An $18k option payment bought 26 months on a 3.2 acre site. What the structure actually cost each side

The assignment restriction is the one I'd have fought hardest. You've just built a machine that produces an entitled site and the only buyer for it is you. If the market moves against you in month 20 and you'd rather take a check than build, you're back at the seller's kitchen table asking for consent, and he knows exactly what your position is at that point.

The entity carve-out helps if it's drafted wide. Does it let you admit a member who ends up with 90% of the economics, or is there a control test with a percentage in it?

Flint has named the load-bearing part. In option agreements the assignment clause and the entity transfer carve-out are usually where the actual transferability of the deal lives, and drafting varies enormously. Some carve-outs permit transfers to affiliates the optionee controls, some define control as more than 50% of voting interests regardless of economics, and some require the original signer to remain a manager. Those three produce very different answers to flint's question, and which one you have is something to confirm with the attorney who drafted it.

On the option itself, two mechanics worth understanding for anyone reading this who hasn't done one.

First, recording. An option is a contract between two parties. Whether third parties, including a future buyer or lender, are on notice of it generally depends on recording a memorandum of option, and recording requirements and effects differ by state. Some sellers refuse recording because it clouds title for the option term. If yours refuses, understand what you are exposed to if the seller sells to someone else, and ask your attorney what remedy you actually have in your state.

Second, credit of option payments. Bramble's 50% credit means half of every payment is essentially rent for time and half is a deposit on the price. That changes the real cost of a delay. At $2,500 a month with 50% credit, each month of slippage past month twelve costs about $1,250 of true burn rather than $2,500.

The entitlement contingency is doing the most work in this structure. A denial at council terminates the obligation. What that clause does not typically cover is an approval with conditions attached that make the project uneconomic, a reduced density, a required road improvement, an affordability set-aside. Approved-with-conditions is a common outcome and it is worth knowing whether your termination right reaches it.

A memorandum of option was new to me. So the option is real between the two of you either way, and recording is about warning everyone else. Have I got that right?

Rigging, roughly yes, and the state part of rena-expert's answer matters more than it sounds.

Bramble, the seller keeping month to month tenants in the old garden center building is the thing I'd watch. 60 days terminable on paper is one thing. A tenant who won't leave is a possession problem and possession problems run on the court's calendar, not yours. I've had a 60 day notice turn into five months. If your closing date is tied to delivering the site vacant, ask what happens if it isn't.

The 3 percent bump on extension is cheap for what it buys, and it would be worth paying more for. $15k for six months on a $1.45M basis is about 1 percent of price per six months of certainty, well under carry on the same land bought outright. What is worth confirming in writing is what happens to the accumulated 50 percent credit on extension. Some drafts stop crediting during extension periods, and people do not notice until the closing statement.

The real question is how comp plan support turns into an actual council vote. Staff support and a supportive comp plan don't guarantee anything once eleven neighbors show up at the hearing. That gap between paper support and a live vote is where these entitlement plays usually get tested.

Kestrel, you don't get comfortable, you price it. Bramble's whole structure exists because the answer is unknowable. He's spending $18k to buy a look at the answer instead of $1.45M.

Bramble, the thing I'd have added is a fixed date by which the seller has to sign the rezoning application as record owner. Some jurisdictions require the owner's signature and I've seen a seller use that signature as a renegotiation lever in month eight.

That kind of nine month gap between contract terms and reality has shown up in client situations before, and it's a useful reminder that option structures can do more for a buyer than underwriting alone when a site sits in the path of expansion but zoning hasn't caught up yet.

Twenty-six months of control on a site with no entitlements is the right order of magnitude on the build side, and it's often still tight. Eleven to fifteen months of entitlement work, then construction documents and permitting on top, and permit review in a lot of jurisdictions runs four to seven months on a project of that size. Closing at the end of the option and starting the permit clock after is fine, but that timeline doesn't support closing and breaking ground in the same quarter. A former garden center is worth a phase two conversation before going too far down this path. Nurseries mean stored pesticides and herbicides, sometimes decades of it, sometimes sitting in a shed with a dirt floor. That's a soil sampling question and it's cheap to answer now.

Girder's point about the nursery soils is the one I'd never have thought of and it's the kind of thing that turns a $18k option into a $18k education. Does the entitlement contingency cover walking on environmental findings, bramble, or is that a separate contingency?

I'm new enough that most of this thread is above me, but the part I understood is that he paid $18k to look at a $1.45M problem for a year. That reframed the whole idea of what an option is for me.