Options to Purchase Real Estate in Massachusetts

By Robert Nislick

You are a Massachusetts commercial tenant or landlord. The lease contains a provision that gives the tenant an option to purchase the leased premises from the landlord.

An option to purchase real property is a “contract by which an owner of realty enters an agreement with another allowing the latter to buy the property at a specified price within a specified time, or within a reasonable time in the future, but without imposing an obligation to purchase upon the person to whom it is given.” Black’s Law Dictionary 1121 (7th ed. 1999).

“An option should specify the period and the manner in which it may be exercised by the buyer, and in addition should contain, or incorporate a separate agreement containing, all of the same provisions as are appropriate to a purchase and sale agreement.” E.C. Mendler, Massachusetts Conveyancer’s Handbook § 2.3 at 45 (3rd ed. 1984).

Suppose that a landlord and tenant have negotiated a long-term lease which provides the tenant an option to purchase the building. Since the inception of the lease, property values have increased substantially. The tenant wants to buy the property from the landlord. The landlord does not want to sell the property to the tenant. The landlord would prefer to sell the property to someone else for more money.

What is the tenant’s remedy? The tenant can file a lawsuit seeking specific performance against the landlord. “Specific performance is a proper remedy to enforce a valid option to purchase real property.” Greenfield Country Estates Tenants Ass’n, Inc. v. Deep, 423 Mass. 81, 89 (1996).

What are the landlord’s defenses? The landlord will want to try to demonstrate that the tenant failed to properly exercise the option in the time specified and in the manner required by the lease. It is possible that the option may also contain a clause that says the option is not valid if the tenant is in default of the lease. The landlord may also try to argue that the language in the option is too indefinite to be enforced.

About the author: Robert Nislick is a Massachusetts real estate lawyer.  He can be reached at (508) 405-1238, or by e-mail at rob@nislick.com.

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