Heads of Terms – Why Wait?

Posted:27th July 2022

Why should you wait to instruct your Solicitors before agreeing Heads of Terms?

Heads of terms are the outline commercial terms agreed between a Landlord and Tenant prior to formal legal documents being prepared and signed. These are often drafted by the estate agent after having discussions between all parties and will confirm the agreed rent, lease term, property description etc.

More often than not, these Heads of Terms will be agreed prior to lawyers being instructed. Whilst Heads of Terms are not strictly legally binding, it is crucial for prospective tenants to try and buck this trend to best protect their interests. Here are several reasons that a Tenant may want to instruct lawyers before agreeing Heads of Terms:

  1. They contain more than purely commercial terms. Agents will often include legal points such as exclusion of security of tenure under the Landlord and Tenant Act 1954, alienation and use classes. Legal advice should be sought during the negotiation of these terms to ensure a Tenant fully understands their importance and effect before agreeing to the same.
  2. The agent represents the Landlord and is trying to get the best deal for them. They have no obligation to assist or advise the Tenant. A solicitor instructed by the Tenant must act in their best interests and can negotiate on their behalf, which helps balance the terms agreed.
  3. Once terms are included in the Heads of Terms, it can be hard to get them out again. When a Tenant has sought the advice of a lawyer, they may realise that they do not agree with certain terms, but trying to change such terms in the lease will be viewed as going against the original deal. It can therefore leave the Tenant in a very difficult negotiating position with them being ‘stuck’ with the original terms.
  4. It helps the Tenant’s lawyer give better advice. The lawyer being party to the initial discussions will give them a better understanding of the deal and its context which allows for more efficient legal drafting. This will save time and will ultimately make for a better and more informed legal process for the Tenant.