Put and call options in NSW: the Gavancorp uncertainty is fixed

Put and call options are one of the most common ways for developers and investors to secure residential land in NSW. They give the buyer time to investigate a site and the landowner a guaranteed exit.

In 2021, the NSW Supreme Court’s decision in BP7 Pty Ltd v Gavancorp Pty Ltd [2021] NSWSC 265 (Gavancorp) put that certainty at risk. The Conveyancing and Real Property Amendment Act 2025 (NSW) has now fixed the problem. This guide explains what went wrong, what has changed and what it means for your option deeds.

Put and call options at a glance

• In a typical deed, the landowner grants the developer a call option (the right to buy), and the developer grants the landowner a put option (the right to make the developer buy).
• In Gavancorp, the Court held that a put option was not an “option to purchase”. So a contract formed when a landowner exercised a put option attracted the usual 5 business day cooling-off period, and the developer walked away.
• A regulation change from 1 September 2022 removed cooling-off for contracts formed on the exercise of a put option. The 2025 Act has now put the position into the Conveyancing Act itself.
• Since 15 August 2025, “option” in the Conveyancing Act covers both an option to purchase and an option to compel the purchase of residential property.
• There is no cooling-off period on the contract that arises when either option is exercised. Instead, the purchaser gets a cooling-off period on the option deed itself.
• Put options granted before 15 August 2025 are not covered by the new option rules in Division 9, so older deeds need a careful review.

What is a put and call option?

A put and call option deed is an agreement that sets the terms of a future sale. The parties don’t sign a contract for sale straight away. Instead, the deed attaches an agreed form of contract, and the contract only comes into existence if one of the options is exercised.

The call option

The call option is granted by the landowner to the buyer. It gives the buyer the right, but not the obligation, to buy the property on the agreed terms within a set period. The buyer usually pays an option fee for that right.

For example, a developer might take a call option over a house while it carries out due diligence, seeks development approval or arranges finance. If the project stacks up, it exercises the call option and the landowner must sell.

The put option

The put option works the other way. It is granted by the buyer to the landowner. It gives the landowner the right to require the buyer to purchase the property on the same terms.

The put option usually opens only after the call option period ends. If the developer decides not to exercise its call option, the landowner can exercise the put option and make the developer buy anyway.

Why combine them?

Together, the two options give each side what it needs. The developer controls the timing, and the landowner knows the sale will happen one way or the other. That certainty is the whole point of the structure.

Put and call options are popular because they let the parties:

• lock in a price and terms early
• allow time for planning, feasibility and due diligence
• let a developer obtain approvals or finance before settlement, and
• give the landowner confidence that a sale will go ahead.

What happened in the Gavancorp case?

Gavancorp involved a developer, BP7 Pty Ltd, and the owners of 14 residential strata lots in Cronulla. Each owner signed a put and call option deed in 2018. The owners granted BP7 call options, and BP7 granted the owners put options.

BP7 let its call options lapse. In 2020, the owners exercised their put options, which formed contracts for sale. BP7 then served notices rescinding the contracts under the statutory cooling-off period, and claimed back its option fees less 0.25% of each purchase price.

What did the Court decide?

Under section 66T(d) of the Conveyancing Act 1919 (NSW), there was no cooling-off period for a contract made on the exercise of an “option to purchase” the property. Justice Darke held that this phrase has its ordinary meaning. A call option is an option to purchase. A put option is not. It is an option to sell.

This meant the contracts formed when the owners exercised their put options were ordinary residential contracts with a 5 business day cooling-off period. No certificate under section 66W had been given to waive it. BP7’s rescission was valid, and it recovered its option fees (which had become the deposit) less 0.25%, even though the deeds said those fees were non-refundable.

Why the decision was a problem

The result turned the commercial purpose of a put option on its head. A landowner who had held the property off the market, sometimes for years, could exercise the put option and still lose the sale.

It also caused uncertainty more broadly:

• landowners could no longer rely on a put option to guarantee a sale
• “non-refundable” option fees could become refundable
• practitioners had to rework their precedents, often by requiring certificates both when the deed was signed and when the put option was exercised, and
• because a put option was not an “option to purchase”, it was unclear whether the separate rules for residential options in Division 9 of Part 4 (cooling-off on the option, prescribed terms and the attached documents) applied to put options at all.

How the law was fixed

The 2022 regulation

From 1 September 2022, the Conveyancing (Sale of Land) Regulation 2022 (NSW) excluded the cooling-off period for contracts made on the exercise of an option to compel the purchase of land. This dealt with the main cooling-off risk for new contracts, but it left the Act itself unchanged.

The 2025 amending Act

The Conveyancing and Real Property Amendment Act 2025 (NSW) received assent and, for these changes, commenced on 15 August 2025. It does three key things for options:

• A new definition. Section 66P(1) of the Conveyancing Act now defines “option” to mean an option to purchase residential property and an option to compel the purchase of residential property. Put and call options are now treated the same way.
• No cooling-off on exercise. Section 66T(d) now refers to any option, so there is no cooling-off period on a contract made when a put or call option is exercised.
• Division 9 applies to put options. The rules for residential options in Division 9 of Part 4 now cover put options too. That includes the cooling-off period on the option, and the prescribed terms, conditions and warranties.

The NSW Registrar General has summarised the changes. The same Act also updated the cooling-off statement in the standard contract. The new form has been mandatory since 1 June 2026.

How cooling-off now works for put and call options

The protection now sits at the start of the deal, when the option is granted, not at the end, when it is exercised.

For a put and call option, the “purchaser” is the developer. That is the party who may be required to buy. Read our guide to cooling-off periods in NSW for how the cooling-off rules work in ordinary sales.

What about options granted before 15 August 2025?

Be careful with older deeds. A transitional provision says that Division 9 does not apply to an option to compel the purchase of residential property given or entered into before 15 August 2025.

What that means for a particular deed depends on when the deed was signed, when any option is exercised, and which version of the law and regulation applied at each step. Deeds signed before September 2022 carry the most risk.

If you hold an older put and call option, get advice before anyone exercises an option. In some cases, certificates or a deed of variation may still reduce the risk.

Practical tips for developers and landowners

• Use an up-to-date precedent. Many deeds still contain drafting that responded to Gavancorp, which may now be unnecessary or inconsistent with the 2025 changes.
• Attach the right documents. The option deed should attach the proposed contract and the documents the law requires for a residential sale.
• Deal with cooling-off at the start. If the parties want the deed to bind immediately, the developer’s solicitor needs to give a section 66ZF certificate after explaining its effect.
• Check the option fee. Be clear about whether the fee is credited to the price, becomes the deposit, or is kept by the landowner if neither option is exercised.
• Confirm the land is “residential property”. These rules apply to residential property. Large rural or commercial sites may be treated differently.
• Diarise the option windows. Missing the call option period can leave a developer at the mercy of the put option, as BP7 found.

Put and call option FAQs

Is there a cooling-off period when a put option is exercised in NSW?

No, for options covered by the current law. Section 66T(d) excludes cooling-off for a contract made on the exercise of a put or call option over residential property.

Does the developer get a cooling-off period on the option deed?

Yes. For a residential option, the purchaser under the option can rescind within 5 business days after the option is granted, and forfeits 0.25% of the purchase price. This can be waived with a section 66ZF certificate.

Is Gavancorp still good law?

The decision was not overturned on appeal. It was overtaken by the 2022 regulation and the 2025 amendments, so its practical effect is now limited mainly to older deeds.

I signed a put and call option deed years ago. What should I do?

Have it reviewed before either option is exercised. The transitional rules mean older put options may not be treated the same way as new ones.

Need help with a put and call option?

We prepare and review put and call option deeds for developers, investors and landowners, and advise on existing deeds before options are exercised. Find out more about our conveyancing services for buying a property and selling a property.

Alternatively, you can give us a call, send us a message or book a call with us by clicking the buttons below.

This article is general information only and is not legal advice. It reflects NSW law at the date of publication. Please contact us for advice about your circumstances.