Commercial Heads of Terms – What is Their Purpose?

Commercial Lease Solicitors Newcastle and Sunderland

When acquiring a Commercial Lease, you will normally be handed documents that are known as “Heads of Terms” and asked to pass them on to your chosen solicitor. It is often the case that a lot of commercial purchasers do not understand or appreciate the role of this document.

Heads of Terms are the basis upon which a Commercial Lease is drafted. The easiest way to explain this is based on a fictional transaction. Say you are taking a lease of a commercial unit in local town or city, you will have agreed on certain terms with the landlord, i.e. you will take the Lease for 5 years, the rent will be £15,000 per annum, there will be a break clause at year 3 or the rent will be reviewed after year 2 etc. These agreed terms will be documented in the Heads of Terms. Commercial surveyors will normally draft this upon the instruction of the landlord.

It is therefore very important as a prospective tenant to check these over very carefully. Everything that you agreed with the landlord should be included in the Heads of Terms. If they are not, then this should be negotiated at the earliest opportunity because it can mean that you miss out on important clauses that you need in the future.

Once this is drafted correctly, the landlord’s solicitors will draft the new Lease. As mentioned above, the Heads of Terms are used to draft the important clauses within the Lease. This is why it is important to check these carefully to ensure that everything you need/have agreed is included.

The tenant’s solicitors will then review the Heads of Terms alongside the drafted Lease to check to ensure that the Lease has been drafted in accordance with the agreed terms. It is often the case that instructions received by a client for a Lease, differ from the Lease draft received from the landlord’s solicitors. This is generally because the Heads of Terms have missed important information out or specifically omits certain terms.

It is also prudent to point out that by checking the Heads of Terms carefully, you may save a lot of money in the long term. What is mean by this is that if there are certain clauses/terms missing which are essential for the smooth running of your business, i.e. opening hours restrictions or strict signage restrictions. Then you can decide not to proceed or negotiate at this early stage, rather than incurring costs with solicitors.

Acting for the tenant means that at Emmersons, our Commercial Property Lawyers can analyse the Heads of Terms and advise our clients accordingly. Typically, of the Heads of Terms have been drafted completely, there should be no need to have to raise anything with our clients because everything is correct. However, it is often the case that things are missed and unless you are advised accordingly, then as a tenant, you can miss out on favourable clauses which could save you thousands in the future.

At Emmersons Solicitors review everything received from the Landlord’s Solicitors in great depth. This is to ensure that you have the fullest possible advice prior to signing a Lease. We like to ensure that all clients are 100% comfortable when signing Leases and also understand what it is they are signing.

If you require help with a Commercial Lease, please do not hesitate to contact us. We would be pleased to have an initial chat with you.

If you need any help about any of the above issues, then please don’t hesitate to contact us:

Commercial Property Solicitor Newcastle:  0191 284 6989

Commercial Property Solicitors Sunderland.: 0191 567 6667

Email us: enquiries@emmersons-solicitors.co.uk

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