Use Your Heads (Of Terms)

Most clients and agents will agree that, if used correctly, Heads of Terms are a useful tool to set out the overall scope of a deal and to record the main points of principle. They are central to identifying the key deal making and breaking terms of a particular transaction. Chris Dixon, Senior Associate in Rawlison Butler's Real Estate Team offers some words of warning.

Agreeing Heads of Terms creates confidence between the parties and the all important "moral obligation" on parties to proceed with the particular transaction as set out in those Heads of Terms.  It's said that, psychologically, it's harder to renege on commitments which are set out in formal Heads of Terms.

Good Heads of Terms should make the later legal negotiations quicker and easier and reduce costs but whilst Heads of Terms are an important element of a deal, care needs to be taken: