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                                                                   Exhibit 10.12

                       NONQUALIFIED STOCK OPTION AGREEMENT

GRANTED TO:                Jonathan Fels

DATE OF GRANT:             March 13, 2003

GRANTED PURSUANT TO:       Amended and Restated Avatar Holdings Inc. 1997
                           Incentive and Capital Accumulation Plan

NUMBER OF UNDERLYING
SHARES OF COMMON
STOCK:                     60,000 shares
EXERCISE PRICE:            $25 per share

         1. This Nonqualified Stock Option Agreement (the "Agreement") is made
and entered into as of March 13, 2003, between Avatar Holdings Inc., a Delaware
corporation (the "Company"), and Jonathan Fels ("Employee"). It is the intent of
the Company and Employee that the Option (as defined in Paragraph 2 below) will
not qualify as an "incentive stock option" under Section 422 of the Internal
Revenue Code of 1986, as amended from time to time (the "Code").

         2. Employee is granted an option by the Compensation Committee of the
Company's Board of Directors (the "Committee") to purchase 60,000 shares of
Common Stock (the "Option") pursuant to the Company's Amended and Restated 1997
Incentive and Capital Accumulation Plan (the "Plan"). Capitalized terms not
defined herein shall have the meanings ascribed thereto in the Plan.

         3. The Option's exercise price is $25 per share, such exercise price
being in the judgment of the Committee not less than one hundred percent (100%)
of the Fair Market Value of the Common Stock on the date of grant.

         4. Subject to Paragraphs 5 and 6 below, the Option shall be exercisable
in full on December 31, 2007.

         5. Subject to Paragraph 6 below, the unexercised portion of the Option,
unless sooner terminated, shall expire on March 13, 2013 (the "Expiration Date")
and, notwithstanding anything contained herein to the contrary, no portion of
the Option may be exercised after such date.

         6. If prior to the Expiration Date, Employee's employment with the
Company or any subsidiary corporation terminates, the Option will terminate on
the applicable date as described below, provided, however, that none of the
events described below shall extend the period of exercisability beyond the
Expiration Date:

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                  (a)      If the employment of Employee is terminated by reason
of Employee's death either while in the employ of the Company or any subsidiary
corporation, the Option shall immediately become exercisable for the number of
shares of common stock equal to the product of (x) a fraction the numerator of
which is the number of completed whole months elapsed from January 1, 2003 to
the date of death, and the denominator of which is sixty (60) and (y) 60,000,
and shall remain exercisable until the first anniversary of Employee's death,
and shall be exercisable by the executor or administrator of the estate of the
deceased Employee or the person or persons to whom the deceased Employee's
rights under the Option shall pass by will or the laws of descent or
distribution;

                  (b)      If the employment of Employee is terminated by the
Company due to Employee's "disability" (as defined below), the Option shall
immediately become exercisable for the number of shares of common stock equal to
the product of (x) a fraction the numerator of which is the number of completed
whole months elapsed from January 1, 2003 to the date of disability, and the
denominator of which is sixty (60) and (y) 60,000, and shall remain exercisable
until the first anniversary of Employee's disability;

                  (c)      If the employment of Employee is terminated by the
Company "without cause" (as defined below), or is terminated by Employee for
"good reason" (as defined below), the Option to the extent not theretofore
exercised shall remain exercisable in accordance with the terms of this
Agreement, including without limitation, the provisions of Sections 4 and 5
hereof.

                  (d)      If the employment of Employee is terminated (i) by
the Company for "cause" (as defined below) or (ii) by Employee "without good
reason" (as defined below), the Option shall, to the extent not theretofore
exercised, immediately become null and void.

                  For purposes of this Agreement, the terms "disability",
"cause", "without cause", "good reason" and "without good reason" shall have the
meanings ascribed to such terms in Employee's amended and restated employment
agreement with Avatar Properties, Inc., dated as of March 7, 2003, as amended
from time to time.

         7. Employee may exercise the Option regardless of whether any other
option that Employee has been granted by the Company remains unexercised. In no
event may Employee exercise the Option for a fraction of a share or for less
than 100 shares unless the number purchased is the remaining balance for which
the Option is then exercisable.

         8. The Option's exercise price shall be paid by Employee on the date
the option is exercised in full in cash.

         9. The Company may withhold from sums due or to become due to Employee
from the Company an amount necessary to satisfy its obligation to withhold taxes
incurred by reason of the issuance or disposition of shares pursuant to the
Option, or may

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require Employee to remit such amount to the Company prior to the delivery to
the Employee of any shares of Common Stock.

         10. Employee shall not have any of the rights of a shareholder with
respect to the shares of Common Stock underlying the Option while the Option is
unexercised.

         11. Any exercise of this Option shall be in writing addressed to the
Corporate Secretary of the Company at the principal place of business of the
Company, specifying the Option being exercised and the number of shares to be
purchased, accompanied by payment therefor.

         12. This Option shall not be transferable otherwise than by will or the
laws of descent and distribution, and shall be exercisable, during Employee's
lifetime, only by Employee. Notwithstanding the foregoing, this Option may be
transferred by Employee solely to Employee's spouse, siblings, parents, children
and grandchildren or trusts for the benefit of such persons or partnerships,
corporations, limited liability companies or other entities owned solely by such
persons, including trusts for such persons, subject to any restriction included
in this Agreement.

         13. If the Company, in its sole discretion, shall determine that it is
necessary, to comply with applicable securities laws, the certificate or
certificates representing the shares purchased pursuant to the exercise of the
Option shall bear an appropriate legend in form and substance, as determined by
the Company, giving notice of applicable restrictions on transfer under or in
respect of such laws.

         14. The Company agrees that at the time of exercise of the Option it
will use reasonable efforts in good faith to have an effective Registration
Statement on Form S-8 under the Securities Act of 1933, as amended (the "Act"),
which includes a prospectus that is current with respect to the shares subject
to the Option. Employee covenants and agrees with the Company that if, at the
time of exercise of the Option, there does not exist a Registration Statement on
an appropriate form under the Act, which Registration Statement shall have
become effective and shall include a prospectus that is current with respect to
the shares subject to the Option, (i) that he or she is purchasing the shares
for his or her own account and not with a view to the resale or distribution
thereof, (ii) that any subsequent offer for sale or sale of any such shares
shall be made either pursuant to (x) a Registration Statement on an appropriate
form under the Act, which Registration Statement shall have become effective and
shall be current with respect to the shares being offered and sold, or (y) a
specific exemption from the registration requirements of the Act, but in
claiming such exemption, Employee shall, prior to any offer for sale or sale of
such shares, obtain a favorable written opinion from counsel for or approved by
the Company as to the applicability of such exemption and (iii) that Employee
agrees that the certificates evidencing such shares shall bear a legend to the
effect of the foregoing.

         15. This Agreement is subject to all terms, conditions, limitations and
restrictions contained in the Plan, which shall be controlling in the event of
any conflicting or inconsistent provisions.

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         16. This Agreement is not a contract of employment and the terms of
Employee's employment shall not be affected hereby or by any agreement referred
to herein except to the extent specifically so provided herein or therein.
Nothing herein shall be construed to impose any obligation on the Company to
continue Employee's employment, and it shall not impose any obligation on
Employee's part to remain in the employ of the Company.

         17. Employee acknowledges and agrees that neither the Company, its
shareholders nor its directors and officers, has any duty or obligation to
disclose to Employee any material information regarding the business of the
Company or affecting the value of the Common Stock before or at the time of a
termination of the employment of Employee by the Company, including, without
limitation, any information concerning plans for the Company to make a public
offering of its securities or to be acquired by or merged with or into another
firm or entity.

         IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first written above.

                                           AVATAR HOLDINGS INC.

                                    By: /s/ Gerald D. Kelfer
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                                        Name:  Gerald D. Kelfer
                                        Title: Chief Executive Officer

ACCEPTED:

/s/ Jonathan Fels
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    Jonathan Fels

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