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Massachusetts Agencies

Options to Purchase

                                                                            Purchase and Sale Agreements

In Parkhurst v. Maynard, 285 Mass. 59, 188 N.E. 510 (1933) one Doane gave an option to purchase to Parkhurst. The option was not recorded. In connection with a divorce proceeding between Doane and his wife Doane conveyed the property to Maynard who took title to secure certain support payments Doane was required to make to his wife but was, nonetheless, a straw[1] and knew of the option. Parkhurst decided to exercise his option and the court said that Maynard was required to give a deed.

We are of the opinion that upon the facts found the plaintiff, as the holder of an unrecorded option to buy the land in question, is entitled to specific performance thereof by one who has acquired the property from the giver of the option of purchase. (Citations omitted.) "The general law . . . is, that where a purchaser before payment and taking title has knowledge of any fact sufficient to put him on inquiry whether there may not be some outstanding right in conflict with the title he is about to acquire, he cannot be considered a bona fide purchaser even if he thereafter pays value for the property." (Citations omitted.)

In Tucker v. Connors, 342 Mass. 376, 173 N.E.2d 619 (1961) the court extended the rule announced in Parkhurst. In Tucker Connors gave an option to purchase to Tucker. Again, as in Parkhurst, the option was not recorded. Connors conveyed the property to Gleken, who gave a mortgage to Central Acceptance. Both Gleken and Central Acceptance knew of the option.

Tucker brought an action against Gleken requiring her to convey the title to him upon the tender of the option price. Tucker also prayed that Central Acceptance discharge its mortgage. The court held for Tucker in both cases.[2]

Clearly, from these cases, the exercise of an option can effectively be made as against those claiming under the person who granted the option if these persons have knowledge of the option,[3] although it has been held that an option to purchase is not an interest in real estate. Thatcher v. Weston, 197 Mass. 143, 83 N.E. 360 (1908).

1 Actually Maynard was the final transferee in a line of straws, all of whom were aware of the option.[Back to text]

2 The case was remanded on the question of what amount Gleken was required to pay to Central Acceptance with respect to the discharge of a prior mortgage which Connors had put on the property and which Central Acceptance had purchased. But this aspect of the case does not affect the ruling that Central Acceptance was required to discharge the mortgage which Gleken had placed on the property.[Back to text]

3 The Parkhurst and Tucker courts refer to "knowledge" of the option. However, this is because in both cases the options were unrecorded. Constructive notice imparted by recording the option would obviously have led to the same result in those cases.[Back to text]