Letting a Commercial Property – Drafting a Heads of Terms (HOTS)

Landlords Property Guide A Heads of Terms document is the first step towards a finalised contract for your benefit as a landlord. Discover the topics your HOTS should cover when dealing with a potential tenant for your commercial property.

Heads of Terms (HOTS)

Any proposed transaction begins with drafting a document, which clearly states the primary terms that both parties have agreed to. This document is called the ‘Heads of Terms’ (HOTS).

A HOTS is not legally compulsory to produce but is recognised as a draft of the main points of the contract.

This means that both parties will only be subject to the comprehensive agreements that are described within the main contract. When both parties agree the HOTS, the legal work can begin! The HOTS can be a simple task and generally results in a quick agreement. The tenant’s or your own agent can draft the HOTS for mutual approval.

When dealing with an overseas company, the HOTS will be a key document in successfully completing a deal. Both parties should clearly state what they require from the draft, as well as identifying the requirements of the other party. This eliminates any confusion from either side, which is considered as a significant benefit of the HOTS.

In many cases, either business might understand some aspects of the others language, but without clear understanding, information can become confused, which can potentially lead to disagreements over what was initially agreed within the draft. If this happens, it may result in the termination of the main contract which is a loss for both sides. It should be noted that a professional translator should be hired.

Within a HOTS agreement, there are various points, which have to be understood and agreed by both parties, including:

  • The nature of the agreement
  • A description of the transaction
  • The rental value, currency and the payment method
  • A proposed timeline of the process (up until completion of the transaction)

It is essential that both parties clearly understand the details of the agreement. With a translation completed by a legal translator, both parties will be provided with the agreement written in their native language, which clearly states all important points. Keeping both parties well informed of the HOTS will eliminate confusion and provide a clear legal framework to complete the transaction.

It is therefore recommended that you seek professional advice from a solicitor who specialises in commercial property law.


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