Heads of Agreement for Lease
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Heads of Agreement for a Lease Template
This Heads of Agreement precedent is for parties intending to enter into a Lease.
Includes provisions relating to:
- Identification of business
- Identification of property from which the business is operated
- Payment of holding deposit
- Vendor’s costs to be paid from deposit
- Deposit to be returned if lease does not proceed, less costs.
- Terms to be included in contract for sale
- Terms to be included in lease
- No binding agreement until contract formalised.
3 pages long.
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Why use a Heads of Agreement for Lease?
It is common practice to take a deposit of one months’ rent before drafting a commercial Lease. The deposit should be refundable, with the landlord’s costs deducted if the matter does not proceed. The contract that makes all this happen is the Heads of Agreement.
A Heads of Agreement is a short term contract that regulates the behaviour of the parties before a lease is entered into. Once a lease is signed it is the lease that governs the relationship.
A well worded Heads of Agreement makes it clear under what circumstances a deposit is returned, and when the landlord’s costs may be deducted. It also guards against claims for damages by either party if the lease does not proceed. There have been many cases in which a landlord or tenant as tried to claim damages from the other for various reasons. A Heads of Agreement that makes it clear contractual obligations do not commence until a lease is signed make such claims easier to defend, or prevents them entirely.
A tenant prefers to have their deposit returned rather than forfeited, even if the landlord’s costs are deducted. A landlord wants to make sure that their costs are paid even of the lease does not proceed. Both parties prefer to have the commercial terms of the lease agreed in writing before going to the trouble of drafting a Lease.
All the above are reasons to put in place a Heads of Agreement first. We have included a Heads of Agreement for Lease with our Leasing bundle which provides suggested wording and a list of commercial terms. Use your head. Use a Heads of Agreement for Lease.