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Buying a Commercial Property – Drafting ‘Heads Of Terms’ (HOTS)

Commercial Property Buying Guide A 'Heads of Terms' is a drafted document that precedes the main contract on a commercial property purchase. Learn all the detail you need about HOTS to successfully purchase a commercial property with our guide.

'Heads of Terms' (HOTS)

Any proposed transaction begins with drafting a document, which clearly states the primary terms that both parties have agreed to; the ‘Heads of Terms’ (HOTS).

A HOTS is not legally compulsory to produce. However, it is recognised as a draft of the main contract.

This means that both parties will only be subject to the comprehensive agreements that are described within the main contract. When both parties agree the HOTS, the legal work can begin! The HOTS can be a simple task and generally results in a quick agreement. The seller’s or your own agent can draft the HOTS for mutual approval.

When dealing with an overseas company, the HOTS will be a key document in successfully completing a deal. Both parties should clearly state what they require from the draft as well as clearly identifying the requirements of the other party. This eliminates any confusion and is considered a significant benefit of drafting the HOTS. It is highly recommended to hire a professional translator.

In many cases, either business might understand some aspects of the others language. But without clear knowledge, information can become misunderstood and can potentially lead to disagreements of what was initially agreed. If this happens, the result could be the termination of the main contract which is a loss for both sides.

Within a HOTS agreement, there are a number of different points which have to be understood and to be agreed by both parties, including:

  • The nature of the agreement
  • A description of the transaction
  • The sale price, currency and the payment method
  • A proposed timeline of the process (anticipated completion of the transaction)

It is crucial for both parties to be able to completely understand the details of the agreement stated. With a translation completed by a legal translator, both parties will be provided with the agreement written in their native language, which clearly states all important points. By drafting the HOTS, this should lead to the elimination of confusion and provide a clear legal framework to complete the transaction.

It is therefore highly recommended that you seek a professional advice from a solicitor who specialises in commercial property law.


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