A person recently sent me an option agreement for one of my novels. She wishes to write the screenplay and market it to Hollywood. What compensation should I ask for?
The general rule is, the longer the option period, the more money you should get up front because she's tying up your script and keeping it from other producers for that amount of time. And the less money you make up front, the more you should get paid when and if the project is funded.
"Free" options (in which you don't get paid anything up front) are the norm rather than the exception, but you'd have to really like her and believe in her as a producer to agree to that -- and it shouldn't be longer than a one-year option. If she can't get someone to put up some money in a year, you should get the project back.
But money up front is smarter. For one thing, I've found that people work harder when they've had to pay something for the project. Also, there's a difference between a producer and a producer with a company and development money. If she's the latter, work some money into the deal.
Finally, if it's a free option, you could work out a step deal whereby she gets a six-month option, but in that amount of time she needs to have certain things done: a budget worked out, a certain number of pitch meetings, whatever makes sense for you. If she meets those criteria, she gets to renew the free option (because she's clearly working to make it happen.) And if she doesn't, you get it back.
Get everything in writing, and make sure that she doesn't have the option to continually renew the free option only because she wants to, and without the need for your consent (it's standard that she'd have one option to renew at her discretion, but it shouldn't be for more than six months, and there shouldn't be more than one of those.)
As to money, you might get nothing up front, or a couple of thousand up front, or if it's a hot property, fifty thousand up front. There are virtually no guidelines. But you want to make sure that no matter what you're paid for the option itself (that's the upfront money) you're paid a certain amount when the project is greenlit, and then the bulk on the first day of principle photography. Under no circumstances should you be made to wait until the film is released to get the bulk of your money. If they want to pay you a bonus when it's released, that's fine, but get in writing that you will be paid at least a certain amount (and it can be whatever you think you're worth -- at that point, they'll have money) as early in the process as possible.
For independent films, the screenwriter is typically paid 3% of the budget -- something in the $15,000 range for a $500,000 film. That sounds reasonable for you as well. But put it in as a minimum -- if it becomes a studio film, you'd be able to get more, and you should.