Buying and selling care homes: Heads of Terms

It is important when buying or selling business assets, such as a care home, to consider whether clear Heads of Terms are needed and, if so, what they should say. In almost all cases, the answer should be 'yes'.

Heads of Terms for any particular deal will set out the basic (but important) key terms of the proposed deal. They are crucial for most deals, because they make express the basic assumptions being made by the parties, for example the price, the timetable and, importantly, the parties' obligations leading up to the formal point where contracts are exchanged (which is the point when the parties become legally bound).

Heads of Terms, properly drafted, allow the parties' advisers to manage the disposal of a business in an efficient and timely manner. However, it is essential to get the balance right. The Heads of Terms should not be so complicated or detailed that they resemble the actual sale contact. The main sale contract documentation (such as an asset purchase agreement or a share purchase agreement) should be the contractual documentation that deals with the minutiae or 'small print' of the terms of the deal and the parties' obligations.