Commercial Property: Should you get draft Heads of Terms checked by a specialist lawyer?
When a commercial property deal is agreed, the parties concerned generally draw up a document called Heads of Terms, a summary of its main commercial points.
Taking specialist legal advice when this document is still at a draft stage can be beneficial for several reasons, particularly because it is so difficult to go back and change things later.
What exactly is a Heads of Terms document?
Heads of Terms can be remarkably simple and merely state a price. They can also be extremely complicated, covering things like rent, renewal terms, permitted use and repairs.
Heads of Terms for commercial leases are generally more detailed, even when the lease is a straightforward one, but other transactions can also involve a great deal of complexity.
Solicitors use Heads of Terms as their starting point. The assumption is that the parties have done their deal. It is therefore important they are correct
Why is early advice on Heads of Terms so key?
It can be difficult to return to and amend Heads of Terms later if, for example, one party realises the impact of a particular provision for them.
This can be more of an issue if one party was not represented by an agent during negotiations - not an uncommon scenario.
Early legal advice from a specialist solicitor on draft Heads of Terms can therefore be extremely valuable for several reasons:
- Having a timely explanation of the commonly used technical terms and their significance can help guide negotiations, saving time and costs later;
- Identifying whether the standard language sometimes adopted in Heads of Terms might be detrimental means potential problems can be highlighted and avoided. For example, standard wording is often used around conditions on break clauses in leases which a tenant should seek to amend during the negotiation stage;
- Providing input on the legal structure of a particular deal can identify a simpler route which achieves the same end;
- Advising on the Stamp Duty Land Tax implications of a particular deal before it is finalised could lead to tax savings. It's important that these points are picked up before final Heads of Terms are issued.
Get in touch
Even where both parties are represented by agents it is advisable to run draft Heads of Terms by your lawyer. We won't advise on the commercial points but we may be able to help elsewhere.
If you need help or advice about Heads of Terms, please contact one of our Wards Solicitors' highly experienced Commercial Property team.
Meet our team here.