Hello everyone,
I was wondering if some one could advise me on the following hypothetical situation. If i hold a call option over a property and then the vendor goes into foreclosure, what happens to my option? I understand that its a question of contract law. Perhaps a clause in the contract is required? Perhaps if they go into foreclosure they do not have the capacity to perform under the contract and i could be eligible to recover my premium?
Any comments are appreciated.
Regards,
David
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Alternatively, if you were to exercise your option it would be at the agreed price – you can't have your cake and eat it.
Sorry Scott i don't quite understand. Wouldn't the vendor going into foreclosure mean that even if i did exercise my option they don't really have the capacity to give it to me – because the bank is now in control over what happens?
On a side note, when they agree to give me the option, does that get put on the title? Does it have to be recorded in court / by a solicitor that they have done so?
Regards,
DavidHi David
The call call option agreements that we're familiar with, have in them a clause that states that we have a "caveatable interest" in the property. We can them make our own decision as to whether we get our solicitor to register a caveat on the property, regarding the option. Thanks.
Cheers, Paul
Paul Dobson | Vendor Finance Institute
http://www.vendorfinanceinstitute.com.au
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davidcball wrote:Sorry Scott i don't quite understand. Wouldn't the vendor going into foreclosure mean that even if i did exercise my option they don't really have the capacity to give it to me – because the bank is now in control over what happens?Regards,
DavidIt would depend upon what is in the option contract whether there is a provision for the loss of the option due to the mortgagee taking possession (the mortgagee would have had to have consented to the option if a caveat was placed on the land).
If you have a caveatable interest, have it registered for peace of mind.
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