As a business owner, you likely need to lease a commercial space for your business. You will form and sign a lease agreement when you take out a commercial lease. However, before this is signed and finalised, you may create a lease heads of terms between you for the commercial property. These detail the main terms you wish to include in your lease agreement and are crucial to the lease transaction. However, it is essential for you as a commercial tenant to be aware of whether these legally bind you in any way as a formal legal agreement. This article will, therefore, explain key points about heads of terms and examine whether they are legally binding.<\/p>\n\n\n\n
With your legal representatives, you and your landlord will set out the terms of your lease agreement. This preliminary document outlines the commercial lease’s main terms and is the head of terms. Another expression for heads of terms is \u2018letters of intent\u2019 or \u2018memoranda of understanding\u2019. The heads of terms therefore set out the commercial terms and any special terms you have negotiated for your lease agreement before you negotiate the legal terms of the lease. They are used by the landlord\u2019s lawyers to prepare the first draft of the lease agreement.<\/p>\n\n\n\n
Heads of terms are helpful for you as a commercial tenant as they allow you to ensure both parties agree to key terms before negotiating the lease agreement, thereby reducing the need to argue with the landlord about key requirements later. They can also help you foresee how to structure the lease agreement and speed up the drafting process. Heads of terms record your intentions and can be helpful as evidence if, for example, the lease agreement does not reflect what these are once the lease agreement is complete. In this case, a court can use them to override the actual legal agreement.<\/p>\n\n\n\n
As a commercial tenant, you should review the heads of terms before you form the lease agreement to check they reflect what you both agreed. This is particularly important for you as the commercial tenant as the landlord, rather than your legal representative, tends to take charge of producing these.<\/p>\n<\/div>\n\n\n\n
Lease heads of terms will be unique to each commercial space in terms of what you and your landlord wish to include in the lease agreement<\/a>. However, they will typically contain:<\/p>\n\n\n\n\n