---
title: "Heads of agreement for a commercial or retail lease (non-binding, subject to formal lease)"
url: "https://ailawframework.com/precedents/commercial-property-and-leasing/heads-of-agreement-commercial-lease"
type: "precedent"
site: "AI Law Framework"
id: "a10-heads-of-agreement-commercial-lease"
area_id: "A10"
kind: "agreement"
ai_level: "yellow"
version: 1
law_stated_as_at: "2026-10-17"
---

# Heads of agreement for a commercial or retail lease (non-binding, subject to formal lease)

> Non-binding heads of agreement recording the commercial terms of a proposed lease, with limited binding clauses, drafted to avoid an unintended agreement to lease and to manage the retail leasing traps.

Canonical page: https://ailawframework.com/precedents/commercial-property-and-leasing/heads-of-agreement-commercial-lease  
Law stated as at: 2026-10-17

Site index for agents: https://ailawframework.com/llms.txt

## Key facts

- Kind: Agreement. A contract between two or more parties.
- Practice area: [Commercial Property & Leasing](https://ailawframework.com/precedents/commercial-property-and-leasing.md)
- Jurisdictions: New South Wales
- AI level: Yellow. AI can help in set ways. A lawyer checks specific points before use.
- Law stated as at: 2026-10-17
- Status: Maintained. Checked on 2026-10-17 against the 5 authorities it cites, for New South Wales.

## When to use it

Use once the landlord and tenant have agreed the main commercial terms and before the formal lease is drafted. Do not use where the parties want an immediately binding agreement for lease; draft a full agreement for lease instead.

## How AI may be used

AI may populate the schedule from the negotiation emails and flag gaps; a lawyer settles the non-binding and binding clauses and checks that conduct has not overtaken the drafting.

**AI may:**

- Extract the agreed commercial terms from emails and term sheets into the schedule, with the source message for each.
- List terms that are missing, inconsistent or still marked "to be agreed".
- Compare the heads of agreement with the later draft lease and list differences.

**AI must not:**

- Must not change the non-binding and binding clauses without lawyer approval.
- Must not describe the document to the client as binding or non-binding without the lawyer's advice on the facts.
- Must not send the document to the other side.

**The lawyer checks:**

- The "subject to formal lease" drafting is clear and consistent throughout, including in covering emails.
- No access, keys, fit-out or payment is given before the lease is signed unless documented in a licence or the binding clauses.
- For a retail shop, the disclosure statement timetable has been considered.

## Authorities

- [Masters v Cameron (1954) 91 CLR 353; 1954 HCA 72 (agreements "subject to" formal contract)](https://www.australiancontractlaw.info/cases/database/masters-v-cameron)
- [Conveyancing Act 1919 (NSW) s 23C (interests in land to be created in writing)](https://legislation.nsw.gov.au/view/html/inforce/current/act-1919-006#sec.23C)
- [Conveyancing Act 1919 (NSW) s 54A (contracts for disposition of land to be in writing; part performance preserved)](https://legislation.nsw.gov.au/view/html/inforce/current/act-1919-006#sec.54A)
- [Retail Leases Act 1994 (NSW) s 3B (agreements to lease) and s 11 (lessor's disclosure statement)](https://legislation.nsw.gov.au/view/html/inforce/current/act-1994-046#sec.3B)
- [Retail Leases Act 1994 (NSW) s 14 (key money and lease preparation expenses prohibited)](https://legislation.nsw.gov.au/view/html/inforce/current/act-1994-046#sec.14)

## Full text and drafting notes

The full text and the drafting notes are not part of this public page. Signed-in firm accounts can read them at https://ailawframework.com/precedents/commercial-property-and-leasing/heads-of-agreement-commercial-lease and through the signed-in MCP connector https://ailawframework.com/mcp/firm.

*Practice guidance for planning and review. Confirm current primary sources and the requirements of the actual matter. This is general information, not legal advice.*