There’s nothing technical or magical (and not really that much legal) about Heads of Terms. But a decent set can help in getting a transaction to run smoothly.
Their purpose is to record the main terms of the deal. Technically you don’t actually need Heads of Terms at all. There’s no law about it. But, they do have a number of advantages.
Focus: They help focus everyone. It’s not uncommon for two people to leave a meeting, each with a very clear (but different) understanding of what was agreed. Setting words down on paper highlights these crossed wires.
Memory: You’d be amazed at the number of times people have a quite vivid memory of the start of a heated discussion on a point, but can’t remember where the discussion ended. Writing it down preserves the evidence.
Instructions: A set of agreed Heads are a great way for both sides to ensure that their respective solicitors are given a consistent understanding of the deal at the outset.
For further information please contact Neil Toner, Partner, Head of Real Estate at Devonshires.