The importance of precision in Option Agreements

Kuits acts for successful Defendants

Kuit Steinart Levy LLP is pleased to have achieved a successful outcome for our clients, the Defendants, in the recent reported High Court judgment in Lomax & Orchard House Property Developments Ltd v Dimelow & Dimelow ([2024] EWHC 3625 (TCC)).

This case involved a dispute between property developers (the Claimants) and landowners (the Defendants) over two option agreements concerning land in Cheshire.

Under a 2017 Master Agreement, the Claimants were granted two options:

• Option C: the Defendants agreed to grant Orchard House/Claimant an option to purchase plot C and entered into an Option Agreement on 19 January 2017 (Option Agreement C). The Claimant served an Option Notice within the contractual five–year period, but failed to pay the required 10% deposit, rendering the notice invalid. A second attempt to exercise the option also failed, as the Defendants had already validly terminated the agreement due to the Claimant’s failure to complete following a binding expert valuation. The Court found that Orchard House were precluded from relying on earlier negotiations, having chosen to follow the expert determination procedure.
• Option F: the Defendants agreed to grant Mr Lomax/Claimant an option to purchase plot F and entered into an Option Agreement on 19 January 2017 (Option Agreement F). The Option Period was two years from the date the Defendants could move into a new farmhouse built by Orchard House. The option could only be exercised after a completion certificate for the farmhouse had been issued. A deposit was to be paid on the date the option was exercised, and completion was set for four weeks after the service of the Option Notice. The Claimant purported to exercise the option but, again, did not pay the required deposit, and a second attempt, made with the deposit, was out of time. The Court found that the first exercise was invalid for non-payment of deposit and the second exercise was too late.

This judgment is a sharp reminder that option notices must be carefully drafted, properly timed, and legally compliant. Serving a notice late, or without the necessary deposit, can be fatal, even if the option agreement itself is loosely worded. Meanwhile, termination of an option must not be done lightly. As the Court emphasised, termination must be legally justified and clearly communicated.

For developers and landowners alike, the message is clear: seek legal advice early, especially when exercising option notices and/or terminating agreements.