Understanding Heads of Terms

Ross Pierrepont discusses the upcoming employment law changes in 2018
February 3, 2020
Commercial law

If you are considering entering into a commercial property transaction or lease this year, then Harjit Singh, a commercial lawyer at Tallents Solicitors, discusses the advantages of seeking legal advice as early as possible in the proceedings before you agree any Heads of Terms or sign any documents.

What are Heads of Terms?

Heads of Terms are a document which set out the bare bones of the deal that has been agreed between the two parties in any intended commercial property transaction. The aim is to guide the drafting of the legal documentation and help identify any potential issues at the earliest possible moment.

As Heads of Terms are intended to guide the transaction they do not legally compel the parties to conclude the transaction on those exact terms. However, once the drafting process has begun you may find it difficult to negotiate the position as external factors such as time may add to the pressures of getting the transaction finalised as soon as possible. It is therefore important to involve your legal representative as early as possible and settle as much as possible before proceeding to the drafting process.

It is important to note that Heads of Terms can be legally binding if there is a need for confidentiality or if an exclusivity agreement if required.

Who is responsible for drafting Heads of Terms?

Although the drafting of Heads of Terms can be left to the parties involved and their agents or surveyors, Harjit advises that you should involve your commercial lawyer early on when agreeing them so they can ensure whether or not the document is intentionally, or unintentionally, legally binding. This will help your legal representative identify any issues during the legal process.

When are Heads of Terms legally binding?

Although Heads of Terms are used for guidance, they can sometimes become legally binding. Under the Law of Property (Miscellaneous Provisions) Act 1989. This could be disadvantageous and as such your legal representative could help you identify, address and avoid these pitfalls. It is therefore important that you introduce your legal representative to the commercial transaction as early in the process as possible.

Commercial legal advice from Tallents

Tallents Solicitors’ commercial property department has years of experience in advising both landlords and tenants regarding all aspects of commercial lease negotiations and the Landlord and Tenant relationship. In the event of a dispute then our specialist litigation solicitors can help guide clients through the process. For more information please contact Harjit Singh on 01636 671881 to arrange a confidential appointment.

commercial law commercial lease commercial lease negotiations commercial property heads of terms Law of Property (Miscellaneous Provisions) Act 1989
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