Selling a Commercial Property – Heads Of Terms (HOTS)

Commercial Property Selling Guide Both parties need to accept the Heads of Terms when selling a commercial property. Learn the finer details of a HOTS document with our detailed and authoritative 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. This document is called the ‘Heads of Terms’ (HOTS).

A HOTS is not legally compulsory to produce but is recognised as a draft of the main points of the Agreement.

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 buyer’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 their requirements of the draft. In addition, should clearly identify the requirements that the other party also may have. This should eliminate any confusion from either side, which is considered a significant benefit of preparing HOTS.

In many cases, either business might understand some aspects of the others language, but without a clear understanding, information can become confused, which can potentially lead to disagreements over what was initially agreed within the draft. If this happens, it could result in the termination of the main contract which is a loss for both sides. It should be noted that a professional translator should be hired.

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

  • Legal parties to the agreement
  • A description of the transaction
  • The nature of the agreement
  • The sale price, currency and the payment method
  • A proposed timeline of the process (up until completion of the transaction)

It is essential 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. Working within the draft HOTS 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 professional advice from a solicitor who specialises in commercial property law.


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