Too often, commercial lease transactions drag on for months - costing time, money, and momentum. And more often than not, the root of the problem is a vague or incomplete set of heads of terms. Take one recent example: a client came to us midway through a lease negotiation with a seemingly well-drafted set of heads. But a closer look revealed unclear break clauses, no agreement on repair obligations, and some wishful thinking about rent-free periods. By the time we reached the final stages, both sides were frustrated, and the deal nearly collapsed.
The lesson? Heads of terms aren’t just admin, they’re strategic. Done properly, they can make or break your lease journey
In this article, our expert Commercial Property lawyers explore why getting the heads of terms right from the start matters, and offer practical tips to help you do just that.
Contents:
- What are heads of terms in a commercial lease – and why are they important?
- What should be included in heads of terms?
- Are heads of terms legally binding?
- Common pitfalls with heads of terms and how to avoid them
- Get the right representation on board
- Think beyond the headline terms
- Can tenants occupy the property after agreeing heads of terms?
- Who should draft and negotiate the heads of terms?
- Tips to remember when negotiating heads of terms
- How Harper James can help
What are heads of terms in a commercial lease – and why are they important?
Heads of terms act as a summary of the main terms agreed between landlord and tenant before the formal lease is drafted. Think of them as the foundation for the legal documents that follow. While they’re usually not legally binding, they set expectations, speed up negotiations, and reduce costly surprises later on.
In a nutshell, heads of terms:
- outline the key commercial points of the lease
- help solicitors draft contracts faster and more accurately
- reduce misunderstandings between parties
- act as a reference point if negotiations get tricky
What should be included in heads of terms?
While every lease is different, key elements you can expect to find in heads of terms include:
- Parties – names and details of the landlord and tenant.
- Property – description and address of the premises being leased.
- Term – length of the lease (e.g., 5 or 10 years).
- Rent – amount, frequency, and any rent review clauses.
- Break Clauses – whether either party can end the lease early and under what conditions.
- Repair Obligations – who is responsible for maintaining and repairing the property.
- Alienation – terms under which the tenant may assign or sublet the lease.
- Service charge – whether this applies and how it’s calculated.
- Security of tenure – whether the lease is protected under the Landlord and Tenant Act 1954.
- Use – permitted use of the premises.
- Alterations – whether the tenant can make changes to the property.
- Insurance – who insures the property and what is covered.
Are heads of terms legally binding?
Generally, no - but be careful.
Heads of terms are intended to be non-binding, so parties can’t sue each other for breaching anything agreed within it. However, specific clauses, like those covering confidentiality or exclusivity, can be legally enforceable if they’re worded that way.
To avoid accidental binding commitments, always:
- Clearly label the document “Subject to contract”
- Involve your solicitor before finalising anything
Common pitfalls with heads of terms and how to avoid them
Heads of terms should clearly reflect what both parties have agreed. While usually non-binding, they do carry a certain commercial and moral weight. Solicitors often find it difficult to challenge or renegotiate terms that were clearly set out in the heads, especially if both parties signed off. So it’s crucial to get them right from the start.
That doesn’t mean the document needs to be overly technical or exhaustive. The goal is to strike the right balance: enough detail to reduce ambiguity and future delays, but flexible enough to keep the deal moving.
Tip: Many key points are discussed informally, such as by phone or over email. Unless those discussions are captured in writing, misunderstandings can creep in. Always bring everything back to one clear, agreed document.
Get the right representation on board
The balance of negotiating power can significantly affect how favourable the heads of terms are for each party. That’s why both sides should have their own professional advisors, including experienced commercial property solicitors, who can help:
- Identify what's “market standard” and what’s not
- Highlight risks or overly restrictive clauses
- Advise on what's reasonable in the context of the deal
In short: early advice leads to better outcomes.
Think beyond the headline terms
There are several clauses that can seriously affect your commercial position. Here are a few areas where landlords and tenants need to pay close attention:
- Lease Term
Your lease should support your short and long-term business plans. If you’re growing fast or may relocate, a shorter lease could make more sense, especially if there are going to be tight restrictions around your ability to break, transfer, or sublet the lease.
- Break clause
Break rights allow a party to end the lease early, but the devil is in the detail. Conditions (like being up to date on rent or repairing obligations) can make break clauses difficult to use in practice. And if a landlord demands reciprocal break rights, it can add uncertainty for the tenant.
- Assignment and underletting
Leases often restrict a tenant’s ability to sublet or assign the premises. If there's a chance you’ll need an exit route, negotiate those rights up front. Note: even if assignment is allowed, the original tenant may still be liable if the incoming party defaults.
- Security of tenure
Under the Landlord and Tenant Act 1954, commercial tenants normally have the right to renew their lease when it expires (known as ‘security of tenure’). But landlords often ask tenants to ‘contract out’ of these rights – leaving them full discretion about whether or not to renew your lease. Your commercial property solicitor will help you understand the implications before agreeing to give up any rights.
- Repair
Most commercial leases are full repairing and insuring (FRI), meaning tenants are responsible for repairs and insurance. This can be a significant cost. Consider limiting your liability with a schedule of condition, especially in older properties. This means you won’t have to return the property in any better condition than at the start of the lease. Both parties should agree on who’s responsible for what from the start to avoid disputes later - Rent review
Rent reviews can be complex and are a common source of dispute. They often follow an “upwards-only” model, but frequency, method (market rent vs. RPI, for example), and notice periods all need careful negotiation.
Remember - every term in your lease has commercial consequences. Heads of terms are the best time to raise concerns, clarify expectations, and avoid misunderstandings before costs mount and positions harden.
Can tenants occupy the property after agreeing heads of terms?
If the tenant needs to move in before the lease is finalised and negotiations are likely to take a while, both parties should think about putting a tenancy at will or a licence in place. These are short-term legal arrangements that can bridge the gap while the formal lease is being negotiated.
But tread carefully. If the deal falls through and the tenant’s already in the space, it can get messy. The landlord may want the property back immediately, while the tenant might need more time to move out, leading to potential legal disputes and disruption for both sides.
Always seek legal advice from experienced commercial property solicitors before agreeing to early access.
Who should draft and negotiate the heads of terms?
Heads of terms are typically prepared by a commercial agent or surveyor. But involving a commercial property solicitor at this early stage can save significant time and cost later.
At Harper James, we regularly work alongside agents to ensure your heads:
- Reflect your true commercial intent
- Flag up risks that might otherwise be missed
- Are legally robust but commercially flexible
Other advisors like tax consultants, accountants, or planning experts may also need to input depending on the deal.
Tips to remember when negotiating heads of terms
Getting heads of terms right from the start can save a lot of time, cost, and frustration later. Here are some key things to keep in mind:
1. Set the foundations
Heads of terms should outline the basic structure of the deal- who’s involved, what’s being leased, for how long, at what cost, and under what conditions.
2. Cover the key points
Include all the main commercial and legal terms, like rent, term, break clauses, repair obligations, and rights to assign or sublet. Missing details now can lead to drawn-out legal negotiations later.
3. Be clear they're not legally binding
Unless you want them to be binding (which is rare), always label the document "subject to contract" to avoid unintended legal obligations.
4. Don’t rush it
Take the time to get the heads right, it’s much easier to sort issues now than to renegotiate a formal lease later.
5. Involve your solicitor early
Getting legal input at this stage helps flag any red flags and ensures the terms reflect your best interests before you're too far down the line.
6. Think long-term
Make sure the lease works for your future plans, will you want to break early, grow into more space, or sublet part of the premises?
7. Keep it flexible where needed
While detail is good, don’t make the heads so rigid that you can’t adapt if something changes during negotiations.
8. Communicate clearly
Misunderstandings often arise from assumptions, make sure both sides write down and agree on the same version of the deal.
How Harper James can help
At Harper James, our experienced commercial property solicitors have supported hundreds of commercial tenants, landlords, and agents in getting lease deals over the line quickly, efficiently, and on the right terms.
We bring:
- Deep commercial insight into what’s market standard and what’s not
- Expert legal guidance to reduce risk and protect your position
- Practical, business-first advice that supports your long-term goals
Whether you're about to take on your first premises or expand your portfolio, let’s make sure your lease starts on the right foot.
