Heads of terms for a commercial lease: what they are, what they cover, and whether they bind

By Instrukt, published by Joshua Giles. Updated 2 November 2026. How we write guides

Not legal advice. This page has not been reviewed by a solicitor.

The short answer

As of November 2026, heads of terms are a written summary of the main terms of a commercial lease, used to instruct lawyers to draft it. The RICS Code for leasing business premises requires RICS members, for a vacant-possession letting in England and Wales, to list 16 items in them and mark them subject to contract.

What are heads of terms?

Heads of terms are “a summary of the agreement between the parties, used to instruct lawyers to produce the actual lease”, and once the lease is signed they fall away (RICS Code, Appendix B, terms used in the guide).

The Code’s purpose is to “promote the issue of comprehensive heads of terms that should make the legal drafting process more efficient” (RICS Code, Part 1). The Code is a reminder to use during negotiations, and it does not prescribe the outcome.

What must heads of terms cover?

For a vacant-possession letting, paragraph 1.3 of Part 2 of the Code requires RICS members to make sure the heads of terms summarise, as a minimum, the position on the 16 items below. The table groups them, and each group links to the paragraph.

Group	Items the Code lists (para 1.3)
Premises and rights	The identity and extent of the premises, with a Land Registry-compliant plan if the lease is registerable; any special rights, such as parking or telecom or data access.
Term and security	The length of the term, and whether the Landlord and Tenant Act 1954 will apply or be excluded; any options for renewal or break rights; any requirement for a guarantor or rent deposit.
Rent and money	The amount of rent, its frequency, and whether it is exclusive of business rates; whether the landlord intends to charge VAT on the rent; any rent-free period or other incentive; any rent reviews, including frequency and basis; liability for service charge and insurance premiums.
Use, dealings and repairs	Rights to assign, sublet, charge or share the premises; repairing obligations; the initial permitted use, and whether changes of use will be allowed.
Alterations and conditions	Rights to make alterations, and any reinstatement obligations; any initial alterations or fit-out, if known; any conditions of the letting, such as subject to surveys, board approvals or planning permission.

For a renewal or extension, the heads of terms must comply with the same list, except for terms stated to follow the tenant’s existing lease, subject to reasonable modernisation (RICS Code, Part 2 para 1.4).

Are heads of terms binding?

The Code requires RICS members to record the agreement in written heads of terms “stating that it is ‘subject to contract’” (RICS Code, Part 2 para 1.3). The Code does not say in terms whether a document marked this way is binding, so the wording alone does not settle the question.

A contract for the sale or other disposition of an interest in land can only be made in writing, incorporating all the terms the parties have expressly agreed, and signed by or on behalf of each party (Law of Property (Miscellaneous Provisions) Act 1989, section 2(1)–(3)). Section 2 does not apply to a contract to grant a short lease of the kind described in section 54(2) of the Law of Property Act 1925 (section 2(5)(a)). A document that does not meet that test may not bind either party, so whether a particular document binds is a question for a solicitor who has read it.

Which leases does the Code cover?

The Code applies to lettings of premises in England and Wales to tenants who will carry on trade, professional or other business activities there (RICS Code, Part 1). It does not apply to agricultural lettings, to premises used only for plant, equipment or advertising media, to premises intended to be wholly sublet, or to lettings of six months or less.

The Code took effect on 1 September 2020 (RICS Code, Part 1). RICS reissued it in September 2023 as a professional standard, with the regulatory requirements unchanged and no material changes (RICS status page). The text checked for this page is the February 2020 edition.

What should you do with heads of terms?

Heads of terms set the commercial deal before lawyers draft the lease. Use the heads of terms tool to list the items, then check each against the 16 items in the Code above.

Keep the “subject to contract” wording on any draft until the terms are agreed, and ask a solicitor to check the document before anyone signs (section 2 of the 1989 Act sets the writing and incorporation requirements).

Questions

Are heads of terms legally binding?

Not by the marking alone. The RICS Code requires RICS members to use the “subject to contract” marking for a vacant-possession letting, and a contract for land must meet section 2 of the Law of Property (Miscellaneous Provisions) Act 1989 (short leases under section 54(2) of the Law of Property Act 1925 are excepted), so whether a document binds depends on its content and form.

How many items must heads of terms cover?

The RICS Code lists 16 items as a minimum for a vacant-possession letting in England and Wales, in paragraph 1.3 of Part 2.

Do heads of terms have to be in writing?

The Code requires them to be recorded in writing. A contract for land must also be in writing and incorporate all the agreed terms under section 2 of the 1989 Act.

Do heads of terms apply to a lease renewal?

Yes, with a change: at a renewal or extension they must comply with the same list, except for terms that follow the tenant’s existing lease, subject to reasonable modernisation (Code, Part 2 para 1.4).

Does the RICS Code apply to premises outside England and Wales?

The Code applies to lettings of premises in England and Wales. It does not state that it applies anywhere else, so check the position for other jurisdictions with a professional.

Agreeing heads of terms?

An independent solicitor you instruct can check your heads of terms against the Code, and draft the lease from them. Instrukt introduces independent SRA-regulated solicitors; it is not a law firm.

Speak to a solicitor

Sources

This guide is general information, not legal advice. Instrukt is not a law firm.