For developers running house and land package arrangements with builders, the transaction structure matters as much as the underlying land deal. These arrangements often account for a significant share of a project’s presales, and securing them on terms that work commercially for both the developer and the builder is central to the project’s success.
Put and call options exist because they solve a genuine problem in this space. They let a developer lock in a committed sale to a builder while giving the builder the flexibility to bring in the eventual homebuyer later, without the builder needing to fund settlement on land it hasn’t yet on-sold. That flexibility is what makes the house and land model commercially viable at scale, and it’s why this structure, rather than a standard contract of sale, tends to be the developer’s preferred mechanism for these deals.
We set out below how this structure works, and where developers should be paying closer attention.
What a Put and Call Option Actually Does for Developers
A put and call option deed sits between two parties, usually the developer as grantor and the builder as grantee, and grants two separate rights. The call option gives the builder the right to require the developer to sell. The put option gives the developer the right to require the builder to buy, typically exercisable if the builder hasn’t acted by an agreed date. Together, these give both sides a level of certainty that a simple contract with a long settlement date doesn’t provide.
For a developer, the appeal is straightforward. A signed option secures the sale of a lot without immediately locking in every detail of who the final buyer will be, which suits a builder still assembling house and land buyers.
Why This Structure Suits House and Land Package Arrangements
House and land package deals depend on timing that a standard contract of sale doesn’t handle well. A builder typically wants to secure land ahead of finding a homebuyer, market the package, and only bring the actual purchaser into the transaction once they’re signed up.
A put and call option allows exactly this. The builder holds the right to exercise, and the option deed’s nomination clause allows the builder to name the ultimate purchaser as the party who completes the contract, often without the builder ever needing to settle on the land itself. This is the mechanism that makes the whole house and land model workable at scale.
Disclosure Gets More Complicated Once a Nominee Steps In
Once a builder nominates the ultimate homebuyer, that buyer becomes the actual party to the contract of sale, and every disclosure obligation that would normally apply to them still applies. The option deed itself doesn’t satisfy this, and a developer who assumes it does is exposed.
Queensland also applies different disclosure regimes depending on the registration status of the lot at the relevant time, which adds a further layer for developers to manage, particularly across staged developments. We’ll cover that distinction in more detail in a separate article.
Getting the Deposit and Timing Provisions Right
Deposit clauses need specific attention in these deeds. It’s common for an option fee to become the deposit under the resulting contract, but where a nominee ultimately becomes the buyer, that builder generally won’t want its own deposit tied up as the nominee’s deposit. Timing provisions around the put and call expiry dates also need to work together with any development approval conditions the builder is relying on, so the option doesn’t lapse before those conditions are met.
A Practical Perspective for Developers
A put and call option is a genuinely useful tool for structuring house and land arrangements with builders, but its value depends on the disclosure and deposit provisions being drafted with the eventual buyer in mind from the start, not treated as boilerplate.
A useful test is whether your current option deed template accounts for disclosure obligations following the nominee once they step in, rather than treating the option deed as sufficient in itself. For many developers, that hasn’t been built into the drafting.
How Ardor Legal Assists Developers with Put and Call Option Arrangements
At Ardor Legal, we assist developers in structuring and preparing put and call option deeds for house and land package arrangements with builders.
Whether you are establishing a new option arrangement or reviewing an existing structure with a builder, we can help ensure the documentation is commercially sound and legally compliant.
Schedule a complimentary 15-minute discovery call with one of our experienced commercial property lawyers to discuss your development and how Ardor Legal can assist.
Frequently Asked Questions (FAQs)
What is a put and call option in a house and land package deal?
A put and call option is a deed giving a builder the right to buy land from a developer (the call option) and giving the developer the right to require the builder to buy (the put option), with a nomination clause typically allowing the builder to substitute the ultimate homebuyer as the contracting party.
Does disclosure still apply once a builder nominates the homebuyer?
Yes. The nominee becomes the actual party to the contract of sale, so all disclosure obligations that would normally apply to a buyer apply to them. The developer remains responsible for ensuring these are met. Queensland also uses different disclosure regimes depending on a lot’s registration status, which we cover separately.
Can a builder avoid settling on the land under a put and call option?
Yes, this is one of the main reasons the structure is used in house and land packages. A properly drafted nomination clause allows the builder to bring in the ultimate buyer to complete the contract without the builder itself taking title.
What happens to the option fee if a nominee is brought in?
This depends on how the deed is drafted. Deposit clauses need to specifically address what happens to the option fee where a nominee becomes the buyer, since a builder generally won’t want its own deposit held as security for the nominee’s obligations.
