An option the registry will not note binds the owner and nobody else.

An option over land is a right to call for its transfer on terms fixed now, and its value depends on a question that is never about the terms: whether the state's registry will record it against the parcel. Where it will, the option binds the land. A purchaser from the owner takes subject to it, a lender to the owner sees it on the register, and the option holder can enforce against the parcel. Where it will not, the option is a contract with the owner. It binds the owner, and an owner who sells to somebody else has breached it, and the option holder has a claim for damages against a person who has just received the sale proceeds and may be in another country. The Gulf registries record what their laws and their practices say they record, and an option drafted in a form the registry does not know is worth what the owner's word and the owner's solvency are worth. A platform that has paid for an option, or built a programme on one, reads the registry before it reads the terms.

This note sets out what an option is and what it is for on the land door, the two kinds of binding, what the registries record and how practice differs from law, the instruments that deliver the same position in a recordable form, the owner's capacity and the several signatories, the option's price and the platform's exposure while it runs, the option in the platform's exposure statement and valuation, the developer's reading, the lender's reading, the onshore interface in each state, a comparison, a worked option as a type, cases, what each party holds, the sequence, questions, terms and what to read.

What an option is for

On the land door the option is the instrument between access and acquisition: the landowner has agreed in principle, the platform needs time to test the parcel against its statement, to obtain the consents its programme needs, to raise the capital or to draw it, and to bring the developer to terms, and neither party wants the transfer before those things are done. The option fixes the terms, gives the platform the time, and gives the landowner a payment for the time and a certainty of terms if the platform calls. It is the land door's most common first contract after the non-disclosure terms, and its worth is the registry's.

The two kinds of binding

A right that binds the land is a right in the parcel itself: it survives the owner's transfer, it appears to anybody who searches the register, it ranks against later interests by its date of registration, and it is enforced against the parcel by an order the registry executes. A right that binds the owner is a promise: it survives nothing but the owner's willingness and solvency, it appears to nobody who searches, it ranks nowhere, and it is enforced by a claim against the owner for damages or, where the court will order it, for performance, against an owner who may by then have sold, borrowed, died or left. The first is property; the second is contract; and the registry is the line between them.

Why the terms are read first and the registry last

The option's terms are the negotiation: the price basis, the period, the premium, the conditions. They are where the platform's attention goes and where the landowner's does, and they are drafted by counsel in the centre from a precedent written for a jurisdiction whose registry notes options. The registry is a counter in another country that neither party has visited, and the question of what it records is asked by counsel in the state when the option is sent for registration, after signing, when the answer changes nothing about the terms and everything about their worth. The order is reversed by asking the registry's question before the term sheet: what will this state record in the platform's favour, in what form, and the terms are then drafted into that form. A platform with the column per state has the answer before the landowner is met.

The registry's practice, read on the day

A registry's practice is what the registrar does with the instrument on the counter, and it differs from the law in three ways. The law may permit an instrument the registry has no form for, so that the instrument is lawful and unrecordable. The registrar may record an instrument under a heading the law did not intend, as a practice that a later registrar may end. And the registry may require particulars, translations, attestations and approvals the law does not mention, without which the instrument waits. Counsel reads the law and then asks the registrar, in writing where the registry answers in writing, and the answer is dated because the practice changes. A platform that relies on a registrability opinion from two years ago relies on a registrar who may have left.

The unrecorded promise's worth

An unrecorded option is not worthless; it is worth the owner's performance, which depends on the owner's willingness and solvency, and on the court's willingness to order performance rather than damages. In some states the courts order specific performance of land contracts readily; in others damages are the rule, and damages against an owner who has sold are a claim in a queue. The platform prices the promise at that worth: a small premium, conditions on the owner's conduct, a charge over other assets of the owner where the owner will give one, and no spending on the programme until the transfer. The promise is a way to hold a conversation open, and not a right to build on.

What the registries record

Each Gulf registry has a list of instruments it records and a form for each: transfers, mortgages, leases above a term, usufructs, sometimes conditional sales, sometimes cautions or notices of claims, rarely options as such. The law says what may be recorded and the registrar's practice says what is recorded on the day, and the two differ: a law that permits the notation of a claim may be administered by a registry that has no form for it and declines. Counsel in the state reads both, and reads the registry's practice by asking the registrar, because the practice changes with the registrar and the instruction of the day. A platform's column per state records what that state's registry will note, in what form, and what it will not.

The instruments that deliver the position

Where the option cannot be noted, the platform chooses an instrument that can. A conditional sale contract, registrable in some states where an option is not, transfers the parcel subject to conditions the platform controls, and delivers the option's position under a different name. A registered mortgage or charge over the parcel securing the owner's obligations under the option, where the registry records mortgages in favour of the platform's onshore vehicle, gives the platform a recorded interest that a purchaser or a lender sees, though it is not the option itself. A transfer of the parcel into a joint venture company at the outset, with the landowner holding shares in the company rather than the land, removes the registry question for the parcel and moves it to the company's register, which the platform controls. A lease with an option to purchase, where long leases are registrable, records the platform's possession and the owner's obligation together. Each instrument has its own registrability, its own transfer cost and its own treatment under the state's foreign ownership rules, and the choice is made per state with counsel.

The mortgagee's consent

A parcel with a registered mortgage is a parcel whose mortgagee ranks ahead of anything the platform records afterward, and whose transfer at exercise needs the mortgagee's release or consent. The instrument is signed with the mortgagee's consent to the record and to the transfer on stated terms, or the platform's right at exercise is a right to a parcel the bank holds. The registry's record shows the mortgage, the platform reads it in the first sequence step, and the mortgagee's consent is a condition of signing in every state where the mortgage is recorded.

The owner's capacity

An option binds the owner who granted it, and the owner is who the registry says, which may be several persons. A parcel held by a family in undivided shares, by an estate whose heirs have not registered, by a company whose directors' authority the registry's record does not show, or by one signatory of four, is a parcel whose option binds the grantor's share or nothing. The platform reads the registry's record of the owner before the terms: every registered holder, their shares, the encumbrances, and the authority of whoever signs. An option from one of four binds one quarter in the best case and a person with no authority in the worst, and the parcel's file names the signatory before it names the price basis.

The option's price and the platform's exposure

The platform pays for the option: a premium at grant, periodic payments to keep it alive, or a share of the price on exercise, and the payments are the platform's exposure to an instrument whose worth is the registry's. An unrecordable option paid for with a large premium is a loan to the owner secured by nothing, and the platform's exposure statement and its committee read the premium as such. The payments are sized to the recordability: a recorded right justifies a premium, an unrecorded promise justifies a small one with the balance on exercise, and the platform's counsel drafts the payment terms to the registry's answer.

The option in the statement and the valuation

The exposure statement says whether the platform may hold options, for how long, at what weight, and whether an option counts toward the concentration limit as though exercised. The valuer values an option on its terms, the parcel's value and the probability of exercise, and on its recordability, because an unrecordable option's value is discounted for the owner's risk. A platform whose net asset value carries unrecorded options at the parcel's value less the price has a net asset value the valuer will not sign, and a committee that reads the options' recordability reads the valuation's basis.

The developer's reading

A developer asked to commit to a programme on optioned land reads the option for what it binds, because a programme built on a promise is a programme the owner can sell out from under. The developer's agreement is conditional on the option's exercise and the parcel's transfer, and a developer that spends on design and consents before the transfer spends against the owner's word unless the option is recorded. The developer's counsel reads the registry's answer with the platform's.

The lender's reading

A lender will not lend against an unrecorded option, because it is not security; it will lend against a recorded conditional sale, a registered charge or a company's shares, and it reads the instrument the platform chose for what it can take. A lender to the owner, meanwhile, sees a recorded right and lends subject to it, or sees nothing and lends as if the parcel were free, and the owner's lender's security ranks ahead of an unrecorded option in every state.

The onshore interface in each state

Each state's land law fixes who may hold land, what instruments the registry records, what consents a transfer needs and what the transfer costs. An option in favour of a foreign-owned vehicle in a state with foreign ownership limits is an option whose exercise needs the foreign ownership approval, and an instrument that transfers the parcel conditionally may itself need the approval at signing. The platform's onshore vehicle is licensed for the state's land activity before the option is taken, because an option in favour of a person who cannot hold the land is an option the registry will not record and the court may not enforce. Counsel in each state writes the column: the instrument, its recordability, the approvals it needs and its cost.

By instrument · by state's practice	Recorded against the parcel	Binds a purchaser	Seen by the owner's lender	Transfer cost at grant	Foreign ownership approval
Option as such	Rarely	Only where recorded	Only where recorded	Usually none	At exercise
Conditional sale contract	In some states	Where recorded	Where recorded	Sometimes at signing	Sometimes at signing
Registered charge securing the option	Where the registry records charges to the platform's vehicle	As a charge, yes	Yes	The charge's cost	Usually for the charge
Transfer into a joint venture company	The transfer is recorded; the option moves to the company's register	Yes, through the company	Yes	Full transfer cost	At the transfer
Registered long lease with purchase option	Where long leases are recorded	The lease, yes; the option, as recorded	Yes	The lease's cost	For the lease
Unrecorded promise	No	No	No	None	None, and none at all

An option, as a type

A platform's onshore vehicle, licensed in a Gulf state, reaches terms in principle with a landowner for a masterplanned parcel and needs a year to obtain the programme's consents and bring the developer to terms. Counsel in the state advises that the registry does not note options but records conditional sale contracts and registered charges in favour of licensed vehicles. The platform and the landowner sign a conditional sale contract, registered, transferring the parcel on the platform's satisfaction of conditions within the year, with a premium paid at signing and the balance on completion, and the foreign ownership approval obtained at signing because the state treats the conditional contract as a transfer for that purpose. The registry's record shows the contract; the landowner's bank, approached for a loan in month six, sees it and declines to lend against the parcel; the developer's agreement is conditional on completion and the developer spends on design against a recorded right. In month eleven the conditions are satisfied, the transfer completes, and the parcel is admitted to the holding under the statement.

The structure paper's page

The structure paper carries a page per state on options: the registry's law and practice on each instrument, the registrar's written answer and its date, the approvals needed at signing, the transfer cost at grant, the foreign ownership treatment, the instrument chosen for the state, the form of the owner's record the platform reads, the premium's sizing rule and the statement's limits. The page is written before the first landowner approach in the state and refreshed when the registrar changes, and it is the page the developer's and the lender's counsel read.

The landowner's reading

A landowner reads the instrument for what it does to the parcel: a recorded conditional sale limits the landowner's dealings with the parcel during the period, prevents a sale to another, and shows on the record its bank will read. A landowner that wants the premium without the record is asking for a promise's price with a right's premium, and the platform's answer is the premium sized to the promise. A landowner that accepts the record has given the platform a right, and the platform's premium and the developer's programme follow. The conversation about the instrument is the first test of whether the landowner intends to transfer, and the land door's practice is to have it early.

The second platform's reading

A manager's second platform is raised on the first platform's record of rights that bound: options that were exercised and parcels that transferred, against options that were lost to a sale or a signatory. A first platform whose column per state was written before the first approach has a record of instruments that held; one whose options were drafted in the centre's form has a record of premiums lost. The second platform's investors read the record as the manager's competence on the door's first contract, and the landowners in each market read it as whether the manager's instruments are ones they will sign.

The platform's own default

The instrument binds the platform too: a conditional sale the platform fails to complete, or an option it lets lapse, leaves the landowner with the premium and, under some instruments, a claim for the platform's failure. The platform's onshore vehicle is the party, and its capacity to perform is the landowner's security; the landowner's counsel reads the vehicle's standing and may ask for the platform's guarantee. The instrument's terms on the platform's default are drafted with the landowner's reading in view, because a landowner that was protected against the platform's default is a landowner that will sign the next instrument.

Four cases, as types

A platform takes an option in the form its counsel in the centre drafted, with a large premium, over a parcel in a state whose registry notes nothing but transfers and mortgages. The owner sells the parcel to a neighbour in month eight. The platform's claim is for the premium and its losses against an owner who has received the price, and the developer's design spend is the platform's loss too.

A platform takes an option from the one signatory of a family parcel who negotiated. The other three holders decline to transfer at exercise, the option binds one quarter, and the platform holds a right to a share it cannot use.

A platform takes a conditional sale contract without the foreign ownership approval at signing, in a state that requires it then. The registry declines to record the contract, the contract is unrecorded, and the platform has an option by another name.

A platform reads the registry's practice in each state with counsel, chooses the recordable instrument, obtains the approvals at signing, reads the owner's record before the terms, sizes the premium to the recordability, and values the right on what it binds. Each option the platform holds binds the land.

What each party holds

The platform holds the instrument, its registration, the approvals and the premium sized to it.

Counsel in the state holds the registry's law and practice and the instrument's choice.

The landowner holds its obligations under the instrument and its parcel subject to the record.

The developer holds its conditional agreement and its reading of what the option binds.

The valuer holds the option's value on its terms and its recordability.

The lender holds its reading of the instrument as security.

Where it surfaces

It surfaces at the registry's counter, when the option is presented and declined. It surfaces at the landowner's bank, when the owner borrows against a parcel whose record shows nothing. It surfaces at the neighbour's offer, when the owner sells. It surfaces at the developer's design spend. It surfaces at the valuer's report, when the option is valued as a promise. It surfaces at the lender's refusal. It surfaces at the other signatories' refusal at exercise. And it surfaces at the committee, when the premium paid is read as a loan to a person the platform cannot find.

The cost of getting it wrong

An unrecorded option costs the premium, the programme's spend, the parcel and the year, and it costs the landowner relationship that the land door runs on, because a dispute with a landowner is heard by every other landowner in the market. The cost of the recordable instrument is the state's transfer cost at signing where it applies, the approvals' time, and counsel's question to the registrar, and it is paid once per state because the column, once written, serves every parcel there.

The committee's reading

The committee reads each option proposed for the instrument chosen, the registry's answer in writing and its date, the owner's record and the signatories' authority, the approvals obtained at signing, the premium against the recordability, and the valuer's basis. It reads the statement's limits on options for the weight the platform may hold in rights that are not yet parcels. A committee that reads an option as a parcel reads a promise as property; one that reads the registry's answer first reads what the platform holds.

A timeline, as a type

Before the platform's first approach in a state, counsel writes the column: the registry records conditional sale contracts and charges in favour of licensed vehicles, not options; the foreign ownership approval is needed at signing for a conditional contract; the registrar's written confirmation is dated. The platform's onshore vehicle is licensed. In month one the landowner agrees terms in principle under non-disclosure. In month two the registry's record of the parcel is read: two holders, a registered mortgage, no other encumbrances. In month three the conditional sale contract is signed by both holders with the foreign ownership approval, the mortgagee's consent and the premium sized to a recorded right, and is registered in month four. In month six the owner's bank, approached for a second loan, sees the record. In month nine the developer, whose agreement is conditional on completion, begins design against the record. In month eleven the conditions are satisfied and the transfer completes. The option, under another name, bound the land from month four.

The sequence

1. The registry's record of the parcel is read: every holder, their shares, the encumbrances, the authority of the signatories.
2. Counsel in the state writes what the registry records, in what form, and what approvals the instrument needs at signing.
3. The instrument is chosen for recordability and drafted to the registry's form.
4. The approvals are obtained at signing where the state requires, and the instrument is registered.
5. The premium and the payment terms are sized to the recordability, and the statement's limits on options are applied.
6. The developer's and the lender's agreements are conditional on the transfer, and the valuer values the right on what it binds.

Questions a manager asks

Can the option be recorded by a caution or notice. In some states, by an instrument the law names and the registry administers; counsel asks the registrar, because the form may exist in the law and not on the counter.

Is a conditional sale the same as an option commercially. Close: the platform controls the conditions and walks away if they fail; the differences are transfer cost at signing, approvals at signing and the landowner's position if the platform defaults.

What about an option in the centre's courts. Enforceable there against the owner in person if the owner submits; the parcel is onshore and the onshore registry executes onshore orders.

How large a premium. Sized to what the right binds; a recorded right carries a premium the platform would lose only if it chose not to exercise.

What if the landowner refuses a recordable instrument. The platform reads why: a landowner that will not have a record against its parcel may have reasons the platform's diligence should find, and the instrument's refusal is information.

Does the option count toward the concentration limit. As the statement says; the usual term counts an option at its exercise price for the limit during its life.

Terms used

Option: a right to call for the parcel's transfer on fixed terms within a period.

Recordability: whether the state's registry will note the instrument against the parcel.

Binds the land and binds the owner: a right in the parcel surviving transfer, and a promise enforceable against the grantor only.

Conditional sale contract: a registered transfer subject to conditions the platform controls, the usual recordable substitute.

Registered charge: a mortgage in favour of the platform's vehicle securing the owner's obligations under the option.

Premium: the payment for the option, sized to what it binds.

What to read

The state's land law on registrable instruments; the registry's practice, from the registrar; the registry's record of the parcel; the foreign ownership rules on options and conditional contracts; the exposure statement's terms on options; the valuer's basis for options. On this site, the access and developer rooms under Land and the onshore room.