Heads of terms are often treated as a procedural step. A short document agreed in principle before solicitors are instructed and “the real work” begins. Because they are commonly labelled “subject to contract”, they are frequently assumed to carry little legal or commercial risk.
In reality, poorly drafted heads of terms are one of the most common causes of delay, dispute and failed commercial property and business transactions.
Understanding what heads of terms actually do and where the risks lie is critical.
What Heads of Terms Actually Do in Commercial Transactions
Heads of terms set the commercial framework for a transaction. They shape how solicitors draft the legal documents and, crucially, they set expectations on both sides.
While most provisions are not legally binding, heads of terms:
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establish the commercial deal structure
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influence negotiation leverage
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anchor expectations for price, risk and timing
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are often shared with agents, funders, boards and investors
Once circulated and relied upon, revisiting them later can be commercially and reputationally costly, even where the document is expressed to be non-binding.
Importantly, some clauses may be legally binding regardless of wording, including:
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confidentiality
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exclusivity or lock-out provisions
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cost-sharing arrangements
A blanket “subject to contract” label does not always remove these risks.
Common Problem Areas in Heads of Terms
In practice, the most frequent issues arise from commercial ambiguity, not legal technicality. Typical problem areas include:
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unclear price mechanisms, rent review assumptions or incentives
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insufficient detail on repairing obligations and condition
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guarantees, rent deposits or security overlooked or underestimated
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unrealistic timescales driven by commercial or agent pressure
These issues rarely disappear. They resurface later when:
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professional costs have already been incurred
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time pressure has increased
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negotiating leverage has reduced
At that stage, options are limited and concessions are harder to resist.
Why Early Legal Input at Heads of Terms Stage Matters
Involving a solicitor at heads of terms stage is not about over-lawyering a deal. It is about identifying deal-breakers early and ensuring the commercial intent can actually be delivered legally.
A short, focused legal review can:
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flag structural issues before positions harden
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test whether assumptions are legally achievable
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prevent weeks of avoidable negotiation later
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reduce the risk of transactions stalling or collapsing
This is particularly important in commercial property transactions, where repairing risk, security and exit provisions can materially affect value.
A Pragmatic Approach to Heads of Terms
Well-drafted heads of terms strike a balance. They are:
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clear enough to provide commercial certainty
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flexible enough to allow proper legal diligence
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realistic about risk, timing and cost
They should be treated as a strategic document, not an administrative one.
Early legal advice at this stage often results in:
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smoother negotiations
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shorter transaction timelines
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fewer surprises once solicitors are formally instructed
Commercial Property and Business Transactions: Take Advice Early
If you are entering into a commercial property or business transaction whether in Cheshire, the North West or elsewhere in England and Wales, the right time to take advice is before heads of terms are agreed, not after problems emerge.
At NJB Legal, early, practical legal input is focused on helping clients move forward with clarity and confidence rather than slowing deals down.
If you would like to discuss a proposed transaction or review heads of terms before committing, a short conversation can often save time, cost and commercial frustration later.
Get in touch to discuss your situation and the next sensible step.