Avoiding Purchase Option Pitfalls

Originally published 2nd Quarter 2004

Purchase options within retail leases are significant issues and are often highly negotiated. Because landlords often provide prospective tenants with the initial draft of a lease, landlords can try to favorably dictate the terms of purchase options in its initial lease draft. Among other things, a carefully drafted purchase option addresses the following:

• who may exercise the option

• when the option may be exercised

• how the option may be exercised

• what conditions may be required to exercise the option

• what property is applicable to the option

• the purchase price of the property

• what remedies may be available in the event of a related dispute