Ahead of the game with Heads of Terms

Mon 11th Jul 2016

Good communication in property transactions is very important.

Buyers & Sellers, Landlords & Tenants and Developers usually want their transaction to move as quickly as possible, and the best way to ensure this is a swift and efficient flow of instructions and information between clients and their advisors throughout the deal.

To get started on the right foot, it is advisable to agree detailed Heads of Terms before lawyers are instructed. The heads can be prepared by the parties themselves or by agents but they should contain a brief summary of everything that has been agreed.

Heads of Terms act as a guide for drafting the transactional legal documentation and whilst they are not legally binding in themselves, they are always useful to refer to in the event of a dispute. All Heads of Terms, no matter the type of property or transaction, should contain basic details including the parties’ names and addresses, solicitors details, a full description of the property (with reference to a plan if necessary) and details of the price, deposit percentage and agreed timescale to exchange and thereafter complete.

On a commercial sale and purchase, you would also expect to see details of any overage and whether or not the sale of the property is to be a transfer of a business as a going concern (TOGC).

On a development deal, subject to planning, you would expect to see details of the sort of planning permission that will be applied for and the timescales for obtaining it. The Heads of Terms should also give guidance as to the costs the developer is able to deduct from the price payable and if that price is paid in installments, what those installments are and the extent to which the developer will be allowed access to the site to carry out surveys.

On a leasehold transaction, the Heads of Terms should include details of the rent, rent review pattern, repair provisions (particularly if the repairing obligation is subject to a Schedule of Condition), alterations provisions, alienation provisions and any break clause. There will also be details of any rent deposit or other security required by the Landlord and any works to be undertaken by either party.

On a residential transaction, Heads of Terms are usually shorter but ensure any reservation deposit paid is set out so both sides are aware of it.

On any transaction it is worth taking time at the beginning to agree Heads of Terms as this will save time, and possibly money, in the long run.


If you would like more information or advice relating to a specific matter, please do not hesitate to contact Jacqui Button on 01727 798086 or email