Heads of Agreement

Transactions involving the acquisition and disposal of commercial property proceed in stages:

• • introduction of the parties and the property;
• • negotiation;
• • the parties entering into a preliminary agreement such as a Heads of Agreement, a confidentiality agreement or exclusive dealing arrangement;
• • the purchaser undertaking pre-contract due diligence;
• • the parties entering into a formal contract;
• • the purchaser undertaking post-contract due diligence; and
• • completion — the passing of ownership, payment.

Prior to entering binding contracts, parties may enter into preliminary agreements such as a Heads of Agreement, which sets out the key terms of a transaction. One of the main purposes of a preliminary agreement is to protect confidentiality because due diligence involves the disclosure of commercially sensitive documents by the vendor to the purchaser. It also signifies the parties entering into a negotiating relationship. Another such purpose is so that the purchaser can secure an exclusive right to negotiate the purchase while pursuing due diligence.

See Heads of Agreement.