What are Heads of Terms?

— 29 Oct 2020, 09:46:27 by Jack Peacock

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The initial agreement for a letting or sale between parties is usually set out in ‘Heads of Terms’. Heads of Terms are the main terms which the parties have mutually agreed to, before entering into a legally binding contract.

Heads of Terms should always be ‘without prejudice and subject to contract’ because, even though the offer has been accepted, the terms can change numerous times before the exchange of contracts and the offer is also not legally binding until contracts are exchanged.

In the event of a new letting or a lease renewal, the main terms which feature on Heads of Terms are: the demise of the property; the length of term; the rent payable; repairing and insuring obligations; permitted use; rent review frequency; rent-free period or other incentives; rights to break or renew the lease; rights to assign or sublet the property; and rights to make alterations.

The main terms which form the Heads of Terms for a sale are: the demise of the property being sold; the purchase price; the tenure; target completion date; deposit on exchange of contracts; and conditions.

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