Encyclopedia
Option to purchase
A right to buy a property on set terms within a set time.
For example: A tenant negotiates an option to buy the building. (Illustration only, not a real deal.)
This is a general industry term with no single official definition. Your lease or contract wording controls.
Example only, not a real client. Say you lease a small industrial building for your machine shop and negotiate an option to buy it within five years at a price set by an agreed formula. Your business grows, you secure financing in year four, and you give written notice on time. You become the owner without competing against other buyers.
What I’d tell a friend
An option to purchase can be worth a lot, but the details decide whether you can actually use it. Pay close attention to the deadline and how the price is set.
Why it matters to you
For a tenant it can lock in the chance to buy the building later. For an owner it can make a sale to anyone else harder, so the price formula, the notice period and what happens on a sale all need to be clear.
How to use it in your deal
Tenants and buyers should make sure the option is clear: the price or how it'll be set, the exercise window, how notice is given, deposit and closing terms. Register it on title through your lawyer so a new owner is bound. Mark the exercise window in your calendar. Get financing lined up ahead of time.
Landlords should consider whether the option limits future sales or refinancing, and price it accordingly; options can make a property harder to sell to others. Buyers of a building with a tenant option should read it carefully, since the tenant may be able to buy the property out from under you. Lenders review options before lending.
Register the option on title if your lawyer advises it, so a buyer of the property is bound. Diarize the exercise window and the exact steps to exercise.
Mistakes I see
Vague price formulas. Not registering. Missing the exercise window. Buyers not noticing existing options.
In BC and Vancouver
Options are contracts; registration follows the Land Title Act. BC courts strictly enforce exercise deadlines.
Official sources: Land Title Act (BC Laws) · CanLII (court decisions)
How an option works
An option to purchase gives you the right, but not the obligation, to buy the property on agreed terms within a set period. It is often negotiated as part of a lease, especially by owner-users.
The price may be fixed, set by a formula or set by an appraisal at the time you exercise the option. A fixed price gives certainty; an appraised price follows the market.
Protecting the option
Check the deadline, exactly how notice must be given and whether the option survives if the landlord sells or refinances. Missing a step can end the option.
Ask a BC lawyer whether to register the option on title and how it interacts with any lender’s mortgage on the property.
Questions to ask before you sign
- What's the price or formula?
- When can I exercise it?
- Is it registered?
- How do I give notice?
- Can I finance in time?
Keep reading
Related terms: First right of refusal (ROFR), Critical dates
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General information for British Columbia only. It isn’t legal, tax, accounting or financial advice, laws and rates change, and reading it doesn’t make you my client. Any numbers or scenarios are hypothetical. Check the linked official source and talk to a lawyer, accountant or other qualified professional before you act or sign anything. See the terms and disclaimer.