Business Lease – Drafting the Heads of Terms

Heads of Terms are an important part of the leasing process for business premises. Their importance is due to every lease containing a certain number of terms which can be varied, such the lease term, the rent, the frequency of any rent reviews and break option, to name a few. The Heads of Terms allow for these terms to be informally agreed before the parties instruct solicitors and start to incur legal costs.

A model Heads of Terms is contained in The Code for Leasing Business Premises in England and Wales 2007, which has been created by property professionals and industry bodies representing both Landlords and Tenants. The following is a list of the main terms that any lease negotiation should consider, though it should be borne in mind that it is not exclusive:

  1. The property address
  2. The Landlord’s name and address
  3. The Tenant’s name and address
  4. The rent
  5. Any rent free period
  6. The type of Lease (Head lease or sub lease)
  7. Term of the lease
  8. Any break option and its frequency
  9. Any rent review and its frequency
  10. Lease renewal option (whether the Landlord & Tenant Act 1954 Part 2 applies)
  11. The legal representatives of the parties
  12. Miscellaneous terms:
  • Â Assignment and/or sub-letting allowed?
  • Â Payment of services and/or service charges
  • Â Insurance and repairing obligations
  • Â Payment of legal costs
  • Â Any Guarantors?
  • Â Any Schedule of Condition to be prepared at the start of the lease?

All parties interested in a lease should aim to (informally) agree the terms of the lease at the very start of the process. In practical terms, this part of the process can take up more time than that actual drafting and signing of the lease itself. Commercial agents and commercial property solicitors can help prepare and guide parties through this vital stage in the leasing process.

If you are a Landlord or Tenant and interested in leasing a property, then get in touch with Lawdit Solicitors’ Commercial Property department who can help and assist you with your lease transaction.

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