Heads of Terms Agreement

Heads of Terms is a document setting out the main terms of a commercial transaction that has been agreed in principle.

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Heads of Terms are typically prepared in advance of a commercial lease. It outlines the general agreement between the landlord and the prospective tenant. If both sides are happy to proceed, the agreement would then be finalised in the lease.

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Heads of Terms can also be used during a commercial property sale. The document sets out the details of the sale, ensuring both the seller and the buyer are on the same page. Like a lease, this agreement would then be solidified in the contract.

Heads of Terms are not normally legally binding, unless they are drafted in a particular way. Instead, the purpose is to set out the basic terms. That way, both parties understand each other's intentions before committing to the transaction. Heads of terms are also known as ‘letters of intent’ or ‘memoranda of understanding’, which better describe their function.

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If either party is not satisfied with the Heads of Terms, then they can enter into negotiations to secure more favourable conditions. Or, they can withdraw from the transaction before wasting any more time or money on a transaction that does not meet their interests.

How can our commercial property solicitors help?

Our commercial property solicitors can draft and review a Heads of Term agreement. We can also negotiate on your behalf.

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If you have been presented with a Heads of Term agreement, contact our commercial property solicitors. We’ll read through the document and explain everything in plain English. We’ll provide independent legal advice regarding the provisions set out, highlighting any areas of concern. This is an important exercise, as you want to be sure that the terms are right for you before progressing any further.

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If you want to negotiate the terms, this is something we can do for you. Our motivation is to help you achieve a positive outcome. This means meeting your commercial objectives, while at the same time protecting your financial position. Our solicitors can liaise with the other party to secure more favourable terms. This is vital, as the Heads of Terms is a skeleton agreement. It will be used to draft the commercial lease or contract of sale.