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Leasehold Heads of Terms - Just How Hard Can They Be?

In these strange and challenging times, we are keenly aware that a lot of you will be looking to enter into new arrangements regarding your business premises and that some of you even now may be negotiating a set of Heads of Terms.

Solicitor or surveyor?

Usually a parties’ surveyor prepares these but all too often we have seen tenant clients who are unrepresented at the crucial negotiation stage, resulting in a less than perfect deal. Tenants need to remember that a landlords surveyor is after all acting for, well, the landlord.

In the number of years we have been dealing with Landlord and Tenant matters (too many to count) we have seen a variety of Heads of Terms produced by either clients themselves or their surveyors.

The home-grown Heads of Terms are often less than clear and do not set out perhaps the terms they ought to and, more importantly, clients often sign up to terms which when we explain what they actually mean are somewhat dismayed or shocked. Usually their response when challenged is “that is not what we meant” or “no I did not agree that” or perhaps more honestly “well if I had understood that I would not have agreed to that”.

I have had some interesting conversations over the years on Heads of Terms, one client signed up to a one year lease contracted out lease (rent circa £200k) on a full repairing basis. I was left advising not to follow through on that, but I am pleased to report we successfully managed to renegotiate the deal so that their repairing obligation was qualified by a Schedule of Condition.

Negotiate terms

Some sets of terms that present an issue are those that lack clarity. I have seen Heads of as a single A4 sheet of paper with scant details such as the parties, the property, the rent and term and I have seen clauses as “the usual provisions will apply”. What “the usual provisions” are is anyone’s guess, since the whole point of Heads of Terms is to negotiate the terms of a new lease and to document the agreement for the lawyers to draft the legal framework documents.

At the other end of the spectrum clients and surveyors have been known to produce six or seven pages of extremely complicated Heads of Terms. These cause issues when the rent perhaps does not merit such a complicated approach. Faced with such terms the client may as well sign that and call it the lease.

The point is really that the Heads of Terms stage is crucially important and sets out the framework and the route map for the legal framework documents. You should not rush into them nor should you go in blind without fully understanding or challenging them. Whilst they are not legally binding as such it is often hard to unpick them.

Specialist commercial property solicitors

If you are unrepresented and are struggling with Heads of Terms or you have had a set of Heads of Terms which on the face of it look fairly innocent but you require clarification, then please contact one of our specialist property lawyers who will be able to guide you.

We will be able to suggest matters that ought to be in (or ought to be removed from) the Heads of Terms and advise on different negotiating tactics to use and when.

It is crucial to get the terms that you want, and have these agreed and clearly set out in the Heads of Terms. If when you have a lawyer look over the terms and it is advised that changes should be made, having to ‘unpick’ the terms puts you on the back foot. Most importantly it causes unnecessary delays and fees. It is always advisable to start off on the right foot with a landlord at the start of a long 10-year lease.

Our advice is to involve us as early as possible. Let us know your plans and requirements and let us help you achieve the best result from the beginning. We are always happy to talk these things through.

For further information please do not hesitate to contact Julian Pyrke on 0117 906 9421 or Jonathan Wilson on 0117 9069413.

The contents of this article are intended for general information purposes only and shall not be deemed to be, or constitute legal advice. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of this article.

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