The first lease draft usually grows around the landlord's assumptions. If the heads are vague, those assumptions harden into clause wording. If the heads are specific, the solicitor is documenting an agreed structure instead of filling commercial silence in the landlord's favour.
In England and Wales, the RICS Code for Leasing Business Premises expects vacant-possession deals to be captured in written heads of terms, marked subject to contract, before the first draft lease is circulated. That is where rent, break rights, repair, service charge, deposit scope, fit-out dependencies and 1954 Act status should be settled while they are still genuinely negotiable.
Vordex helps at the stage where those risks are still moveable. Compare the heads against the draft lease pack, spot drift early and get a plain-English explanation of what changed before paid redrafting starts to expand.
Decision support, not legal advice. For unusual premises, major fit-out works, title issues, live disputes or urgent completion deadlines, take qualified legal advice.
Commercial lease heads of terms set the commercial bargain before the lease is drafted. They are usually not the lease itself, do not grant occupation rights and are ordinarily expressed to be subject to contract. Their real job is to stop the first draft from becoming the place where the landlord decides the unanswered points.
If the lease wording is already in circulation, move next to Commercial Lease Review UK and Commercial Lease Clauses Checklist UK. If you only need temporary occupation rather than a full lease, compare the structure with commercial lease vs licence to occupy before you assume a traditional lease pack is the right route.
Get the money and timing right at heads stage and the first draft becomes easier to control. Leave them loose and the lease can absorb assumptions that were never part of the commercial conversation.
Set the annual rent clearly, then remove the ambiguity that usually causes trouble later. A heads document should make clear whether the figure is exclusive of VAT, how often it is paid, and whether the deal assumes business rates sit separately from rent.
The common mistake is agreeing only ‘£X per annum’ and leaving VAT, payment timing and review mechanics to the lease draft. That turns a headline number into a later drafting argument about cash flow and hidden cost exposure.
Related: Commercial Lease Rent Review
An incentive is only useful if it is pinned to the right trigger. Heads of terms should say when the rent-free period starts, how long it lasts and whether it covers base rent only or also service charge and insurance.
The expensive version of this mistake is simple: the tenant hears ‘three months rent free’ and later discovers the clock started before the unit was actually ready to trade.
A term should do more than describe how long the tenant is tied in. It should work with the fit-out budget, the break structure, the review dates and the time needed for the site to prove itself.
A term can look moderate in the abstract but still be commercially poor once you layer in the break date, first review and the money already committed to opening the premises.
Related: Commercial Lease Break Clause • Agreement for Lease
If a deposit is part of the deal, the heads should narrow the argument before the deed is drafted. The amount, what it secures and the release trigger should all be settled early.
The phrase ‘three months’ rent deposit’ sounds clear, but it usually is not. Without detail, the deed often ends up broader, longer and more expensive than the tenant expected.
A guarantor can be part of the commercial bargain, but the scope matters. Heads of terms should identify the guarantor and set the expected boundaries before the guarantee is drafted into something much wider.
‘Guarantor required’ is one of the loosest phrases in heads of terms. Unless it is limited, the drafting stage can convert a narrow credit ask into a much broader risk transfer.
These are the clauses that most often distort the commercial deal once the drafting starts. Heads of terms should answer them early enough that nobody can later claim the landlord wording is just ‘standard’.
A break right is valuable only if it is usable in the real world. Heads of terms should define the date, notice period, method of service and the conditions, rather than just noting that a break exists.
The trap is not the absence of a break. It is a break that exists on paper and fails on a technicality because the heads never pinned down the conditions.
The RICS leasing code recommends a lighter tenant break structure unless the parties expressly agree something stricter at heads stage.
Related: Commercial Lease Break Clause
Heads of terms should make clear whether the deal is full repairing and insuring, internal repairing only, or limited by a schedule of condition. On older stock, that distinction can change the economics of the whole lease.
‘Standard FRI lease’ is often the wrong shortcut. On a tired unit, it can mean the tenant funds the correction of historic defects that existed long before occupation began.
Related: FRI Commercial Lease • Commercial Lease Dilapidations
‘Standard service charge’ is not a complete commercial point. Heads of terms should outline the service charge shape early enough that the lease draft is documenting an agreed cost envelope, not inventing one.
Once the lease says the tenant pays ‘all costs and expenses’, the negotiation starts uphill. It is far easier to agree the cap and exclusions before the drafting language hardens.
RICS service charge standards now place even more emphasis on fairness, transparency, timely budgets and reducing avoidable disputes.
Related: Commercial Lease Service Charge
Insurance is not only about who pays the premium. It is also about what happens when the premises cannot be used. That question should be visible in the heads, not left to boilerplate.
The problem is rarely the line item marked insurance. The real problem is paying rent, staff and stock costs while the unit is unusable because the suspension wording was never agreed properly.
Related: Commercial Lease Service Charge
Many lease problems are not really lease problems at all. They are handover, consent and timing problems that were never described clearly enough in the heads. This is the section that stops the paperwork from drifting away from the operational reality.
In England and Wales, heads of terms should state clearly whether the lease is protected by Part II of the Landlord and Tenant Act 1954 or contracted out of it. That is not a drafting afterthought. It changes renewal leverage from the start.
Leaving 1954 status until the lease is nearly complete is one of the easiest ways to lose negotiating leverage without realising it until too late.
Scotland and Northern Ireland do not use the same 1954 Act framework. Do not assume English wording travels safely across the UK.
Related: Contracted Out Commercial Lease • Commercial Lease Renewal
If the business depends on extraction, signage, data cabling, power upgrades, shopfront changes or landlord enabling works, heads of terms should say so. This is often where a deal that looked ready in principle turns out not to be occupationally ready at all.
Rent and term can both be acceptable and the site can still be commercially unusable if the heads say nothing about the works needed before trading begins.
Related: Agreement for Lease • Permitted Use in a Commercial Lease
Planning permission, landlord consent, superior landlord consent, lender consent and energy compliance are different questions. If the deal depends on any of them, heads of terms should treat them as express conditions rather than assumptions.
The planning problem is often not that nobody thought about it. It is that the heads did not say who carries the risk if permission, consent or compliance works delay opening.
Planning permission does not override private lease restrictions, and lease consent does not remove the need for statutory approvals.
Related: Permitted Use in a Commercial Lease • Agreement for Lease
If a licence for alterations will be required, the consent path should be part of the heads. It is far easier to settle fees, timing and reinstatement assumptions before the lease draft and fit-out documents start pointing in different directions.
A business can agree fit-out in principle and still lose time and money later because the heads never addressed the route to consent, the fee exposure or the end-of-term strip-out position.
Related: Permitted Use in a Commercial Lease • Assignment vs Subletting
Use heads of terms for the commercial outline, an agreement for lease where the deal depends on works or conditions, and the lease for the final occupational contract. If the unit cannot actually be occupied yet, short heads alone are often not enough.
| Document | Main job | Usually binding? | Best used when | Main risk if handled badly |
|---|---|---|---|---|
| Heads of terms | Set the commercial outline before drafting. | Usually no, if clearly subject to contract. | A straightforward letting where the core business points can already be identified. | Missing detail lets the first lease draft drift in the landlord’s favour. |
| Agreement for lease | Create a binding route to a lease that will be completed later. | Usually yes. | The deal depends on works, planning, fit-out, access, a longstop or other conditions precedent. | Delay, unclear works scope, weak remedies and arguments before occupation even starts. |
| Lease | Record the final occupational contract. | Yes. | The parties are ready to grant and take the tenancy now. | The tenant discovers too late that the drafting no longer matches the commercial deal. |
If the deal depends on works, conditions or phased access, compare Agreement for Lease before assuming short heads are enough. If what you actually need is short-term occupation with more landlord control, compare commercial lease vs licence to occupy as well.
A retail tenant agrees heads on a high-street unit: five-year term, headline rent, three months rent free and a year-three tenant break. On the surface, the deal sounds settled. In practice, the missing detail is where the risk starts to move.
The landlord's solicitor then fills every gap in the landlord's favour. None of those points looks dramatic when viewed separately. Taken together, they change the economics and the exit routes of the whole deal.
That is the difference between a short commercial note and a heads document that is actually fit to instruct the drafting stage.
The costly part is rarely typing the first draft. The costly part is discovering, after drafting has started, that the commercial deal was never fully agreed in the first place.
The most expensive leasing risk is often spread across several documents. Use Contract Risk Check for the fastest first pass. If the lease wording is already out, pair that with Commercial Lease Review UK and the drafting-stage guides for break rights, FRI wording, service charge and renewal strategy.
Do not send the deal to lease drafting until these points are stated plainly enough that the next solicitor can document the bargain without inventing missing commercial terms.
Parties, premises and any required plan.
State it clearly enough that nobody drafting later needs to infer the commercial intention from silence.
Term length, intended start date, handover date and any early access rights.
State it clearly enough that nobody drafting later needs to infer the commercial intention from silence.
Any longstop, survey condition, board approval or financing condition.
State it clearly enough that nobody drafting later needs to infer the commercial intention from silence.
Whether the letting is simple enough for heads alone or really needs an agreement for lease.
State it clearly enough that nobody drafting later needs to infer the commercial intention from silence.
Headline rent, VAT position and payment frequency.
State it clearly enough that nobody drafting later needs to infer the commercial intention from silence.
Any rent-free period or capital contribution, including when it starts.
State it clearly enough that nobody drafting later needs to infer the commercial intention from silence.
Any rent review mechanism and the basics of how it works.
State it clearly enough that nobody drafting later needs to infer the commercial intention from silence.
Deposit amount, scope, draw conditions and release trigger.
State it clearly enough that nobody drafting later needs to infer the commercial intention from silence.
Any guarantor, including scope, cap and release point.
State it clearly enough that nobody drafting later needs to infer the commercial intention from silence.
Repair position, including whether FRI wording is limited by a schedule of condition.
State it clearly enough that nobody drafting later needs to infer the commercial intention from silence.
Service charge scope, caps, excluded costs and treatment of reserve funds.
State it clearly enough that nobody drafting later needs to infer the commercial intention from silence.
Insurance recovery, excesses, uninsured risk and rent suspension.
State it clearly enough that nobody drafting later needs to infer the commercial intention from silence.
Any landlord works, enabling works or handover standard that affects opening.
State it clearly enough that nobody drafting later needs to infer the commercial intention from silence.
1954 Act status or other local renewal framework.
State it clearly enough that nobody drafting later needs to infer the commercial intention from silence.
Tenant break date, notice and conditions.
State it clearly enough that nobody drafting later needs to infer the commercial intention from silence.
Permitted use, signage, data access, parking, loading and other essential rights.
State it clearly enough that nobody drafting later needs to infer the commercial intention from silence.
Alterations route, licence for alterations assumptions and reinstatement expectations.
State it clearly enough that nobody drafting later needs to infer the commercial intention from silence.
Assignment, sharing or subletting expectations where flexibility matters.
State it clearly enough that nobody drafting later needs to infer the commercial intention from silence.
Move next to Commercial Lease Review UK, Commercial Lease Break Clause, FRI Commercial Lease, Commercial Lease Service Charge and Commercial Lease Clauses Checklist UK for the drafting-stage analysis.
Straight answers to the points that most often get left until too late.
Usually not, provided they are clearly marked subject to contract and are drafted as a commercial outline rather than a concluded deal. That does not mean every line is harmless. Exclusivity, confidentiality, costs and similar provisions can still be written so that they bite on their own terms.
At minimum: the premises, term, rent, VAT position, payment frequency, incentives, break rights, repair position, service charge and insurance treatment, 1954 Act status, use, alterations, fit-out, deposit or guarantor, and any conditions such as planning, surveys or board approval. The most expensive omissions are usually break conditions, schedule of condition, deposit scope, service charge caps and fit-out dependencies.
Yes, in England and Wales they should. Renewal rights alter end-of-term leverage and can change the advice a tenant needs before committing. If the property is in Scotland or Northern Ireland, do not assume English wording carries across. Those jurisdictions use different business tenancy frameworks.
When the deal depends on something happening before the lease can sensibly start. Common examples are landlord works, planning permission, phased handover, longstop dates, utilities, fit-out access or a specific completion condition. In those cases, short heads are often too thin because the real risk sits in timing, works scope and default remedies.
Yes, for a fast first pass on missing protections, internal inconsistencies and drift between the heads, draft lease and supporting documents. It is especially useful where several linked documents are moving at once. It is not a substitute for tailored legal advice on title, unusual premises, major fit-out projects, serious defects or live disputes.
Vordex currently offers pay as you go review at £7.99 for Basic and £17.99 for Complex, alongside a free entry point for first-pass testing. The practical difference is usually the size of the document pack and how many linked issues need to be checked together.
No. Planning control and lease control solve different problems. You may obtain planning permission and still be blocked by the permitted-use clause or a missing landlord consent. Equally, lease consent does not remove the need for planning or other statutory approvals.
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