today while somebody else decides later whether to proceed. Whether you are paid enough for that is a question for a registered valuer.

What is the difference between a call option and a put and call option? A call option gives the developer a right to compel you to sell and gives you no matching right, so if they walk away the deal simply ends. A put and call adds a right for you to compel them to buy, so the land is likely to change hands either way — which is why the financial substance of the entity behind it matters far more under that shape.

Is the option fee a deposit, and do I keep it if the option is not exercised? It is usually described as something other than a deposit — a deposit sits under a contract that already exists, while an option fee is generally the price of the right itself. Deeds are commonly drafted so the fee is forfeited if the option lapses, or credited towards the price if it is exercised, and yours will say which. Because the character of the fee and its treatment depend on the document, have your solicitor confirm both, and your accountant confirm the tax position.

Does the South Australian cooling-off period apply if I sign an option deed? This is a question for a solicitor before signing rather than for an article. South Australia's disclosure and cooling-off framework sits in the Land and Business (Sale and Conveyancing) Act 1994 and runs through the vendor's statement, the Form 1. How that framework applies where a contract comes into existence by the exercise of an option, rather than by signature on a contract of sale, is exactly what to put to your solicitor in writing before you sign. The interstate material you are most likely to find — section 66W certificates and the like — is New South Wales law under New South Wales legislation and does not answer it for a South Australian block.

Can I still sell or refinance during the option period? Usually not freely. Depending on what the deed grants, an option holder here may have an interest capable of supporting a caveat under the Real Property Act 1886, and a caveat on your title can affect what is registered against it; whether your deed creates such an interest is for your solicitor to say. You will also still own the land, so the holding costs that apply to your circumstances — rates, levies, insurance, maintenance and, depending on your position, land tax — keep running across the term. Your accountant and RevenueSA own the land tax question; ask your solicitor what you can and cannot do with the title once the deed is signed.

If a developer has approached you about your South Australian land, we can help you assemble the owner-side team — solicitor, registered valuer, accountant — and get the sequence right before you respond. We coordinate your professionals; we do not review your deed or value your land. Book a free consult.