Heads of terms for business premises

Heads of terms are the place to resolve major commercial choices before they become detailed lease wording. The RICS leasing code promotes clear negotiations and comprehensive heads for business premises in England and Wales. ^[1]

Make every concession identifiable

Record the parties, property, term, rent, incentive, review basis and proposed break. State whether sums include VAT and whether a service charge cap is intended. Describe the permitted use and the landlord's agreed contribution to works with enough precision to draft it.

Mark points still open. An agent's email saying the landlord is 'flexible' does not identify an agreed concession or the conditions attached to it.

Clarify commitment and dependencies

Ask which parts are intended to bind immediately and which remain subject to contract. Confidentiality, exclusivity or cost provisions may need separate attention. Identify conditions concerning planning, finance, survey or approval of fit-out plans.

Repair allocation should be settled before broad repairing language enters the lease. Security arrangements belong in the commercial discussion too. Circulate the same dated version to the negotiating team and lawyers so later drafts do not rely on conflicting instructions.

Identify the bargain rather than describe the conversation Write each agreed point so someone absent from the negotiations can understand it. Instead of recording that the landlord will assist with works, specify the work, contribution, timing and conditions still to be agreed. Instead of describing rent as competitive, state the amount, payment frequency and treatment of VAT where relevant. The RICS leasing code promotes comprehensive heads of terms to improve informed negotiations and drafting. [1] Clear instructions help the solicitors preserve the commercial agreement rather than guess what a brief agent's summary was intended to mean.

Identify the parties and the premises accurately. A trading name may differ from the legal entity taking the lease, and a unit number may not describe storage, parking or external equipment areas. Attach or refer to a suitable plan and record any rights central to the business. If a guarantor or group company is involved, name the proposed role. These details affect the legal structure and should be resolved early enough to avoid a draft lease being prepared for the wrong entity or an incomplete description of the letting. ## Record the conditions attached to every concession An incentive should show what the tenant receives and what must happen to obtain or retain it. A rent-free period may depend on the commencement date, fit-out programme or another event. A service charge cap needs its scope and any indexation or exclusions considered. Ask whether a concession appears in the lease or a separate document and whether it is personal to the first tenant. The value of a negotiated benefit can change substantially if it ends on assignment or requires a condition the business cannot meet.

Read connected terms together. A break after a particular period may be less useful if the notice date arrives before the business can assess its performance. A landlord's fit-out contribution may not solve a cash-flow problem if payment follows completion of all works. A repair limitation may need a condition survey before its wording can be settled. Record these dependencies explicitly. Heads of terms are most useful when they show how the deal operates, including the relationship between concessions, rather than present each attractive headline as an isolated promise. ## Keep open points visible and commitment deliberate Mark unresolved matters as open and identify who will obtain the information needed to decide them. If planning, finance, a survey or board approval is a condition of proceeding, describe the intended dependency and ask the solicitor how it should be expressed. Avoid using a vague statement that the tenant is satisfied in principle when an essential issue remains unknown. A landlord or agent receiving the heads should be able to distinguish a completed commercial decision from a proposal that is still subject to investigation.

Ask which provisions are intended to have immediate legal effect. Negotiations described as subject to contract can still involve separate proposals about confidentiality, exclusivity or costs that require their own advice. Do not assume the document is harmless because its title sounds preliminary, or binding in every respect because it has been signed. The intended status needs to be assessed from the wording and circumstances. Establish that status before paying money, promising reimbursement of another party's fees or agreeing to stop considering other premises. ## Use one authoritative version through drafting Date the agreed heads and circulate the same version to the business decision-maker, agent, surveyor and solicitor. Keep a record of later changes showing which point was revised and who authorised it. If the landlord changes a commercial term in correspondence, ensure that change reaches the drafting team rather than remain in a separate email chain. Version discipline matters because a solicitor may otherwise faithfully draft an earlier instruction while the business believes a later concession has already been incorporated.

When the lease arrives, compare its material provisions with the agreed heads and any later authorised amendments. Ask for differences to be explained in practical terms. Some issues will require detail that the heads did not attempt to settle, but that should not conceal a departure from a negotiated limit or benefit. Before signing, confirm the final position on every point previously marked open. Retain the heads with the completed documents so the negotiation history remains available if a question arises about how an unusual clause or side arrangement came to be agreed.