Option Agreement Template for the UK

Use an option to buy agreement when you want time to evaluate a potential purchase without the risk of losing the opportunity to another buyer. It's particularly valuable in property development, where you might need several months to obtain planning permission, conduct surveys, or arrange funding before you enter into a binding purchase.

The agreement also proves useful in business acquisitions, giving you exclusive rights to buy shares or assets while performing due diligence. For startup investments, option agreements help structure staged investments, letting investors secure future ownership rights at today's prices, which is helpful when the valuation might increase significantly. In each case the option sets out the trigger event that lets the holder exercise the option and requires the seller to complete.

• Share Option Agreement: Grants the right to acquire shares at a fixed exercise price, usually vesting over time and exercisable on a sale or listing. This is the form most people mean by a free share option agreement template in the UK
• Employee Share Option Agreement: Used to give staff a stake in the business. Whether a tax-advantaged scheme is available has to be settled before grant, not after
• Incentive Stock Option Agreement: Incentive award over shares, typically with vesting tied to service and leaver provisions that decide what happens on exit
• Call Option Shareholders Agreement: Gives one shareholder the right to require another to sell, often used for succession and deadlock
• Put And Call Option: Pairs a right to require a sale with a right to require a purchase, so either side can force the transfer. A cross option agreement uses the same mechanism between shareholders, commonly for business succession on death or retirement
• Land Option Contract: Option over land, commonly used by developers pending planning. Must contain all agreed terms in the signed document and be protected by registration
• Commercial Lease With Option To Purchase: Combines tenancy rights with a future right to buy the premises

• Founders and Company Directors: Grant options over shares to staff, advisers or investors, and need vesting, exercise conditions and leaver terms settled at the point of grant
• Employees and Advisers: Receive an option and need to understand the exercise price, the vesting schedule, and what happens to unvested shares if they leave
• Investors: Lock in future rights to acquire shares at a price agreed today, including staged investment structures
• Shareholders: Put and call arrangements between existing holders, typically for succession, retirement or the death of a shareholder
• Property Developers: Secure potential development sites while investigating planning permission and feasibility
• Solicitors: Draft and review the agreement to ensure it is enforceable and that the formalities have been met

Follow these steps to draft an enforceable option agreement. Work through each term and condition in order so nothing is left ambiguous. This guide applies to a private company granting options over its own shares as well as options over land or other assets.

• Asset Details: Gather precise descriptions of the property, shares, or assets covered by the option, including the registered title where land is involved
• Party Information: Collect full legal names, addresses, and company registration details for the buyer and seller
• Option Terms: Define the option period, exercise price, and any deposit or option fee amounts
• Conditions: List any prerequisites like planning permission or due diligence requirements
• Exercise Process: Specify how and when the holder can exercise the option, including notice periods and the trigger event
• Payment Terms: Detail payment schedules, deposit arrangements, and completion timelines for the transaction
• Special Rights: Include any renewal rights, transfer restrictions, or early termination provisions
• Registration: For land, protect the option by registering it against the title so a later purchaser takes subject to it

• Parties' Details: Full legal names, addresses, and registration numbers for all involved entities
• Option Rights: Clear description of what can be purchased and under what circumstances
• Duration Terms: Specific start and end dates of the option period
• Consideration: Details of option fee and purchase price to ensure enforceability
• Exercise Mechanism: Precise process for exercising the option, including notice requirements
• Property Description: Detailed specification of the asset or property subject to the option
• Governing Law: Explicit statement that English law applies
• Signature Block: Space for dated signatures of all parties, with witness provisions if needed

An option agreement and an acquisition agreement both deal with transferring property, shares or assets, but they operate at different stages and carry different commitments under the law of England and Wales. The table below sets out the main differences.