Heads of terms for a commercial lease set out the key points of the deal before the legal drafting begins. It’s the commercial summary: the bones that the full lease then gets built around. It’s tempting to treat it as a formality and rush through it to get to the “real” paperwork. That’s a mistake. Almost every delay, dispute, and unexpected cost later in the process can be traced back to something that was left vague or unsaid at this stage.
What Should Heads of Terms Cover in a Commercial Lease?
A good set of heads of terms answers the questions that the lease will otherwise have to fight over. At a minimum:
- The parties: who’s the landlord, who’s the tenant, and is anyone guaranteeing the tenant’s obligations.
- The property: exactly what’s being let, including any shared areas, parking, or rights of access.
- The term: how long the lease runs, and the start date.
- The rent: the figure, when it’s paid, and any rent-free period at the start.
- Rent review: whether there is one, how often, and on what basis (open market, RPI, CPI).
- Break clause: whether either side can end it early, when, and on what conditions.
- Repairing obligations: who’s responsible for what, and whether there’s a schedule of condition limiting the tenant’s liability.
- Permitted use: what the tenant is allowed to use the premises for.
- Alienation: whether the tenant can assign or sublet, and on what terms.
- The 1954 Act: whether the lease is protected or contracted out.
- Costs: who pays the legal and other costs of putting the lease in place.
- Rent deposit: whether one is required, and how much.
Why Heads of Terms Matter in a Commercial Lease
Every one of those points is something the parties will otherwise argue about during drafting. Pin them down at heads of terms stage and the lawyers (or the platform) are just writing up what’s already agreed. Leave them open and you get the back-and-forth that makes commercial leases drag on for weeks: a query raised, a client consulted, a counter-proposal, more waiting.
The classic example is the repairing obligation. “Full repairing and insuring” sounds clear until you realise the tenant assumed a schedule of condition would cap their liability and the landlord assumed it wouldn’t. That’s a real disagreement worth real money, and it’s far easier to settle in a one-line entry on the heads of terms than after the draft lease has gone back and forth three times.
Clear heads of terms for a commercial lease give both sides a much better starting point. They reduce uncertainty and help prevent disagreements during the drafting process.
Are Heads of Terms for a Commercial Lease Legally Binding?
Heads of terms are normally marked “subject to contract”, which means they’re not legally binding: a statement of intent, not a contract. That’s deliberate. It lets both sides agree the commercial shape of the deal without being locked in before the detail is worked out. Just don’t mistake “not binding” for “doesn’t matter”. In practice, a clear set of heads of terms is what makes the difference between a lease that completes quickly and one that doesn’t.
The Real Benefit: Speed
When the heads of terms are complete and unambiguous, the actual legal completion can be fast, because all the hard decisions have already been made. That’s exactly the principle Aqqord is built on. The commercial terms get agreed up front; the legal drafting is already done and pre-negotiated; and what usually takes weeks happens in minutes. Clear heads of terms for a commercial lease give both sides a much better starting point. They reduce uncertainty and help prevent disagreements during the drafting process.
Frequently Asked Questions on Heads of Terms
A document agreed between landlord and tenant before the lease is drafted, setting out the commercial shape of the deal: parties, property, term, rent, review, break rights, repairing obligations, and the rest.
Normally no. They’re marked “subject to contract”, so they’re a statement of intent rather than a contract. That’s deliberate: it lets both sides agree the deal’s shape before committing to the detail.
At a minimum: the parties (and any guarantor), the property, the term, the rent and any rent-free period, rent review, break clause, repairing obligations, permitted use, alienation, the 1954 Act position, costs, and any rent deposit.
Anything left open gets argued about during drafting, and every disagreement adds rounds of back-and-forth between the parties. Most delays and unexpected costs in a lease transaction trace back to something unsaid at the heads of terms stage.
Aqqord turns clear commercial terms into a complete, signable lease without the weeks of drafting in between. Enter your heads of terms and preview a full draft for free at aqqord.com: office, retail, and industrial leases, all pre-negotiated to be fair, with nothing to pay until both parties sign.
