Land Ownership and Use

The simplest form of property use rights is to own the real property on which the algae biofuels facility will be constructed.  The developer, once a site is determined, will typically enter into a purchase and sale agreement or an option to purchase the site.  A purchase and sale agreement should include the purchase price, closing date, closing contingencies and deliveries, representations and warranties, indemnification, and other material terms of the purchase.  An option to purchase may be contained in a stand-alone document or incorporated in a ground lease (discussed below); in either case it should be recorded in the appropriate jurisdiction’s (county’s) real property records.  An option may also be structured as either a simple option to purchase or a right of first refusal should another party desire to purchase the same site.  Rather than an immediate purchase of the real property on which the facility will be constructed, the developer may acquire an option to purchase the property at a future date. 

In a simple option to purchase, the developer acquires the right to purchase the real property from the owner for a specified price during a defined term.  Typically, an option “premium” or fee will be paid by the developer at the time the option is entered into.  The option agreement should define, in as much detail as possible, the term of the option, the manner in which the option may be exercised, the purchase price, and the method of paying the purchase price.  If the purchase price is not fixed at the time the option is entered into, it is advisable to base the purchase price on the fair market value of the property, as determined by an independent appraisal.  As an alternative, the purchase price may be a fixed amount that is adjusted based on a yearly consumer price index.

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