Answers · Heads of agreement (commercial lease)
What is a heads of agreement in a commercial lease negotiation?
Direct answer
A heads of agreement (HoA) is a short document recording the key commercial terms a landlord and tenant have agreed for a lease — rent, term, options, incentives, permitted use — before formal lease documents are drafted. It's usually non-binding, aside from specific clauses like confidentiality, and exists to lock in terms quickly before legal drafting begins.
Negotiating every clause of a full lease from a blank page is slow. The heads of agreement shortcuts that by getting both sides to agree the commercial substance — the numbers and the big structural terms — in a page or two, so the lawyers then draft a lease that matches an already-agreed deal rather than negotiating it from scratch.
Whether an HoA is binding matters enormously and should never be assumed. Most are deliberately expressed as subject to contract, meaning either party can still walk away until the formal lease is signed — though specific clauses (confidentiality, exclusivity for a defined period, cost-sharing) are often carved out as binding even within a non-binding document. Read the document for exactly what it says on this point; don't infer it.
For a tenant, the HoA stage is the best point of leverage — it's far easier to negotiate rent, incentives, make-good and options before a lease is drafted than to unpick them afterwards. Treat it with the same care as the lease itself, because in practice it usually determines what the lease says.
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