Heads of terms are the short, structured summary of the commercial deal that landlord and tenant agree before the lawyers draft the lease agreement. They record rent, term, break rights, incentives, repair and the other points that decide what the tenancy actually costs – normally marked subject to contract so neither side is bound. Their quiet power: whatever is conceded here is rarely won back in drafting.
What heads of terms are and where they sit in the deal
Every negotiated letting passes through the same funnel: viewings and offers first, then a written outline of the agreed commercial position, then the legal drafting that turns that outline into a signed lease agreement. Heads of terms are the middle stage – a document of a few pages, prepared by the agent or the landlord, that names the parties, describes the premises and sets out the deal points one by one. The document is also known as a term sheet, a letter of intent or a memorandum of understanding, and in cross-border CEE deals all three labels circulate. The purpose is practical rather than legal: to check that both sides mean the same thing by the deal before either starts paying lawyers, and to give the drafting teams a single agreed reference. In a typical Slovak industrial letting the outline runs from the unit and its size through rent, indexation, term and incentives down to who insures what – short enough to read in ten minutes, decisive enough to shape the next ten years.
What belongs in them: the RICS checklist as the benchmark
The most widely used benchmark for a complete set comes from the UK: the RICS Code for Leasing Business Premises, 1st edition, published February 2020 and effective from 1 September 2020, makes written heads of terms – marked subject to contract – a mandatory requirement for RICS members in England and Wales, and prescribes a minimum checklist. That list is a useful discipline in any market: the identity and extent of the premises, the length of term and any renewal or exclusion rights, break rights, any guarantor or deposit, the rent and rent-free period, rent review mechanics, VAT, liability for service charge and insurance, rights to assign and sublet, the repair obligation, permitted use, alterations and reinstatement, and any conditions such as survey or board approval, per the RICS code. CMS notes that this was the first time parts of the code became mandatory for members rather than guidance. Slovak practice is not governed by RICS, but well-advised parties here cover the same ground – because every item missing from the outline resurfaces later as an expensive surprise in drafting.
Binding or not: what subject to contract actually protects
The standard position is that the document creates no obligation to enter the lease: it is expressly non-binding, evidenced by the subject to contract label, and either party can still walk away. Two carve-outs are routinely made binding on purpose – exclusivity, which takes the unit off the market for an agreed period while lawyers draft, and confidentiality, which protects the commercial terms themselves. The discipline matters in both directions. A tenant who treats the outline casually because it is not binding discovers that the practical room to reopen points shrinks the moment drafting starts: the landlord’s lawyer drafts from the agreed summary, and every reopened point costs goodwill, time and fees. A landlord who lets vague wording through – an unspecified rent review basis, an undefined repair standard – inherits the ambiguity in negotiation. The honest way to read the document: legally soft, commercially hard. It binds nobody and anchors everybody.
The Slovak angle: why the outline stage decides real money
The Slovak industrial market is a renegotiation market as much as a relocation market: of the roughly 136,000 square metres of gross leasing activity in the first quarter of 2026, renegotiations accounted for 53 per cent, per CBRE figures reported by Property Forum. That means more than half of all deal-making is existing tenants re-agreeing terms – and a renewal negotiation runs through exactly the same outline stage as a new letting, usually faster and with a weaker hand if the tenant starts late. The deal points with real money attached are familiar from the checklist: the rent-free period and any fit-out contribution, the indexation clause, the break option and its conditions, service charge exposure and the reinstatement obligation at exit. Each of them is negotiated in the outline and merely documented in the lease. Occupiers who involve advisers only at the drafting stage have, in effect, already negotiated – without noticing and often without comparables at the table.
Why occupiers should care at EUR 4.55 per square metre
Slovak occupiers currently pay a prime rent of EUR 5.95 per square metre per month and an average of EUR 4.55, per CBRE figures reported by Property Forum. On a 10,000 square metre unit at the average, the headline rent is EUR 546,000 a year – our multiplication – and the points fixed at the outline stage routinely move that outcome by more than any drafting refinement ever will: a three-month rent-free period is worth EUR 136,500 on that tenancy, an uncapped indexation clause can compound low single-digit percentages into a five-figure annual difference, and an unqualified repair clause quietly transfers end-of-term risk that surfaces years later as a dilapidations bill. None of these are legal subtleties; all of them are commercial positions that belong in the term sheet, in numbers, before drafting begins. The practical rule for occupiers: negotiate the outline as if it were the lease, because commercially it is – and treat the lawyer’s job as protecting what the outline won, not winning what it gave away.
Frequently Asked Questions
Are heads of terms legally binding?
As a rule, no – the document is expressly non-binding and marked subject to contract, so neither side is obliged to complete the lease. Exclusivity and confidentiality clauses are the usual exceptions, made binding on purpose. The commercial reality is stricter: agreed points are rarely reopened successfully in drafting.
Who prepares them?
Usually the landlord’s agent, from the park’s standard template. That is precisely why tenants should review the draft line by line and insist on adding what is missing – the template reflects the landlord’s preferred positions, and silence on a point is itself a position.
What should a tenant check before signing the outline?
Completeness against a checklist like the RICS minimum: premises and measurement basis, term, break rights and their conditions, rent, rent-free period, indexation, service charge exposure, repair standard, alterations and reinstatement, assignment and subletting rights, and any conditions of the letting. If a point that costs money is not written down, it is not agreed.
How detailed should the document be?
Detailed enough that a lawyer could draft the lease from it without asking commercial questions. Vague entries – market rent review, usual repair obligations – are deferred disputes. Numbers, dates and named mechanisms beat adjectives.
Is a letter of intent the same thing?
In leasing practice the terms overlap: both record an intended deal before contracts. A letter of intent is more common in sale and built to suit transactions and sometimes carries binding process obligations. Whatever the label, what matters is the content and which clauses are expressed to bind.