Heads of Terms set out the terms of a transaction and will be used as a guide by your solicitor in drafting the documents. They will also be referred back to as a point of reference throughout the transaction to ascertain what the terms of the deal are.
Some heads of terms are more detailed than others but the key is to make sure you aren’t agreeing to anything within the heads of terms which you do not understand or are unable to deliver on. We are always on hand to offer advice in relation to heads of terms and a few points to look out for are set out below:
Particular care should be taken where companies are set up for an individual transaction. Whilst they may form part of a wider group of companies you will not have the benefit of a guarantee from any other companies within the group without the other parties being a party to the contract. If you are concerned about the financial strength of the proposed contracting party it would be best to work out what security you would require for the works/payments and specify this within the heads of terms. There are various types of security which could be offered including escrow accounts, guarantees and bonds.
All reasonable endeavours is still onerous but also should be avoided. Its meaning is uncertain but it may still require you to sacrifice your commercial interests to comply with the obligation.
The least onerous is a reasonable endeavours obligation and requires you to take a reasonable course to achieve an objective. This will not normally mean you having to sacrifice your commercial interests. You will see other endeavours obligations such as reasonable commercial endeavours but these have not yet been tested in the courts so their meaning is uncertain.
In order to ensure you are only paying overage if you are benefitting from a consent you would typically be seeking for it to only be paid once you had obtained a planning consent and were either selling the property or implementing the consent. You would also need to ensure the provisions were released ideally when the overage payment was made or if it is an on-going overage obligation when your dwellings sold.
For more information on this article, please contact Lola Skuse.
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