Commercial heads of terms
Commercial heads of terms before signing a lease
Heads of terms can make a commercial lease feel real before the tenant has fully tested the numbers. Rent, rent-free period, deposit, service charge, repair obligations, break clause and rent review wording can all affect whether the site can carry the lease.
Use this page to pressure-test the commercial assumptions before the lease process becomes expensive.
Heads of terms
Headline rent
The starting rent should be tested against the revenue the site can realistically support.
Heads of terms
Rent-free period
The timing of any incentive matters because it affects whether launch cash survives the opening period.
Heads of terms
Deposit
Cash tied up at the start reduces working capital before trade has proved itself.
Heads of terms
Service charge and insurance
These can change the true occupancy cost even when the rent looks manageable.
Heads of terms
Break clause and rent review
Exit flexibility and future rent increases should be read together, not in isolation.
Heads of terms
Opening date and handover condition
If the unit is not ready or the condition is worse than expected, the opening capital stack can become tight fast.
Why it matters
Heads of terms shape the lease before the documents do
The legal effect depends on the wording, so the commercial assumptions should be checked before the deal is treated as settled.
Commercial deal shape
What rent is being assumed, what incentive is being offered, and what date does the rent start from?
Cash exposure
How much cash is tied up in deposit, fit-out, legal fees, and launch costs before the site trades?
Downside risk
If trading starts slowly, do the terms still leave enough room to absorb the first weak months?
Legal review
If the wording is being treated as settled, has a solicitor checked the draft first?
Illustrative example
Worked example using the current YieldLens scenario
This is illustrative only. It is not a real case study.
Annual rent
£60,000
Monthly rent
£5,000
Expected monthly revenue
£24,960
Rent burden
20.0%
Starting cash
£90,000
Opening cash buffer
£9,000
If heads of terms fix the rent, deposit and fit-out timetable before the operator has tested the full opening capital stack, the lease can become fragile even where the trading case looks plausible.
Questions to ask before heads of terms are agreed
- What rent is being assumed and from what date?
- Is the rent-free period for fit-out only or trading too?
- How much deposit is required and when is it released?
- Is service charge capped, estimated or variable?
- Who pays for landlord works and fit-out works?
- What is the first break date?
- Does the break date fall before or after rent review?
- What repairing obligations are expected?
- What condition will the unit be handed over in?
- Has a solicitor reviewed the wording before it is treated as settled?
How YieldLens helps
Use the free check before heads of terms become expensive
YieldLens cannot review the heads of terms or replace legal review. It helps you structure the commercial numbers before you commit to a lease.
Free commercial check
- Rent burden
- Opening cash pressure
- Break-even customers
- Downside trading
- Lease pressure points
Standard file
- Assumption review
- Stress-test interpretation
- Negotiation levers
- Evidence checklist
- Lease questions and printable memo
Related guides
Before-signing lease guides
Use the checklist hub for the wider picture, then read the focused guides where a clause or cost line needs closer attention.
Commercial lease costs before signing
Check the full cost stack before the lease is drafted.
Commercial rent-free period before signing
See whether the incentive really protects opening cash.
Commercial lease deposit before signing
Check how the deposit changes working capital.
Commercial rent review before signing
Check whether future rent increases could tighten the deal.
Commercial break clause before signing
Check whether exit flexibility changes the downside.
FAQs
Commercial heads of terms FAQs
Short answers for people comparing rent, incentives, and lease viability before the final lease is drafted.
What are heads of terms in a commercial lease?
Heads of terms are the key commercial points agreed before the final lease is drafted. They usually cover rent, incentives, deposit, timing, and other major deal terms.
What should I check before agreeing heads of terms?
Check the rent, rent-free period, deposit, service charge, break clause, rent review, repair obligations, permitted use, and the opening cash impact before treating the deal as settled.
Should I test rent affordability before heads of terms?
Yes. The earlier the affordability and viability check happens, the easier it is to spot whether the deal is still workable before legal work becomes expensive.
Do heads of terms include rent-free period and deposit?
Often they do, but the exact wording and level of detail can vary. The important point is to test the commercial effect before the final documents are prepared.
Can heads of terms affect commercial lease viability?
Yes. The agreed commercial terms can lock in assumptions that change opening cash, downside risk, and whether the site can carry the lease.
Is YieldLens giving legal advice on heads of terms?
No. YieldLens UK provides indicative decision-support only. It helps you pressure-test the commercial numbers and questions, but it does not replace legal, tax, valuation, or financial advice.